Overview of the Judicial Interpretations on Relevant Issues Concerning the Application of the PRC Anti-Unfair Competition Law
On 17 March 2022, the PRC Supreme People’s Court ("SPC") published the Judicial Interpretations on Relevant Issues Concerning the Application of the Anti-Unfair Competition Law of the People's Republic of China ("Interpretations"). The Interpretations took effect on 20 March 2022. On 17 March 2022, the judges in charge of the Civil Division III of the SPC also held a press conference (“Press Conference”) on the Interpretations.
The Interpretations provide for further judicial explanations on, among others, the application conditions of Article 2, the acts of confusions as stated in Article 6, and the online unfair competing behaviors as stated in Article 12 of the PRC Anti-Unfair Competition Law (“AUCL”). Below is an overview of the key content of the Interpretations.
1. According to Article 1 of the Interpretations, if a business operator’s activities (“Relevant Activities”) disrupt the market competition order, harm the lawful rights and interests of other business operator(s) or consumers, and in case these Relevant Activities are not governed either by Chapter II of the AUCL or the PRC Patent Law, the PRC Trademark Law or the PRC Copyright Law, then such Relevant Activities may be governed by Article 2 of the AUCL (please see more information in Item 2 below), i.e. they might be considered as unfair competition acts under the AUCL.
Thus, Article 1 of the Interpretations seems to be a catch-all clause, i.e., in case there are no applicable laws/legal provisions to the Relevant Activities, the People’s Court may, according to Article 1 of the Interpretations, determine whether such Relevant Activities are unfair competition acts and, thus, in violation of the AUCL.
2. According to Article 2 of the AUCL, while carrying out production or business activities, a business operator shall follow the principles of voluntariness, equality, fairness and good faith, abide by laws and business ethics. The term “unfair competition act” in the AUCL means that the act conducted by a business operator in the course of its production or business activities is in violation of the AUCL, disrupting the market competition order, harming the lawful rights and interests of other business operator(s) or consumers.
The Interpretations provide for further standards for determining “other business operator(s)” and “business ethics” as stated in Article 2 of the AUCL.
a) According to Article 2 of the Interpretations, a market entity which competes for a trading opportunity with the business operator or undermines a competitive advantage of the business operator in the course of the latter’s production or business activities may be considered as "other business operator(s)" according to Article 2 of the AUCL.
Thus, our understanding is that it is not necessary for the business operator and other business operator(s) to be direct competitors or in the same industry. The competing relationship might also be considered to exist, if, e.g. they compete for an online trading opportunity.
b) According to Article 3 of the Interpretations, a code of conduct generally followed and recognized in a specific commercial field can be considered by the People’s Courts as "business ethics" as stated in Article 2 of the AUCL. Article 3 of the Interpretations further lists the factors to be considered, including, the state of the mind of the business operators, the willingness of the counterparties, the impact on the rights and interests of consumers, the market competition order, and the social public interest.
Considering that from time to time it is unlikely to have a generally followed and recognized standard for some business activities in certain industries (e.g., the internet industry), Article 3 of the Interpretations continues to state that the People’s Courts may also make reference to the professional standards or the technical standards, etc. formulated by the relevant industry authorities, industry associations or self-regulatory organizations. As pointed out in the Press Conference, one of the purposes of this is to facilitate the relevant industry authorities, industry associations or self-regulatory organizations to formulate more professional standards or technical standards, and, thus, to provide guidance for the establishment of the business ethics in the concerned industries.
Thus, our understanding is that the term “business ethics” stated in Article 2 of the AUCL cannot be simply considered to be the same as the daily moral standards. Further, it is not necessarily that business ethics are generally accepted and well known as far as a specific commercial field is concerned.
3. The Interpretations (from Article 4 to Article 15) provide for further explanations on “acts of confusion” as stated in Article 6 of the AUCL, including, among others, the terms “with influence to a certain extent”, “decoration”, “name of an enterprise”, and “facilitations to the act of confusion of another party”.
According to Article 6 of the AUCL, a business operator shall not perform any of the following acts of confusion, which lead to a misunderstanding that the products are the products of another party or that there is a specific connection with another party: (i) unauthorized use of a mark that is identical or similar to another party’s product name, packaging or decoration, which are with influence to a certain extent; (ii) unauthorized use of the following names with influence to a certain extent, including an enterprise’s name (including abbreviated name, trade name and the like), a social organization’s name (including abbreviated name and the like), or an individual’s name (including pseudonym, stage name, translated name, and the like); (iii) unauthorized use of the main part of a domain name, the name of a website or a webpage, which are with influence to a certain extent; or (iv) any other act of confusion that is sufficient to lead to a misunderstanding that the products are another party’s or that there is a specific connection with another party.
