How to protect the corporate reputation in current information age

These cases mainly focused on network infringement, demonstrate the China’s determination to better protect corporate reputation rights, and emphasizes the importance of protecting such right by law, in order to create a better business environment.

​Effective protection of corporate reputation

Several cases illustrate the importance of corporate reputation. Strengthening its protection is of great significance to enterprises.

The People’s Court ordered a self-media operator (somewhat comparable to an influencer), to bear responsibility for defaming the reputation of a real estate brokerage company by releasing “black articles” and punished for the malicious infringement.

In another case, the People’s Court also focused on the connection between the reputation of the founder of the enterprise and the reputation of the enterprise itself. The People’s Court held that derogatory remarks against the founder constituted an infringement of corporate reputation rights.

One case concerned immediate pre-litigation remedies: the behavior of a catering company and a food company were viewed as having a high possibility of infringement and had also aroused great social concern. The People’s Court supported the urgency of remedying the rights of the damaged enterprises and instructed behavioral preservation measures. These remedies stopped the damaging behavior affecting the reputation of the enterprises and prevented the damage from expanding.

Focus on network infringements

In practice, many acts infringing the corporate reputation are committed online through a network. The infringement spreads quickly and often causes much more serious impacts on the operation and development of enterprises. The released judicial cases show the People’s Court’s severe punishment of network related infringements.

In one case, an enterprise credit agency was held liable for wrongly associating information that affected the reputation of a company. The People’s Court urged the credit agency to strengthen its awareness of the protection of the corporate reputation rights of other enterprises while expanding its own business.

Case 5 concerned an automotive professional evaluator with certain expertise. The People’s Court held that he had a higher duty of care than ordinary consumers and had to act objectively and fair when publishing evaluations on automobiles. The evaluator’s comments about a specific automobile manufacturing company and its products were made without actual evaluation or other basis, lacked factual evidence and harmed the company’s reputation by lowering public perception of the products. The final judgement ordered the evaluator to publicly apologize and compensate for damages.

Sanctioning “smearing” behavior

Some media companies released false information about other companies in order to gain attention and followers.

In one case, a media company published inaccurate information about layoffs at a beverage company, alleging that the beverage company was in the process of laying off 20% of its employees. The fake news was widely disseminated, resulting in damages to the company’s reputation and disruption to its normal operations. The People’s Court ruled that the media company had infringed the beverage company’s corporate reputation right and ordered it to apologize and pay damages. The judgement tried to safeguard the legitimate rights and interests of the beverage company, but also to serve as deterrent for online media.

These cases illustrate the effort to achieve more comprehensive and equal protection of corporate reputation rights. They also serve as examples for timely and adequate remedies, aiming to create a more favorable business environment, promote fair competition and safeguard the legitimate rights and interests of the enterprises.

​Crisis Management Mechanisms

In case of negative information or a potential reputation infringement, companies should be able to promptly activate crisis management plans. This includes the ability to rapidly assessing the situation, formulating response strategies, and issuing official statements to clarify facts. Through these actions, the negative impact shall be reduced. Additionally, company managers should work closely with their own or an external public relations team to mitigate the impact through positive publicity. Therefore, it is essential for companies to establish a crisis management mechanism in advance. A good crisis management mechanism may facilitate the companies to maintain the brand image, enhance public trust, reduce economic losses, stabilize business operations and minimize legal risks. The crisis management mechanism normally includes public opinion monitoring by using network monitoring tools and professionals, regular risk assessments (including market risks, reputation risks and legal risks etc.) for identifying factors and events that may lead to damage to reputation rights, and establishment of crisis response team. Such team is often composed of senior corporate leaders, public relations department, legal department and marketing department. The mechanism further includes the formulation of crisis handling processes, as well as summarizing and reflection on the whole crisis management process afterwards.

Prompt Legal Actions

When corporate reputation damage is detected, companies need to promptly collect evidence. This can include, e.g., website screenshots, news reports, social media posts and evidence of economic loss. The evidence needs to be prepared in a form acceptable to the People’s Courts. Lawyers can preserve the evidence through notarization, blockchain technology, etc.

If necessary, companies can initiate legal proceedings to require the infringing party to cease the infringement, eliminate the negative impact, restore the company’s corporate reputation, make apology and compensate for economic losses. For malicious and untrue content on online platforms, companies may also request the online platforms to remove such infringing content or take other appropriate measures.

In urgent cases, companies may apply for a pre-litigation remedies at the People’s Court, in order to prevent the infringement from further expanding the damages in a timely and effective manner. If successful, such action can be a cost- and time-efficient way of dealing with the infringement.

Strengthening Intellectual Property Protection

Companies should enhance the protection of their brands, trademarks, domain names, and other intellectual property. They should regularly monitor the market to prevent malicious registrations of similar trade names or the use of similar marks that might cause confusion to the public. In China, Chinese consumers usually know the Chinese trademarks better than the foreign trademarks. The Chinese trademark is usually a transliteration of a company’s foreign house mark/tradename. As such, the registration of trademarks in Chinese characters is of great importance.

Internal Management and External Communication

Corporate reputation rights are core assets and crucial for a company’s survival and development. Any damage to corporate reputation can lead to a decline in customer trust, loss of market share, social credit and other severe consequences. Internally, companies should establish robust mechanisms for reviewing and approving external communications to ensure the accuracy and truthfulness of public-facing content. Externally, companies should strengthen communication with media and the public, respond promptly to social concerns, and build a positive corporate image.

Employees’ Legal Awareness

Companies may provide necessary legal training to their employees, so that they can understand how to avoid infringing others’ reputation rights and how to protect the company’s corporate reputation during daily work and online interactions. Relevant Code of Conduct can be stipulated clearly in the Employment Contract or in the company internal rules and regulation, such as the Employee Handbook.

Exercise Caution with Third-Party Evaluations and Reviews

When engaging third parties for product evaluations or credit ratings, companies should carefully select the credit agencies, conclude a proper service agreement with them, and closely monitor whether the evaluation process is fair and objective. In the service agreement, detailed quality control and breach of contract clauses are essential. 

Corporate reputation is an invaluable intangible asset in market competition, directly affecting brand image, competitiveness, and commercial value. In today’s information age, companies face increasingly complex public opinion environments. Therefore, the management should prioritize the corporate reputation protection by creating systematic crisis management mechanism in advance and promptly taking legal actions and adopting public relations strategies when infringement occurs, to safeguard the business interests.