Draft Revision of China’s Anti-Unfair Competition Law Released

By: Yuanmei Lu & Zhenye Wang (Sheppard Mullin)

China’s Anti-Unfair Competition Law (AUCL) has been amended twice since its enactment in 1993, first in 2017 and again in 2019. On December 25, 2024, the Standing Committee of the National People’s Congress released a Draft Revision to the AUCL (the “Draft Revision”) for public comment. The public consultation period will end on January 24, 2025.

Below, the authors a brief analysis of the key revisions proposed in the Draft Revision.

I. Introduction of Platform Operators’ Responsibilities

The Draft Revision introduces new obligations for platform operators, defined as entities providing internet platform services such as business premises, transaction matching, and information exchange to natural persons, legal persons, and other market entities. Specifically, platform operators are required to (i) include provisions in their platform service agreements and transaction rules to ensure fair competition among users; and (ii) take necessary measures to prevent unfair competition practices by users on the platform.

The current AUCL prohibits operators engaged in production and business activities through the internet from using “technical means” to influence user choices or disrupt the business operations of other operators. The Draft Revision broadens this to include “data and algorithms, technology, platform rules, etc.” and explicitly prohibits the misuse of platform rules to enable malicious transactions. For example, operators are prohibited from obtaining or using other operators’ legally held data through fraud, coercion, electronic intrusion, or other inappropriate means.

Article 14 of the Draft Revision explicitly prohibits platform operators from forcing businesses operating on their platforms to sell goods at prices below cost in accordance with the platform operators’ pricing rules, as this is deemed to interfere with fair competition.

II. Introduction of Specific Provisions on Confusion

1. Expansion of Protected Commercial Identifiers

To address disputes over the misuse of commercial identifiers, the Draft Revision explicitly includes the names of non-legal organizations, names and icons of new media accounts, and application names and icons as protected commercial identifiers.

2. Prohibition on Confusion through Search Keyword Manipulation

The Draft Revision prohibits operators from setting, without authorization, the names of others’ products or enterprises (including abbreviations, trade names, etc.) as search keywords, provided these names have a certain level of influence. This measure aims to prevent misleading search results that could confuse consumers.

3. Introduction of Liability for Assisting in Confusion

The Draft Revision adds a new provision in Article 7 stating that operators shall not facilitate others in conduct that causes confusion. Correspondingly, the legal liability provisions in the Draft Revision introduce administrative penalties for such facilitative actions.

4. New Exemption from Penalties for Sellers

A new provision in the Draft Revision allows sellers to avoid administrative penalties if they can demonstrate that they acted without subjective fault.

CONTINUE READING…