Amendment to China's Anti-Unfair Competition Law published

The current AUCL is largely retained in the amendment, with only editorial changes to the existing articles. However, the amendment also contains several additions that address current challenges relating to market conduct, enforcement and corporate responsibility. The main additions to the current AUCL in the amendment are set out below.

One of the most significant additions to the amendment is the broader definition of unfair competition in Chapter II.

​According to the current wording of the law, practices that create a risk of confusion through the use of labels, trade names, company logos, packaging, but also the main domain name or website, which are identical or similar to those of other companies, fall under the category of confusing commercial practices.

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The amendment explicitly mentions new forms of misconduct. These include:

The amendment does not specify what is meant by "influence to a certain extent". The Supreme People's Court published an interpretation of the still applicable provision of the current AUCL in 2022 (Several Issues Concer­ning the Application of the PRC Anti-Unfair Competition Law). According to this interpretation, "influence to a certain extent" requires that such names and signs have a "certain degree of market recognition" and "distinc​­tive features indicating the origin of the goods". Factors to be taken into account in determining a 'certain degree of recognition' include the degree of recognition of the signs; the time, territory, quantity and target customers of the sale of the goods; the duration, degree and geographical extent of recognition; and the degree of protection of the signs.

The amendment also prohibits businesses from assisting others to engage in misleading commercial practices.

By broadening the catalogue of confusing commercial practices and acts, the amendment aims in particular to take account of the complex realities of modern commerce. The prohibition on the unauthorized use of another party's brand or trade name as a keyword for internet searches is intended to prevent the diversion of internet traffic to its own websites or platforms, thus ensuring fair competition.

While the current law only prohibits the giving of bribes, the amendment now expressly prohibits the receiving of bribes. This applies to individuals and organizations that could use their position to unfairly influence busi­ness decisions. By covering both sides of the transaction, the amendment aims to curb corruption.

The rules on combining the sale of goods with a prize draw have also been amended. In addition to the existing rules, the amendment now prohibits changing the conditions for claiming the prize, the amount of money or goods as the prize, etc. after the start of the corresponding promotional sales activities without good reason.

The amendment expands the catalog of expressly prohibited practices that impede or disrupt the normal oper­ation of online products or services lawfully offered by other businesses, namely:

Under the current AUCL, companies are prohibited from committing defamatory acts in the course of business by producing or disseminating false or misleading information. The amendment extends the scope of damage to business reputation to cases where a person instructs others to engage in such conduct, with the instigator being held liable. In addition, the concept of "damage to the reputation or credibility of competitors" is ext­en­ded to "damage to the reputation or credibility of other market participants". The above interpretation of the AUCL by the Supreme People's Court defines "other market participants" as enterprises that can potentially compete for business opportunities and affect an enterprise's competitive advantages in production or trade. Although the interpretation does not specify that the "other market participants" must operate in the same industry as the potentially competing or injured entrepreneur, it is likely to be a prerequisite for any claims against them that they are involved in activities relevant to competition. In principle, however, this amendment extends the group of affected parties beyond competitors to include significantly more companies, which may contribute to a more effective regulation of this unfair practice.

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​An important addition to the amendment is aimed at platform operators. They are explicitly prohibited from forcing vendors to sell products below cost. In addition, large companies and other economic operators may not abuse their advantages in terms of financial resources, technology, transaction channels, industry influence, etc. by imposing unreasonable payment terms, payment modalities, payment deadlines or liability for breach of contract on smaller companies (SMEs) and forcing them to enter into exclusive contracts or similar.

Such practices, which are often used to artificially dominate markets, disrupt fair competition and can harm smaller companies that cannot sustain such pricing strategies. By tackling these practices, the amendment aims to create a level playing field for all market participants and improve consumer choice by promoting gen­uine competition.

In addition, the amendment appears to close a gap in the legal protection against abuse of dominant position by large companies. Abuse of dominant position is generally addressed in the Anti-Monopoly Law. Accordingly, companies with a dominant market position may not abuse their dominant market position to eliminate or restrict competition. Thus, the amendment does not refer to dominant companies, but to large companies, which do not necessarily have to be dominant. In practice, larger companies, even if they are not dominant, often impose unfair restrictions on their business partners, making it more difficult for the latter or other third parties to use the legal remedies provided by the Anti-Monopoly Law to protect their interests, as the Anti-Monopoly Law does not apply in this respect.

