China Issues Interim Unfair Competition Regulation for “Internet Industry”
Published 2 June 2024
Xia Yu
On 11 May 2024, China’s State Administration for Market Regulation (“SAMR”) released the Interim Unfair Competition Regulation in the Internet Industry (“Regulation”) which will come into effect on 1 September 2024. Currently, China’s Anti-Unfair Competition Law is a comprehensive law against unfair competition, while China’s E-Commerce Law and its administrative regulations, the Measures for the Supervision and Administration of Network Transactions (“Measures”) involve anti-unfair competition provisions in the network field. The Regulation, consisting of five chapters and 43 articles, not only elaborates on the unfair competition acts in the Anti-Unfair Competition Law in the field of the Internet but also elaborates in detail on the unfair competition clauses in the E-Commerce Law and the Measures.
The Anti-Unfair Competition Law, revised in 2019, stipulates that unfair competition acts include confusion, false propaganda, and fabricating and disseminating false information to damage the business reputation and product reputation of competitors. The E-Commerce Law promulgated in 2018 does not involve these traditional unfair competition acts, but the Measures promulgated in 2021 emphasize the prohibition of them in the network field. The newly promulgated Regulation makes adjustments and supplements to the relevant provisions of these traditional unfair competition acts in the Anti-Unfair Competition Law and the Measures.
For the confusion prohibited by the Anti-Unfair Competition Law, the Regulation adjusts the unauthorized use of product names, company names, and personal names, which is listed as a kind of confusion in the Anti-Unfair Competition Law, to the unauthorized use of them as the main part of domain names or other marks in network business activities. Furthermore, the Regulation lists more prohibited confusing acts, including unauthorized use of the same or similar marks as the page design, name, or icon, shape of others’ application software, online stores, small programs, or game interfaces that have a certain influence, as well as network aliases, network symbols, or network abbreviations; and producing and selling goods that are mistaken for others’ goods or have a specific connection with others.
Regarding false propaganda, the Anti-Unfair Competition Law prohibits only false advertising of the characteristics of goods. The Regulation also prohibits false advertising of operators. Meanwhile, the Measures list four ways to implement false propaganda. The Regulation adds more, including displaying through websites, implementing commercial marketing activities through live broadcasting or hot searches, falsifying business-related data, inducing users to engage in interactive behaviors, and marketing by creating false public opinion hotspots.
Regarding the prohibitions of fabricating and spreading false information and damaging the business reputation and product reputation of competitors in the Anti-Unfair Competition Law, the Regulation specifies it as acts in the network environment, such as organizing and instructing others to maliciously evaluate competitors’ products; using or organizing and instructing others to spread false information; spreading risk warnings, customer letters, warning letters or report letters containing false information. In addition, the Regulations define product reputation as the reputation and popularity of the product in terms of quality and brand and clarify that business reputation includes the relevant public's evaluation of the operator's credit status, business ethics, technical level, or economic strength.
Regarding new types of unfair competition acts in the network field, Article 12 of the Anti-Unfair Competition Law specifically stipulates that operators shall not use technical means to hinder or disrupt the normal operation of network products or services provided by other operators by influencing user choices or other means. Regarding this article, the Regulation first clarifies that the technical means include the use of the Internet, big data, and algorithms; influencing user choices includes violating user wishes and right of choice, increasing operational complexity, and disrupting the continuity of use; and the factors considered in determining whether it constitutes the obstruction or sabotage include whether the products or services of other operators cannot be used normally, cannot be downloaded, installed, updated or uninstalled normally, whether the cost of providing products or services has increased unreasonably, and whether the number of users or visits has decreased unreasonably.
In addition, the Regulation further explains the three specific acts of obstruction or sabotage, namely inserting links and forcing target jumps, misleading, deceiving, and forcing users to modify, close, or uninstall other operators' products or services, and malicious incompatibility, listed in Article 12 of the Anti-Unfair Competition Law, According to Articles 13 to 15 of the Regulation, the first type of act includes inserting jump links, embedding products or services in the products or services of other operators, using keyword associations, or setting false operation options to set links to their products or services, deceiving or misleading users to click; the products or services of other operators mentioned in the second type of act include equipment, functions or other programs; and the factors for determining the malicious intention referred in the third type of act include whether the operator knows or should know that the incompatible behavior will hinder or disrupt normal operation, whether the incompatible behavior affects normal operation, whether it is targeted at specific objects, whether it affects consumers or the public interest, whether it complies with industry practices, and whether it will lead to unreasonable increases in the costs of other operators' products or services.
