China: Zhejiang Court Recognizes Use of AI to Generate and Spread False Content Constitutes Unfair Competition
Published 16 February 2026
Fei Dang
On February 3, 2026, the WeChat Public Account the Hangzhou Intermediate Court introduced a case concluded by the People’s Court of Binjiang District, Hangzhou, that recognized the constitution of unfair competition by spreading AI-generated false information. The plaintiffs involved Alibaba Group Holding Limited and its affiliate Hangzhou Alibaba Advertising Co., Ltd. (“the Plaintiffs”), whereas the defendant is an individual, Li, who is the actual operator of an account on Baijiahao, a Baidu platform.
The Plaintiffs’ claims
The Plaintiffs claimed that the two plaintiffs are affiliated companies belonging to the Alibaba Group and the business name “阿里巴巴（Alibaba）” has established a “direct, stable, and close correspondence” with the Plaintiffs, through the Group's long-term operations and development, becoming widely recognized by the relevant public and enjoying extremely high reputation and influence. Therefore, the Plaintiffs contended that their “阿里巴巴（Alibaba）” should be protected under the Anti-Unfair Competition Law as a business name with certain influence.
The Plaintiffs claimed that the Defendant published an article titled “Is Ali Digital Holding Co., Ltd. Real?” on his operated Baijiahao Account on December 30, 2023, and the said article was in suspicious of the following unfair competition acts:
1. Confusion: The Defendant's extensive use of the Plaintiffs’ “阿里巴巴（Alibaba）” business name in the involved article and accompanying images not only created a high likelihood of confusion among the relevant public but also constituted an infringement of the Plaintiffs’ legitimate rights and interests, including its business name. Such conduct therefore constituted unfair competition as defined under Article 6 of the Anti-Unfair Competition Law.
2. False promotion: The article in question mentioned a company named Ali Digital Holdings Co., Ltd. and claimed it was an important subsidiary of the Plaintiffs with close ties to the Plaintiffs. However, the Plaintiff pointed out that this company actually refers to a third-party entity named “Ali Digital Holdings (Shenzhen) Co., Ltd.” The “阿里(Ali)” name was registered by a third party unrelated to this case, and this company has no affiliation or cooperative relationship with the Plaintiffs in this case. Therefore, the Plaintiff contended that the article in question “contained fabricated false information that was misleading. Its publication and dissemination misled the understanding and judgment of internet users, making it highly likely that the relevant public would mistakenly believe that this third-party company was established or operated by the Plaintiffs, or that some form of cooperation or affiliation existed between it and the Plaintiffs.” This constituted false promotion under Article 8 of the Anti-Unfair Competition Law.
3. Unfair competition that violated the principles of honesty and credit: The defendant, “as an operator of a self-media account, fabricated false and misleading information to publish the articles in question for the purpose of attracting attention, driving traffic, increasing followers, and cultivating the account, thereby free-riding on the Plaintiffs’ goodwill and improperly obtaining commercial benefits,” in violation of Article 2 of the Anti-Unfair Competition Law.Accordingly, the Plaintiffs claimed that the Defendant should bear the civic liability of ceasing the infringement, eliminating the adverse effect, and compensating the damages of RMB 500,000 yuan.
The Defendant’s claims
The Defendant claimed that 1) The Defendant did not use the account that published the article in question as a primary tool for generating income, nor did he publish the article in question as part of his primary work duties in managing that account. The article in question was entirely AI-generated by the Defendant under the title “Is Ali Digital Holdings Co., Ltd. Real?” without any addition of the Defendant's personal subjective intent. Therefore, the Defendant did not qualify as an “operator” under the Anti-Unfair Competition Law, and there existed no actual or potential direct or indirect competitive relationship between the Defendant and the Plaintiffs. 2) The entity “Ali Digital Holdings (Shenzhen) Co., Ltd.” referenced in the article was genuinely established prior to its publication. Consequently, the article's assertion that this company “is indeed a real enterprise” did not constitute false statements. There was no subjective malice to damage the Plaintiffs’ commercial reputation, no objective possibility of infringing upon the Plaintiffs’ business interests, and no likelihood of causing public confusion. 3) The article in question contained no content that disparaged, defamed, attacked, or otherwise harmed the Plaintiffs’ interests. There was no subjective malice to damage the Plaintiffs’ reputation or economic interests. 4) The questioned article's publication page bears the notation “Generated by Wenxin Large Model 4.0” in the lower right corner. This practice complies with the content labeling requirements stipulated in the Interim Measures for the Administration of Generative Artificial Intelligence Services. The Defendant had no subjective intent to mislead the public. In a word, the Defendant requested the court to dismiss the Plaintiffs’ claims.
Court’s opinions
Upon trial, the Court summarized the key issues of the case as follows: 1. Whether the Plaintiffs and the Defendant were properly constituted as parties; 2. Whether the alleged infringing acts constituted unfair competition; 3. If so, whether the Defendant should bear liability.
