The Law of the People's Republic of China for Countering Unfair Competition

 


Adopted on 2 September 1993 at the Third Session of the Standing Committee of the Eighth National People's Congress

Chapter 1 General Provisions

Article 1 With a view to safeguarding the healthy evelopment of the socialist market economy, encouraging and protecting fair competition, stopping acts of unfair competition, and defending the lawful rights and interests of operators and consumers, this law is enacted.

Article 2 In carrying on transactions in the market, operators shall follow the principle of voluntariness, equality, fairness, honesty and credibility, and observe generally recognized business ethics.

Unfair competition in this Law refers to acts of operators which contravene the provisions of this Law, damage the lawful rights and interests of other operators, and disturb the socio-economic order.

Operators in this Law refer to legal persons, other economic organizations and individuals engaging in the trading of goods or profit-making services (Goods mentioned below include services.).

Article 3 The People's Governments at various levels shall adopt measures to stop acts of unfair competition and create a salutary environment and conditions for fair competition.

The administrative authorities for industry and commerce in the People's Governments above the county level shall monitor and investigate acts of unfair competition. In respect of those acts which according to the provisions of various laws and administrative regulations, shall be monitored and investigated by other departments, these provisions shall be abided by.

Article 4 The State encourages, supports and protects all organizations and individuals in carrying out social monitoring of acts of unfair competition.

Staff members of State organs shall not support or cover up acts of unfair competition.

Chapter 2 Acts of Unfair Competition

Article 5 Operators shall not adopt the following unfair means to carry on transactions in the market and cause damage to competitors:

(1) passing off the registered trademarks of others;

(2) using, without authorization, the names, packaging or decoration peculiar to well-known goods or using names, packaging or decoration similar to those of well-known goods so that their goods are confused with the well-known goods of others, causing buyers to mistake them for the well-known goods of others;

(3) using, without authorization, the enterprise names or personal names of others on their own goods, leading to people to mistake them for the goods of others;

(4) forging or falsely using, on their goods, symbols of quality such as symbols of authentication and symbols of famous and high-quality goods, falsifying the origin of their goods, and making false representations which are misleading as to the quality of the goods.

Article 6 Public utility enterprises or other operators having monopolistic status according to law shall not force others to buy the goods of operators designated by them so as to exclude other operators from competing fairly.

Article 7 A local government and its subordinate departments shall not abuse their administrative powers to force others to buy the goods of operators designated by them and to restrict the lawful business activities of other operators.

A local government and its subordinating departments shall not abuse their administrative powers to restrict the entry of goods from other parts of the country into the local market or the flow of local goods to markets in other parts of the country.

Article 8 An operator shall not practise bribery using money, valuables or other means to sell or buy goods. Where an operator secretly pays a kickback to the other party, be it an entity or individual, off the book, it or he shall be punished for offering a bribe; where the other party, be it an entity or individual, secretly accepts a kickback off the book, it or he shall be punished for taking a bribe.

In the selling or buying of goods, an operator may express clearly its or his intention to offer a discount to the other party and pay a commission to the middleman. Where an operator gives a discount to the other party and pays a commission to the middleman, it or he must enter the items in the book factually. An operator accepting a discount or commission must enter it in the book factually.

Article 9 An operator may not use advertisement or other means to give false, misleading information on the quality, composition, performance, use, manufacturer, useful life, origin, etc. of the goods.

Advertisement operators may not act as an agent in designing, producing and releasing false advertisements where they clearly know, or should know, that the information in the advertisements is false.

Article 10 An operator may not adopt the following means to infringe on the business secrets of others:

(1) obtaining business secrets from the owners of rights by stealing, promising of gain, resorting to coercion or other illegitimate means;

(2) disclosing, using or allowing others to use business secrets of the owners of rights obtained by the means mentioned in the preceding section;

(3) disclosing, using or allowing others to use business secrets that he has obtained by breaking an engagement or disregarding the requirement of the owners of the rights to preserve the business secrets.

Where a third party obtains, uses or discloses the business secrets of others when it or he has or should have full knowledge of the illegal acts mentioned in the preceding section, it or he shall be deemed to have infringed on the business secrets of others.