Secondly, Articles 16 to 21 of the Regulation list the following unfair competition acts of obstruction or sabotage: 1. Deliberately engage in large-scale, high-frequency transactions with other operators, or give positive reviews in a short period, causing other operators to be subject to search demotion, credit rating reduction, product removal, link disconnection, or service suspension; maliciously buy goods in bulk in a short period without paying; or malicious bulk purchases followed by returns or refusal to receive goods.2. Targeting specific operators, to intercept and block their legitimate information content and web pages.3. Interfere with normal transactions between other operators by influencing user choices, limiting traffic, blocking, search demotion, or product removal, or affecting the business choices of other operators by restricting the transaction objects, sales areas, or time, or participating in promotional activities.4. Affects the business options of other operators by restricting trading objects, sales areas, or time, or participating in promotional promotion activities.5. Illegal acquisition and use of data legally held by other operators.6. Unreasonably provide different transaction conditions to transaction counterparties with the same conditions, infringing on the transaction counterparties’ right of choice and fair transaction rights.7. Download, install, and run applications against the user’s will; interfere with the download, installation, operation, update, or dissemination of other operators' network products or services, or implement acts such as search demotion, limit service content or adjust the natural ranking of search results; refuse to provide an uninstall function for applications that are not essential for the relevant device or set unreasonable obstacles to uninstalling applications.
Article 35 of the E-Commerce Law forbids online platform operators to implement unfair competition acts such as using service agreements, trading rules, and technical methods to conduct unreasonable restrictions or additional unreasonable conditions for the operator's transaction, transaction price, and transactions with other operators, or charge unreasonable fees to operators. The Regulation further explains the content of the clause. According to the Regulation, it constitutes a violation to force operators to sign an exclusive agreement that sets unreasonable restrictions on the price of goods, sales objects, sales areas, or sales time, and unreasonable setting deduction deposit, reduction of restrictions such as subsidies, preferential and flow resources. Meanwhile, for the online platform operators with competitive advantages, the Regulation stipulates that they must not abuse their information advantages such as background transaction data, traffic, and management rules to affect the business operation of other operators by the methods of blocking third-party business information or inaccurate the order of product display.
In conclusion, the Regulation supplements and details the current laws and regulations of unfair competition in the network field. It is conducive to the implementation of the laws and regulations, thereby promoting the healthy development of the domestic network economy. However, the Regulation is a temporary one, suggesting its uncertainty.
The Anti-Unfair Competition Law, revised in 2019, stipulates that unfair competition acts include confusion, false propaganda, and fabricating and disseminating false information to damage the business reputation and product reputation of competitors. The E-Commerce Law promulgated in 2018 does not involve these traditional unfair competition acts, but the Measures promulgated in 2021 emphasize the prohibition of them in the network field. The newly promulgated Regulation makes adjustments and supplements to the relevant provisions of these traditional unfair competition acts in the Anti-Unfair Competition Law and the Measures.
For the confusion prohibited by the Anti-Unfair Competition Law, the Regulation adjusts the unauthorized use of product names, company names, and personal names, which is listed as a kind of confusion in the Anti-Unfair Competition Law, to the unauthorized use of them as the main part of domain names or other marks in network business activities. Furthermore, the Regulation lists more prohibited confusing acts, including unauthorized use of the same or similar marks as the page design, name, or icon, shape of others’ application software, online stores, small programs, or game interfaces that have a certain influence, as well as network aliases, network symbols, or network abbreviations; and producing and selling goods that are mistaken for others’ goods or have a specific connection with others.
Regarding false propaganda, the Anti-Unfair Competition Law prohibits only false advertising of the characteristics of goods. The Regulation also prohibits false advertising of operators. Meanwhile, the Measures list four ways to implement false propaganda. The Regulation adds more, including displaying through websites, implementing commercial marketing activities through live broadcasting or hot searches, falsifying business-related data, inducing users to engage in interactive behaviors, and marketing by creating false public opinion hotspots.
