Revised Anti-unfair Competition Law enters into force

The revised Anti-unfair Competition Law entered into force on January 1 2018 – its first major revision since 1993.

Businesses have long relied on the Anti-unfair Competition Law to restrain other parties from free-riding on their fame and causing confusion. It has been especially useful where a defendant has not, strictly speaking, infringed any registered trademarks or patents owned by the plaintiff, but has instead copied the business practices or trade dress of the plaintiff in other ways (eg, copying the decor of a retailer, reproducing a product’s packaging or making misleading statements).

This report discusses key amendments to the definition of unfair competition acts and their implications.

Addition of catch-all provision on acts of confusion
A catch-all provision has been introduced to Article 6(4) of the new law, which states that businesses cannot engage in:

“other acts of confusion sufficient to mislead a person into thinking that the goods of one business (defendant) is that of another business (plaintiff) or has a particular connection with another business (plaintiff).” 

As unfair competition acts were exhaustively listed and rigidly defined under the old law and the court’s application of the provision was narrow, this provision is welcome news. While the old law prohibited only the unauthorised use of “names, packaging or decor of well-known goods” and “enterprise names or personal names”, the new provision gives broader protection to businesses and is particularly useful against defendants who imitate part of the plaintiff’s business practices, but do not entirely copy their trade dress or decor. However, since the definition of ‘other acts of confusion’ is vague, judges will be able to exercise greater discretion in unfair competition findings, which may increase uncertainty.

Unfair competition acts on the Internet
Given the prevalence of online transactions in China, the new law also prohibits businesses from adopting technical measures to disrupt the legitimate operations of other businesses. Notable prohibitions include:

• inserting a link or forcing redirection of web pages of online products or services legally provided by others without consent (Article 12(1));
• misleading, defrauding or compelling users to modify, close or uninstall online products or services legally provided by others (Article 12(2)); and
• other acts of interfering or damaging the normal operation of online products or services legally provided by others (Article 12(4)).

Forging others’ registered trademarks
While Article 5(1) of the old law included “forging others’ registered trademarks” as one of the definitions of unfair competition, such activity is already covered by the Trademark Law and has been removed from the new law.

Defendants who engage in unfair competition are often also engaged in trademark infringement. Therefore, if a plaintiff brings a lawsuit against a defendant on both claims, the two claims and corresponding infringing activities may be considered separately by the court, or even in separate cases. 

False commercial promotion
The new law addresses false commercial promotion – including those on e-commerce platforms – by prohibiting false or misleading commercial advertising in respect of products’ “user reviews” and “honours”, which consumers often rely on. Further, Article 8 of the new law prohibits businesses from engaging in false transactions with other businesses to conduct misleading or false commercial promotion.

Comment
While the Anti-unfair Competition Law has been amended to address new business activities and unfair competition behaviour, how the courts will apply its provisions to protect business rights and encourage fair competition remain to be seen.