In 1993, China enacted its Unfair Competition Law (UWG). Since then, laws on trademark law, advertising law and Antitrust Law have emerged in China. This has resulted in various overlaps with the Unfair Competition Act 1993, which have been eliminated by the Unfair Competition Act 2018. In addition, some new provisions have been included to improve protection.
With the 1993 Unfair Competition Act, China wanted to show the world that it was fulfilling its obligations under international treaties. Specifically, Art. 10bis of the Paris Convention requires member states to “ensure effective protection against unfair competition”.
However, a lot has happened since 1993, both in legislation and in practice, and a renewal was necessary. Special laws emerged that overlapped with the “all-in-one” regulation of the UWG 1993. For example, the UWG 1993 qualified the use of signs that are confusingly similar to registered Trademarks as an unfair act. The new UCA 2018 leaves this protection to the Trademark Act. The new Article 6 UCA is only directed at the Risk of Confusion with unprotected signs.
“Art. 6
Entrepreneurs shall not engage in the following misleading practices, which confuses consumers or leads to the assumption of a special relation with the products of other enterprises themselves:
Unauthorized use of a sign identical with or similar to the name …”
(1) unauthorized use of a sign identical with or similar to the name, packaging or decoration of others’ goods with certain influence;
(2) unauthorized use of others’ name with certain influence, such as the name (including abbreviations and trade names) of a company, the name (including abbreviations) of a social organization, or the name (including pseudonyms, stage names and name translations) of an individual;
(3) unauthorized use of the principal part of a domain name, the name of a website, or a web page with certain influence of others; and
(4) other misleading practices likely to generate confusion with the products of other enterprises or with other enterprises themselves.”
The overlaps between advertising law (which primarily serves to regulate the advertising industry) and the UCA have also been eliminated. The UCA 2018 focuses on the fairness of advertising between companies. The antitrust provisions of the UCA 1993 can no longer be found in the new UCA either, as they have now been codified in Antitrust Law.
The article on unfair use of network technology is completely new in the UWG 2018. This article is motivated by a major battle (“3Q War”) in 2010 between Tencent and Qihoo360. The internet article regulates the following unfair behavior.
“Art. 12
Entrepreneurs, who make use of the Internet for manufacturing and operation activities, shall abide by the provisions of this law.
Entrepreneurs shall not, with the help of network technology and by influencing the choice of users or by other ways, hinder the normal operation of network applications or services legally provided by other entrepreneurs in the following ways:
(1) without the authorization of other entrepreneurs, by inserting links in their network applications or services and by proceeding to a jump to the target webpage;
(2) by misleading, deceiving or forcing users to modify, close or uninstall the network applications or services legally provided by others;
(3) by proceeding intentionally to the incompatibility with the network products or services provided by others; and
(4) by hindering the normal operation of the network applications or services legally provided by others in other ways.”
As in the UWG 1993, the UWG 2018 also provides that an unfair Competitor can be prosecuted in court, by the authorities and under criminal law. Although the UWG 2018 declares in the introduction that the law serves to protect both companies and consumers from unfair competition, only companies are still entitled to take legal action in court.
The upper limits for fines in administrative proceedings have been significantly increased. The attractiveness of the administrative procedure lies not only in the fact that the authority conducts the proceedings in response to a corresponding complaint by a Competitor, but also that it keeps the complainant’s information secret (whistle blower protection). It remains to be seen whether this will make the administrative procedure too attractive.
The following article shows that the authority’s powers go relatively far:
Art. 13
The supervising authorities has the following powers in the supervision and examination of unfair competition practices:
(1) to enter business premises related to the suspected acts of unfair competition for inspection;
(2) to question the entrepreneurs, interested third parties and other relevant entities and individuals under investigation, and to require them to provide relevant information or other materials in relation to the acts under investigation; –
(3) to consult and to copy agreements~ accounting books, invoices, documents, records~ business fax or letters and other materials with regard to the activities of unfair competition;
(4) to seize or to obtain the properties in relation to the suspected acts of unfair competition; and
(5) to check the bank accounts related to the suspected acts of unfair competition.
Before the measures in the preceding paragraph are taken, a written report shall be filed to the person in charge of the supervising authority for approval. Before the measures in subparas. (4) and (5) in the preceding paragraph are taken, a written report shall be filed to the person in charge of the supervising authority of the People’s government at or above the level of a districted city for approval.
The supervising authorities abide by the Administrative Compulsion Law of the People’s Republic of China and other relevant laws and regulations in their investigations of suspected acts of unfair competition, and disclose the investigation and results to the public in a timely manner.
The law stipulates that the authority publishes its contact details and that it treats reports confidentially.
“Art. 16 (added)
Any entity or individual has the right to report a suspected act of unfair competition to the supervising authority, which examines the report in a timely manner after the reception. The supervising authority publishes their telephone numbers, post addresses or e-mail addresses for receiving reports and keeps informants confidential. In the case of a report with the informant choosing not to withhold his identity and with relevant facts and evidence provided, the supervising authority notifies the informant of the result. “
Compensation is calculated according to the actual or calculated loss of the injured party. If this is difficult, the infringer’s unlawful gain is taken into account. The infringer must also bear the reasonably incurred legal costs of the injured party.
“Art. 17
The Entrepreneurs bear the liability for damages caused to the damaged party for violation of the provisions of this Law.
The entrepreneur damaged by unfair competition practices may bring lawsuit to the People’s court when his legal interests and rights are damaged.
The amount of damages caused to an entrepreneur by any act of unfair competition shall be determined as per the actual loss of the business incurred by the unfair competition practice; if it is difficult to calculate the actual loss, as per the profits acquired by the unfair competitor from the unfair competition practice. The reasonable cost of the damaged party or investigating the unfair competition practices shall also be compensated.”
Links:
GRUR lnt. 7 /2018 pages 626 -645, Yaotian Chai, “The new anti-unfair competition law of the People’s Republic of China 2018”. (The legal articles in English are quotes from the article).