Regarding the prohibitions of fabricating and spreading false information and damaging the business reputation and product reputation of competitors in the Anti-Unfair Competition Law, the Regulation specifies it as acts in the network environment, such as organizing and instructing others to maliciously evaluate competitors’ products; using or organizing and instructing others to spread false information; spreading risk warnings, customer letters, warning letters or report letters containing false information. In addition, the Regulations define product reputation as the reputation and popularity of the product in terms of quality and brand and clarify that business reputation includes the relevant public's evaluation of the operator's credit status, business ethics, technical level, or economic strength.
Regarding new types of unfair competition acts in the network field, Article 12 of the Anti-Unfair Competition Law specifically stipulates that operators shall not use technical means to hinder or disrupt the normal operation of network products or services provided by other operators by influencing user choices or other means. Regarding this article, the Regulation first clarifies that the technical means include the use of the Internet, big data, and algorithms; influencing user choices includes violating user wishes and right of choice, increasing operational complexity, and disrupting the continuity of use; and the factors considered in determining whether it constitutes the obstruction or sabotage include whether the products or services of other operators cannot be used normally, cannot be downloaded, installed, updated or uninstalled normally, whether the cost of providing products or services has increased unreasonably, and whether the number of users or visits has decreased unreasonably.
In addition, the Regulation further explains the three specific acts of obstruction or sabotage, namely inserting links and forcing target jumps, misleading, deceiving, and forcing users to modify, close, or uninstall other operators' products or services, and malicious incompatibility, listed in Article 12 of the Anti-Unfair Competition Law, According to Articles 13 to 15 of the Regulation, the first type of act includes inserting jump links, embedding products or services in the products or services of other operators, using keyword associations, or setting false operation options to set links to their products or services, deceiving or misleading users to click; the products or services of other operators mentioned in the second type of act include equipment, functions or other programs; and the factors for determining the malicious intention referred in the third type of act include whether the operator knows or should know that the incompatible behavior will hinder or disrupt normal operation, whether the incompatible behavior affects normal operation, whether it is targeted at specific objects, whether it affects consumers or the public interest, whether it complies with industry practices, and whether it will lead to unreasonable increases in the costs of other operators' products or services.
Secondly, Articles 16 to 21 of the Regulation list the following unfair competition acts of obstruction or sabotage: 1. Deliberately engage in large-scale, high-frequency transactions with other operators, or give positive reviews in a short period, causing other operators to be subject to search demotion, credit rating reduction, product removal, link disconnection, or service suspension; maliciously buy goods in bulk in a short period without paying; or malicious bulk purchases followed by returns or refusal to receive goods.2. Targeting specific operators, to intercept and block their legitimate information content and web pages.3. Interfere with normal transactions between other operators by influencing user choices, limiting traffic, blocking, search demotion, or product removal, or affecting the business choices of other operators by restricting the transaction objects, sales areas, or time, or participating in promotional activities.4. Affects the business options of other operators by restricting trading objects, sales areas, or time, or participating in promotional promotion activities.5. Illegal acquisition and use of data legally held by other operators.6. Unreasonably provide different transaction conditions to transaction counterparties with the same conditions, infringing on the transaction counterparties’ right of choice and fair transaction rights.7. Download, install, and run applications against the user’s will; interfere with the download, installation, operation, update, or dissemination of other operators' network products or services, or implement acts such as search demotion, limit service content or adjust the natural ranking of search results; refuse to provide an uninstall function for applications that are not essential for the relevant device or set unreasonable obstacles to uninstalling applications.
Article 35 of the E-Commerce Law forbids online platform operators to implement unfair competition acts such as using service agreements, trading rules, and technical methods to conduct unreasonable restrictions or additional unreasonable conditions for the operator's transaction, transaction price, and transactions with other operators, or charge unreasonable fees to operators. The Regulation further explains the content of the clause. According to the Regulation, it constitutes a violation to force operators to sign an exclusive agreement that sets unreasonable restrictions on the price of goods, sales objects, sales areas, or sales time, and unreasonable setting deduction deposit, reduction of restrictions such as subsidies, preferential and flow resources. Meanwhile, for the online platform operators with competitive advantages, the Regulation stipulates that they must not abuse their information advantages such as background transaction data, traffic, and management rules to affect the business operation of other operators by the methods of blocking third-party business information or inaccurate the order of product display.
In conclusion, the Regulation supplements and details the current laws and regulations of unfair competition in the network field. It is conducive to the implementation of the laws and regulations, thereby promoting the healthy development of the domestic network economy. However, the Regulation is a temporary one, suggesting its uncertainty.