China: Stricter competition rules

The amendment to the AUCL broadens the definition of unfair competition. Firstly, it extends the list of misleading business practices that could lead to confusion among consumers. Another significant addition to the amendment relates to bribery and corruption. While the previous version of the law only prohibited the granting of bribes, the amendment now also prohibits their acceptance. This applies to individuals and organizations who could exploit their position to influence business decisions unfairly.

The amendment also imposes strict documentation requirements on companies. All discounts, commissions and related financial transactions must be transparently recorded. Further legislative changes address the issue of linking goods sales with prize draws, obstructing or disrupting online business activities, causing reputational damage in the course of business transactions, price dumping and exploiting a dominant position in the market. Additionally, a new provision has been introduced for unfair competitive practices committed abroad. According to this provision, if such an act is committed abroad and disrupts the domestic (Chinese) market or infringes the legitimate rights and interests of domestic companies, it can be dealt with or sanctioned in China in accordance with the AUCL provisions.

The amendment expands the investigative powers of supervisory authorities. Furthermore, it has tightened the sanctions regime. In addition to an increase in the range of fines for violating the law, responsible employees and managers can now also be held personally liable.

In light of the substantial amendments to the legal framework, companies should review and update their internal regulations, with particular emphasis on those pertaining to compliance, along with their business practices, marketing strategies, pricing policies, and competitive strategies, documentation requirements, and so forth.

Conversely, the amendment to the AUCL also grants companies extended legal protection as a result of the additions made. Companies now have better opportunities to take action against competitors who engage in activities that were still acceptable under the old version of the law.