Key issue 1
The Court considered that the Plaintiffs herein, Alibaba Group Holding Limited, together with Alibaba Advertising Co., Ltd., have established and operated multiple e-commerce platforms such as Alibaba International Trade Market (alibaba.com) through long-term operation and development. The corporate name “阿里巴巴(Alibaba),” for which they hold rights, has gained significant recognition and influence among the relevant public. Therefore, the Plaintiffs’ name, as a corporate designation with considerable influence, is eligible for protection under the Anti-Unfair Competition Law, and both Plaintiffs possessed proper standing. The Defendant herein is the operator of a professional e-commerce promotion account certified by the platform and possessing a substantial follower base. Given that the account “exerts considerable influence over consumers in the relevant field and can guide consumer transaction decisions, its essence lies in leveraging information networks for product sales and promotion, making it a significant participant in market competition.” Consequently, the Defendant also qualified as an “operator” as defined under the Anti-Unfair Competition Law.
In determining whether a competitive relationship existed between the Plaintiffs and Defendant, the Court held that although the two parties did not engage in direct competition within the same business scope, the existence of a competitive relationship is not limited to competition within the same industry. The Plaintiffs are globally renowned internet enterprises conducting e-commerce operations through their numerous well-known e-commerce platforms. While the Defendant is an individual operating a self-media account, which also engages in commercial promotion, live-streaming consultations, and e-commerce sales through the said account, thereby functioning as a market participant within the e-commerce sector. Therefore, a competitive relationship exists between them. The Court further noted that “the Defendant attracted traffic and grew followers by publishing the allegedly infringing article in question, but the information contained therein contained factual errors that were highly likely to mislead the market or relevant public. Such misinformation could potentially subject the two Plaintiffs to public pressure and reputational damage.”
In short, the Court determined that both Plaintiffs and Defendants possessed proper standing and a competitive relationship, which was not limited by the specific nature, scale, or business volume of their respective operations.
Key issue 2
As it is mentioned above, the Plaintiffs claimed that the series of acts of the Defendant respectively violated the confusion provided in Article 6, the false promotion in Article 8, and the unfair competition in Article 2 of the Anti-Unfair Competition Law. Accordingly, the Court considered that:
1. Confusion
The article in question published by the Defendant herein was a commentary piece, containing no product links or promotional language for goods or services. Although the said article used the term “阿里巴巴(Alibaba)” and its brand logo, potentially with the intent to attract traffic, such use was necessary to introduce the relationship between Alibaba Digital Holding Limited and the Plaintiffs, rather than directly promoting the Defendant's own goods or services. Therefore, the relevant public would find it difficult to infer a specific connection between the Defendant and the Plaintiffs based solely on the use of “阿里巴巴(Alibaba) ” in the article. In short, the Court determined that the Defendant's use of the “阿里巴巴(Alibaba) ” name and brand logo in the article did not constitute an act of confusion as defined under Article 6 of the Anti-Unfair Competition Law.
2. False promotionSince the article in question did not involve any goods, and the Defendant's act of publishing the article was not inherently a commercial promotional activity, the Court determined that the Defendant did not engage in false or misleading commercial promotion for the goods or services it provided. Therefore, it did not constitute false promotion as defined under Article 8 of the Anti-Unfair Competition Law.
3. Unfair competition
The Court considered that the Defendant published the article in question with the subjective intent of “gaining followers and driving traffic to pursue personal commercial interests, thereby facilitating the promotion of related products through their account.” Nevertheless, he still had the obligation to verify the authenticity of published information. “Despite being fully aware that the allegedly infringing article was automatically generated by artificial intelligence and that its information source was unreliable, the Defendant failed to conduct even minimal verification of the article's content. Furthermore, the article lacked any prominent labeling to alert the public that it was AI-generated, thereby enabling the dissemination of false information online. The Defendant also exacerbated the article's misleading nature by manually adding images bearing the Plaintiffs’ brand logo.” Accordingly, the Court determined that the Defendant's publication of the article demonstrated clear subjective fault, constituting a violation of commercial ethics.
In addition, the Court also considered that the equity relationship between Ali Digital Holding Co., Ltd. and the Plaintiffs is a verifiable fact through industrial and commercial registration records. However, the article in question conflated the relationship between the two entities, drawing false conclusions and sustaining public attention. Such conduct “would mislead the public into erroneous perceptions, adversely affect the actual business operations and corporate reputation of the two Plaintiffs, and necessitate significant expenditure of time and resources by the Plaintiffs to clarify these misrepresentations.” Accordingly, the Court determined that these actions disrupted market competition order, harmed the competitive interests of the two Plaintiffs, and caused corresponding losses to them.
In short, the Court determined that the Defendant's said actions constituted unfair competition practices that violated commercial ethics, disrupted market competition order, and harmed the lawful rights and interests of the two Plaintiffs. These actions fell outside the scope of violations specifically addressed in Chapter II of the Anti-Unfair Competition Law and provisions of the Patent Law, Trademark Law, Copyright Law, etc. Therefore, such conduct constituted unfair competition practices regulated under Article 2 of the Anti-Unfair Competition Law.