Business secrets in this Article refer to technical information and operational information which is not known to the public, which is capable of bringing economic benefits to the owners of the rights, which has practical applicability and which the owners of the rights have taken measures to keep secret.

Article 11 An operator may not sell its or his goods at a price that is below the cost for the purpose of excluding its or his competitors.

In any of the following events, such sales do not come under acts of unfair competition:

(1) selling fresh goods;

(2) disposing of gods the useful life of which is about to expire or other overstocked goods; (3) seasonal lowering of prices;

(4) selling goods at lowered prices for paying off debts, changing the line of production or closing the business.

Article 12 In selling its or his goods, an operator may not make a tie-in sale against the wish of the buyer or attach other unreasonable conditions.

Article 13 An operator may not make the following kinds of sales with prizes attached:

(1) using the fraudulent method of falsely claiming the existence of prizes or intentionally causing previously determined people to win the prizes to make sales with prizes attached;

(2) promoting the sale of inferior but high-priced goods by offering prizes;

(3) making sales with prizes attached in the form of a lottery where the amount for the highest prize exceeds RMB 5,000 yuan.

Article 14 An operator may not utter or disseminate falsehoods to damage the goodwill of a competitor or the reputation of its or his goods.

Article 15 Tenderers may not submit tenders in collusion with one another to force the tender price up or down.

A tenderer may not collaborate with the party inviting tenders to exclude competitors from fair competition.

Chapter 3 control and Inspection

Article 16 The control and inspection authorities above the county level may exercise control over and carry out inspection of acts of unfair competition.

Article 17 In monitoring and investigating acts of unfair competition, the control and inspection authorities are entitled to exercise the following functions and powers:

(1) questioning operators under scrutiny, interested parties and witnesses, and requiring them to provide evidential material or other information related to acts of unfair competition;

(2) consulting and copying written agreements, account books, receipts, bills, vouchers, invoices, documents, records, business correspondence and other material;

(3) inspecting property related to acts of unfair competition as stipulated in Article 5 of this Law and where necessary, order operators under investigation to explain the source and quantity of the goods, temporarily stop selling them pending inspection, and not to remove, conceal or destroy them.

Article 18 When monitoring and investigating acts of unfair competition, members of the control and inspection authorities shall produce warrants of inspection.

Article 19 When the control and inspection authorities are monitoring and investigating acts of unfair competition, the operators under investigation, interested parties and witnesses shall truthfully provide them with relevant data or information.

Chapter 4 Legal Responsibility

Article 20 Where an operator, in contravention of the provisions of this Law, cause damage to another operator, i.e., the injured party, it or he shall bear the responsibility for compensating for the damages. Where the losses suffered by the injured operator are difficult to calculate, the amount of damages shall be the profit gained by the infringer during the period of infringement through the infringing act. The infringer shall also bear all reasonable costs paid by the injured operator in investigating the acts of unfair competition committed by the operator suspected of infringing its or his lawful rights and interests.

When the lawful rights and interests of the injured operator are damaged by the acts of unfair competition, it or he may institute proceedings in the People's Court.

Article 21 Where an operator passes off the registered trademark of another person, uses the enterprise name or personal name of another person without authorization, counterfeits or fraudulently uses symbols of quality such as symbols of authentication and symbols of famous and high-quality goods, falsifies the origin of the goods and makes false representations which are misleading as to the quality of the goods, it or he shall be punished in accordance with the provisions of the Product Quality Law of the P.R.C.

Where an operator uses, without authorization, the names, packaging or decoration peculiar to well-known goods or uses names, packaging or decoration similar to those of well-known goods so that its or his goods are confused with the well-known goods of others, causing buyers to mistake them for the well-known goods, the relevant control and inspection authority shall order it or him to stop the offence, confiscate the illegal income, and may impose, according to circumstances, a fine of more than twice and less than three times the amount of illegal income; where the circumstances are serious, the said authority may revoke its or his business licence; where an operator sells goods which are counterfeit or of inferior quality, constituting a crime, it or he shall be prosecuted according to law for its or his criminal liability.

Article 22 Where an operator practises bribery using money, valuables or other means to sell or buy goods, constituting a crime, it or he shall be prosecuted according to law for its or his criminal liability; where the act does not constitute a crime, the relevant control and inspection department may according to circumstances, impose a fine of more than RMB 10,000 yuan and less than RMB 200,000 yuan. Its or his illegal income, if any, shall be confiscated.