a) Article 4 of the Interpretations further clarifies the meaning of the term “mark with influence to a certain extent” as stated in subparagraph (1) of the first paragraph of Article 6 of the AUCL, i.e., it refers to a mark with certain market awareness and distinctive characteristics that can identify the source of the products bearing such mark. Article 4 of the Interpretations also lists the factors to be considered in order to determine whether a mark has certain market awareness, including, among others, the level of the public awareness within China, the time, territory, amount, and target of the sales of the products, the duration, degree, and geographical scope of the promotion for the products, and the protection status of the mark.
b) Article 8 of the Interpretations states that the term “decoration” as stated in subparagraph (1) of the first paragraph of Article 6 of the AUCL may be determined based on a business operator’s overall business image with a unique style, consisting of, among others, the ornaments in the business place, the style of the business utensils, and the dress style of the business personnel.
c) Article 9 of the Interpretations is about the enterprise’s name, i.e., an enterprise’s name legally registered with the market supervision authority, or the name of an overseas enterprise used for commercial purposes in China, may be determined by the People’s Courts as the “name of an enterprise" as stated in subparagraph (2) of the first paragraph of Article 6 of the AUCL.
d) Articles 12 and 13 of the Interpretations state that the term “a misunderstanding that the products provided by a business operator are those of another party or have a certain connection with another party” as stated in subparagraph (4) of the first paragraph of Article 6 of the AUCL include, among others: (i) a misunderstanding that there is a certain connection through commercial association, licensed use, naming sponsorship, advertising endorsement or otherwise, with another party; (ii) the use on identical goods of a product name, packaging, decoration or any other mark which are identical to or basically no visual difference from that of another party shall be deemed sufficient to cause confusion with another party’s mark with influence to a certain extent; (iii) the use of a registered trademark or an unregistered well-known trademark of another party as the trade name in its enterprise’s name to mislead the public.
e) Article 15 of the Interpretations provides that under the circumstances where a party intentionally provides facilitations to the act of confusion of another party such as storage, transportation, post, printing, concealment and business premises, such party shall be held liable according to Article 1169 of the PRC Civil Code, i.e. such party shall assume joint and several liability with the other party which has conducted the act of confusion.
Our understanding is that the provisions (from Article 4 to Article 15) in the Interpretations, especially those on the terms “with influence to a certain extent” and “a misunderstanding that the products provided by the business operator are those of another party or have a certain connection with another party” provide more practical guidance for the People’s Courts in practice when they determine whether an “act of confusion” as stated in Article 6 of the AUCL is established.
4. Articles 21 and 22 of the Interpretations provide further explanations on the terms "forcing a URL redirection" and " maliciously interfering with the users" in the internet industry as stated in subparagraphs (1) and (2) of the second paragraph of Article 12 of the AUCL.
According to Article 12 of the AUCL, a business operator that makes use of the internet to engage in production and business activities shall not, by taking advantage of technical means, through influencing users’ choices or in other ways, perform any of the following acts that impede or disrupt the normal operation of network products or services legally provided by other business operator(s): (i) inserting a link or forcing an URL redirection in a network product or service legally provided by other business operator(s) without the consent of the latter; (ii) misleading, deceiving or compelling users into modifying, closing, or uninstalling a network product or service legally provided by other business operator(s); (iii) maliciously causing the implementation of incompatibility with a network product or service legally provided by other business operator(s); or (iv) any other act that impedes or disrupts the normal operation of network products or services legally provided by other business operator(s).
a) According to Article 21 of the Interpretations, the term “forcing a URL redirection” refers to a redirection of the link without the consents of both the other business operator(s) and the users. Thus, if a URL redirection is initiated by the users, whether such redirection constitutes a violation of subparagraph (1) of the second paragraph of Article 12 of the AUCL will depend on the following factors, among others, the specific way that the link was inserted, whether it is justifiable, and the impact on the interests of the users and that the other business operator(s).
b) According to Article 22 of the Interpretations, if a business operator, without both giving a prior express notice to the users and obtaining the consent from the users, maliciously interferes with or sabotages a network product or service legally provided by other business operator(s) by means of misleading, deceiving or compelling any users into modifying, closing or installing the product or service or by any other means, it may be considered as violating subparagraph (2) of the second paragraph of Article 12 of the AUCL.
Our understanding is that Articles 21 and 22 of the Interpretations provide more practical guidance for the People’s Courts to determine whether an unfair competition act in the internet industry constitutes "forcing a URL redirection" or "maliciously interfering with users" as stated in subparagraphs (1) and (2) of the second paragraph of Article 12 of the AUCL. However, considering the rapid development of the technology and business models in the internet industry, the Interpretations do not further list the types of unfair competition acts in the internet industry as stated in subparagraphs (3) and (4) of the second paragraph of Article 12 of the AUCL.
5. Conclusion
Overall, the implementation of the Interpretations contributes to strengthening the judicial system against unfair competition acts, strengthening the basic position of competition policy, and promoting the formation of a uniform domestic market with fair competition.
This article was authored by Aiping Bao who has now left CMS.