Key Issue 3
Regarding the liability, although the Defendant argued that the article in question was generated by artificial intelligence and thus they should not be held responsible, the Court pointed out that as a self-media blogger engaged in commercial content management, the Defendant should bear a duty to review the information they publish. Furthermore, "under current technological conditions, the phenomenon of ‘AI hallucinations’ is difficult to completely avoid. Users of generative AI, possessing the greatest control over the output, bear a reasonable duty of care regarding the dissemination and utilization of such content. This includes reviewing and filtering false information, making reasonable efforts to ensure the authenticity and integrity of disseminated content, or adding prominent labels to alert the public that the article was AI-generated. Such measures are necessary to prevent the spread of false information from harming others' legitimate rights and interests or disrupting social order." In short, the Court recognized that the Defendant should bear the relevant liability.
Regarding the elimination of adverse effects, the Court considered that the Defendant shall publish a statement on its Baidu Baijiahao self-media account to eliminate the impact, with the statement preferably published consecutively for three days. Regarding compensation for damages, considering that the Plaintiffs failed to prove actual losses incurred due to the infringement and that the Defendant's profits from the infringement were relatively low, the Court, after comprehensively weighing relevant factors such as “the Plaintiffs' reputation and influence, the nature and consequences of the alleged infringing acts, the Plaintiffs' reasonable expenses incurred in protecting their rights, and the adverse publicity and public opinion management costs suffered by the Plaintiffs,” determined that the Defendant shall compensate the Plaintiffs for economic losses amounting to 30,000 yuan (including reasonable expenses incurred in protecting their rights).
Comment
This case involves unfair competition stemming from an “AI hallucination”—specifically, a large language model fabricating information it perceives as real, plausible, or credible.
In this case, the Defendant published an article automatically generated by generative AI on his self-media account and faced legal action due to its false content. Although the Defendant argued that the entire article was AI-generated without any subjective input and that the publication page clearly labeled it as generated by a large language model in the bottom-right corner, the Court did not accept these defenses. On one hand, the Court determined that as a self-media operator publishing articles for the purpose of attracting followers, driving traffic, and obtaining commercial benefits, the Defendant bore a reasonable duty of care regarding the authenticity and accuracy of the article's content. This was particularly true since the relevant facts in the article (such as the Plaintiffs’ equity relationship with the mentioned enterprise) could be verified through channels like industrial and commercial registration information. Therefore, “AI generation” could not serve as grounds for exempting the Defendant from liability. On the other hand, although the article's publication page bore a disclaimer in the lower right corner indicating it was generated by a large model, the Court determined that such labeling failed to comply with the relevant provisions of the Measures for the Labeling of Artificial Intelligence Generated and Synthesized Content. This is because the disclaimer was only displayed in the Defendant's account backend and was not visible to the relevant public during reading. Consequently, it could not absolve the Defendant of liability for disseminating false information.
It is worth noting that the said Measures for the Labeling of Artificial Intelligence Generated and Synthesized Content were issued to promote the healthy development of artificial intelligence and standardize the labeling of AI-generated synthetic content, which became effective on September 1, 2025. Among them, Article 4 thereof stipulates that “Where the generative synthetic services provided by service providers fall under the circumstances specified in Article 17.1 of the Provisions on the Administration of Deep Synthesis of Internet-Based Information Services, explicit labels shall be added to the generative synthetic content in accordance with the following requirements: (1) Add textual prompts or universal symbol indicators at the beginning, end, or appropriate intermediate positions within the text, or incorporate prominent warning labels on interactive interface screens or surrounding text areas; ...” Article 10 thereof further stipulates that “When users utilize online information content dissemination services to publish generated or synthesized content, they shall proactively declare such content and employ the labeling functions provided by service providers for identification purposes."It can be seen that upon utilizing generative AI technology to produce the article in question, the Defendant failed to conduct basic fact-checking through publicly available information channels regarding the content pertaining to the Plaintiffs equity relationship. The Defendant neglected to fulfill its duty of review commensurate with its capacity for diligence. Furthermore, the Defendant did not proactively display a statement or prominent label at the front end of the article to alert the public that the information was AI-generated, thereby failing to fulfill its legal obligation to provide prominent warnings. The Defendant's failure to conduct minimal fact-checking on the article's content and to prominently label it as AI-generated led to the dissemination of false information online. This action not only damaged the Plaintiffs’ commercial reputation but also violated the principle of good faith and disrupted market competition order. Accordingly, the Court ultimately determined that the Defendant's said actions constituted unfair competition as defined in Article 2 of the Anti-Unfair Competition Law, namely, “acts by an operator in production and business activities that violate the provisions of this Law, disrupt the order of market competition, and harm the lawful rights and interests of other operators or consumers.”
In a word, the case explicitly states that the phenomenon of “AI hallucinations” is difficult to avoid under current technological conditions, but this cannot serve as grounds for exempting AI technology users from liability. It thereby establishes clear boundaries of responsibility for users of AI-generated content, namely their obligations to review and label such content. By focusing the case's dispute on the conduct standards of generative AI users rather than solely blaming the inherent limitations of AI technology itself, this ruling not only safeguards technological innovation space but also provides clear legal guidance for regulating the labeling and dissemination of AI-generated content by defining behavioral standards for users.