Article 23 Where public utility enterprises or other operators having monopolistic status according to law force others to buy the goods of operators designated by them so as to prevent other operators from competing fairly, the control and inspection authorities at the level of provinces or municipalities which are divided into districts shall order them to desist from the illegal acts and may punish them by imposing, according to circumstances, fines of more than RMB 50,000 yuan and less than RMB 200,000 yuan. Where the designated operators take advantage of the illegal arrangement to foist inferior but high-priced goods on buyers or make exorbitant charges, the control and inspection authorities shall confiscate the illegal income and may, according to circumstances, impose fines of more than twice and less than three times the illegal income.

 Article 24 Where an operator uses advertisement or other means to give false, misleading information on its or his goods, the relevant control and inspection authority shall order it or him to desist from the illegal act, dispel the bad influence, and may, according to circumstances, impose a fine of more than RMB 10,000 yuan and less than RMB 200,000 yuan.

Where an advertisement operator acts as an agent in designing, producing and releasing false advertisements when it or he clearly knows, or should know, that they are false, the relevant control and inspection authority shall order it or him to desist from the illegal act, confiscate its or his illegal income, and impose a fine on it or him according to law.

Article 25 Where any party infringes the business secret of another person in contravention of the provisions of Article 10 of this Law, the relevant control and inspection authority shall order it or him to desist from the illegal act and may, according to circumstances, impose on it or him a fine of more than RMB 10,000 yuan and less than RMB 200,000 yuan.

Article 26 Where an operator makes sales with prizes attached in contravention of the provisions of Article 13 of this Law, the relevant control and inspection authority shall order it or him to desist from the illegal act and may, according to circumstances, impose on it or him a fine of more than RMB 10,000 yuan and less than RMB 100,000 yuan.

Article 27 Where tenderers submit tenders in collusion with one another to force the tender price up or down, or where a tenderer collaborates with the party inviting tenders to prevent competitors from competing fairly, its or his successful bid is null and void. The control and inspection authority may, according to circumstances, impose on it or him a fine of more than RMB 10,000 yuan and less than RMB 200,000 yuan.

Article 28 Where an operator commits an act in contravention of an order to temporarily stop selling, and not to remove, conceal or destroy, property related to acts of unfair competition, the relevant control and inspection authority may, according to circumstances, impose on it or him a fine of more than twice and less than three times the price of the property which has been sold, removed, concealed or destroyed.

Article 29 Where a party is not satisfied with the decision on punishment made by the relevant control and inspection authority, it or he may, within fifteen days from the date of receipt of the decision on punishment, apply to the competent authority at the next higher level for reconsideration; where the party is not satisfied with the decision made after reconsideration, it or he may, within fifteen days from the date of receipt of the written decision made after reconsideration, institute proceedings in the People's Court; the party may also directly institute proceedings in the People's Court upon receipt of the decision on punishment.

Article 30 Where a local government and its subordinate departments, in contravention to the provisions of Article 7 of this Law, force others to buy the goods of operators designated by them, restrict the legitimate business activities of other operators, or restrict the normal flow of goods between regions, the higher authorities shall order them to rectify the situation; where the circumstances are serious, the competent authorities at the same level or the next higher level shall take disciplinary action against the persons directly responsible. Where the designated operators, taking advantage of this illegal arrangement, sell foist inferior but high-priced goods on buyers or make exorbitant charges, the control and inspection authorities shall confiscate the illegal income and may, according to circumstances, impose a fine of more than twice and less than three times the illegal income.

Article 31 Where a staff member of the State organ monitoring and investigating acts of unfair competition abuses his powers and neglects his duty, constituting a crime, be shall be prosecuted for his criminal liability according to law; where the act does not constitute a crime, he shall be disciplined administratively.

Article 32 Where a staff member of the State organ monitoring and investigating acts of unfair competition acts irregularly out of personal considerations and intentionally screens an operator from prosecution fully knowing that he has contravened the provisions of this Law, constituting a crime, the said staff member shall be prosecuted for his criminal liability according to law.

Chapter 5 Supplementary Provision

Article 33 This Law shall enter into force on 1 December 1993.