In addition to the existing powers to investigate suspected unfair competition practices, such as inspecting business premises, interviewing the company and other parties involved, reviewing contractual and financial documents, accessing bank accounts and seizing assets, the amendment adds the possibility of interviewing the company's legal representative or principal as a new power of the authorities in the event of a suspected violation of the law, as well as requiring them to take immediate corrective measures. On the one hand, this addition is likely to be of a clarifying nature, as interviews with the company, its stakeholders and other persons are already possible under the current law and include the legal representative and the principal. On the other hand, one of the main objectives of the new regulation is probably to be able to require immediate corrective action, which of course can be initiated directly by the legal representative or the principal.

In particular, the possibility for the competent authorities to require immediate remedial action may improve or even extend the legal protection or remedies available to companies that are victims of unfair competition, as not only are civil remedies available against the competitor (injunctions, damages, etc.), but the authorities may also intervene directly and prevent the anticompetitive conduct. However, it is unclear whether a victim com­pany can demand that the competent authorities require the competitor to take immediate corrective action. According to the wording of the current AUCL, the Administration for Industry and Commerce (AIC - now Administration for Market Regulation - AMR) of county-level governments and above is responsible. The amend­ment, however, refers only to departments of people's governments at or above the county level that are responsible for combating unfair competition. This means that there is at least a theoretical possibility that, if the amendment is put into effect, the AMR at the county level may no longer be responsible for investigating and punishing unfair competition, but another department or authority. It remains to be seen whether this option will be exercised by respective governments.

With regard to the introduction of new elements of unfair competition, the amendment also includes corres​­ponding sanctions for violations of the new regulations. In addition, the amendment also provides for more severe penalties in the form of increased fines. The range of fines for violations has been increased to up to RMB 5 million. In serious cases, a company's business license may also be revoked or withdrawn.

In addition to the imposition of fines, sanctions may also include entries in the Corporate Social Credit System. The authorities are also required to publish the results of investigations and sanctions.

As the amendment also targets bribery in business transactions, it introduces a dual penalty system that pun­ishes both the recipient and the giver of bribes. Specifically, the amendment provides for a fine of up to RMB 2 million for companies and RMB 500,000 for individuals who accept bribes in business transactions.

In addition, the sanctions under the AUCL or its amendment are not exhaustive. In principle, additional san­ctions may be imposed under other relevant laws if the violation of the AUCL also constitutes an offense under another such law. Examples include the Advertising Law and, most importantly, the Criminal Law.

On the other hand, the amendment introduces a new provision that allows sellers of illegal goods to avoid administrative sanctions if they can prove that they acted without subjective fault. However, the sale of such goods must be stopped immediately.

The amendment also imposes stricter documentation requirements on companies. All discounts, commissions and related financial transactions must be transparently recorded. This measure is intended to prevent finan­cial practices that could conceal bribery or other unethical behavior.

For managers and directors, the amendment introduces a new level of personal responsibility. They can no longer delegate ethical matters to compliance teams alone; they must actively monitor internal practices, im​­plement effective controls and promote a culture that prioritizes integrity. This includes ensuring transparent financial practices, actively preventing bribery and maintaining robust documentation to demonstrate com­pliance with the law.

In addition, companies that cooperate during an investigation or take proactive steps to mitigate harm may be subject to reduced penalties.

The amendment also introduces a new provision for acts of unfair competition committed abroad. If such an act is committed abroad and disrupts the domestic (Chinese) market or infringes the legitimate rights and interests of domestic enterprises, the act shall be dealt with or prosecuted in accordance with the provisions of the AUCL.

The amendment to the AUCL signals a further shift in how unfair competition and corporate misconduct will (or should) be dealt with in the future. For companies doing business in China, these changes mean greater scru­tiny, a higher risk of penalties and a stronger incentive to be proactive about compliance. The expansion of the definitions of unfair competition requires companies to carefully review their marketing, pricing and competi­tive strategies, especially in the digital space and on platforms. Failure to adapt to these changes could result in heavy fines, reputational damage or even loss of business license.

Conversely, companies that embrace these reforms and adapt their practices to the updated requirements can strengthen their market position and build trust with consumers and regulators alike. In addition, the amend­ment expands the "toolbox" for companies to take action against competitors and other market participants who use unfair means in their business dealings and (could) harm the company.

The final wording and effective date of the amendment remain to be seen. However, based on past experience, it is expected that only minor adjustments will be made.

Companies should use the amendment to the AUCL, even before it is finalized and enacted, as an opportunity to review and update their internal rules, in particular those relating to compliance, but also their business practices, documentation requirements, etc., especially in light of the expected additions to the law by the amendment to the AUCL:

On the other hand, the amendment to the AUCL also provides companies with extended protection, especially with regard to unfair competitive practices. This makes it easier for companies to take action against compet­itors who commit acts that are (still) acceptable under the current law, even though they may harm the com­pany.​