Article 7 of the draft amendments stipulates that additional behaviours may constitute confusing conducts under the law
Some of these additions have been causing debate
The draft amendments introduce a provision on secondary liability, as well as strengthened legal liabilities
Background
In December 2024 the Standing Committee of the National People’s Congress reviewed draft amendments to China’s Anti-unfair Competition Law and released the same for further public comments. The draft amendments are built upon a version released by theShutterstock/crystal51State Administration for Market Regulation in 2022, which proposed thorough revisions to the law, ranging from general principles and speciffc forms of unfair competition conducts to legal liabilities.
This update aims to highlight the proposed changes, particularly in relation to confusing conducts and the relevant liabilities.
Confusing conducts
Article 7 of the draft amendments, corresponding to Article 6 of the Anti-unfair Competition Law, stipulates that additional behaviours may constitute confusing conducts:
unauthorised use of non-legal entity names, in addition to legal entity names;
unauthorised use of another's inffuential social media account name, application name or icon;
unauthorised use of another's registered or unregistered well-known trademark as part of a business name; and
unauthorised use of another's inffuential product name or business name as a search keyword.
The revisions are seemingly based on regulatory and judicial experience. They appear to clarify the intended scope of protection under the Anti-unfair Competition Law, rather than expanding the existing scope.
However, not all changes have been deemed appropriate. Questions have been raised as to the necessity of adding “inffuential social media account name, application name or icon”, which are already included in the catch-all “commercial identiffers” regulated under the current Article 6 of the law.
Another point causing debate relates to keywords. Keyword search advertising refers to a form of online advertising whereby advertisers bid on speciffc keywords or phrases. There are two typical ways of using third-party marks as keywords: explicit use and implicit use. Explicit use refers to visibly incorporating keywords into advertising content, namely in the webpage titles or descriptions. Courts typically ffnd that such acts constitute trademark infringement if registered marks are involved, or amount to unfair competition due to the use of third-party commercial identiffers. In contrast, implicit use involves embedding keywords solely in backend metadata, which is invisible to users. While various decisions have held that this does not violate Article 6 of the Anti-unfair Competition Law because there is no visible use of third-party commercial marks, some courts have leant toward a ffnding that implicit use is unethical and violates the general principles of good faith. While there are still divergent opinions, it seems premature to add keywords to the law without differentiating between explicit use and implicit use.
Secondary infringement liabilities
Article 7 of the draft amendments introduces a provision on secondary liability that expressly prohibits operators from aiding others in engaging in confusing behaviours by providing conveniences such as storage, transportation or other support services. This provision is intentionally broad, allowing for greater ffexibility in judicial practice whenidentifying and addressing facilitation behaviours. It underscores the responsibility of businesses not only to refrain from engaging in confusing practices, but also to avoid enabling such practices by others. This is in line with existing provisions in the Patent Law and Trademark Law. Article 22 further adds administrative liabilities for secondary infringement.
Strengthened legal liabilities
The draft amendments demonstrate the intention to strengthen enforcement measures and step up legal liabilities. Article 18 of the draft amendments provides that the administrative authorities may give a warning to the legal representative of an enterprise and demand that corrective measures be taken. Article 35 raises the amount of personal ffnes for impeding administrative investigations. Administrative ffnes have also been increased for various unfair competition conducts, such as trade secret infringement.
Extraterritorial jurisdiction
Article 40 provides that the Anti-unfair Competition Law may apply to extraterritorial conducts that have an adverse impact on domestic market order or business operators’ interests. This provision aims to ensure that there are adequate tools and provisions in place to address and mitigate the impact of such cross-border unfair competition activities.
Comment
The above are examples of the systemic changes proposed by the draft amendments. Many seem to echo with China’s recent policies and practice to tighten scrutiny over unfair competition behaviours, better safeguard commercial identiffers and prevent market confusion, all of which are critical in a rapidly evolving digital economy.
