On May 11, 2024, China's top market regulator, the State Administration for Market Regulation (SAMR) announced the Interim Regulations on Anti-Unfair Competition on the Internet ("the Regulation"), aimed at preventing and curbing unfair competition online and promoting the healthy development of the digital economy. The Regulation, which establishes and clarifies the "traffic light" rules for online competition behaviors, will take effect on September 1, 2024.

Before the announcement of the Regulation, the SAMR had released the Regulations on Prohibiting Unfair Competition on the Internet (Draft for Comments) on August 17, 2021, to solicit public opinions. As a supplementary regulation to the Anti-Unfair Competition Law, the Regulation is the first significant administrative regulation in the field of unfair competition since the enactment of China's first Anti-Unfair Competition Law in 1993, and it summarizes China's experiences in addressing online unfair competition since the law's amendment in 2017. Currently, China is undergoing the third amendment of the Anti-Unfair Competition Law, which has been included in the legislative work plan for 2024 by China’s national legislature, the Standing Committee of the National People's Congress for review. According to the Anti-Unfair Competition Law (Draft for Comments) published on November 27, 2022, one of the main contents of the third revision is the improvement of rules against unfair competition in the digital economy. The Regulation closely aligns with and responds to the trends of this new round of amendments, offering significant guidance and practical value.

The Regulation consists of five chapters and 43 articles, divided into General Provisions, Online Unfair Competition Behaviors, Supervision and Inspection, Legal Liabilities, and Supplementary Provisions. The main contents are as follows:

1. Detailed listing of online unfair competition behaviors. The Regulation categorizes and refines online unfair competition behaviors and establishes clear standards. It specifies new forms of traditional unfair competition behaviors such as passing off, confusion and false advertising in the online environment, and addresses hot issues like fake orders and manipulated reviews (sellers' deceitful techniques to boost ratings), fake reviews for cashback, and the fabrication of traffic and interaction data. Further, it details other forms of online unfair competition, listing behaviors such as traffic hijacking, intentional interference, and malicious incompatibility, along with the criteria for their identification. The Regulation also regulates new types of unfair competition conducted through technological means, such as illegal data acquisition and discriminatory treatment. Additionally, it includes a catch-all clause to provide a basis for regulating "other forms of online unfair competition."

2. Strengthening the responsibilities of platform operators. The Regulation emphasizes the responsibilities of platform operators, urging them to regulate competition behaviors within their platforms, take necessary measures against unfair competition, and report such activities. It also addresses issues such as platforms abusing data algorithms to gain competition advantages and using service agreements and trading rules to restrict transactions.

3. Optimizing enforcement and case handling procedures. The Regulation clarifies the general jurisdiction principles for cases of online unfair competition and makes special provisions for the jurisdiction of significant cases based on the characteristics of online unfair competition behaviors. Additionally, the Regulation establishes an expert observer system to provide intellectual support and technical assistance for addressing complex issues.

4. Clarifying legal responsibilities. The Regulation links the legal liabilities of unfair competition behaviors to the Anti-Unfair Competition Law, E-commerce Law, Anti-Monopoly Law, and Administrative Penalty Law, enhancing the combined effect of legal regulations in market supervision. It also specifies the legal liability for confiscating illegal gains to strengthen regulatory effectiveness.

Overall, within the context of building a unified national market in China, the Regulation serves as an important institutional safeguard guiding businesses towards orderly competition and innovative development. It will also become a crucial legal basis for market supervision authorities in enforcing laws against online unfair competition. 

Rights holders suspecting online unfair competition behaviors have the right to report to the market supervision authorities, which should respond promptly. In practice, courts have accepted most disputes over online unfair competition and have gradually accumulated trial rules. After the implementation of the Regulation, resolving disputes over online unfair competition through administrative channels may present a new scenario. Meanwhile, in traditional judicial channels, the Regulation may serve as one of the bases for adjudication reasoning in disputes over online unfair competition. Additionally, businesses involved in online activities are recommended to conduct compliance reviews in advance based on the Regulation and reassess online activities, to avoid compliance risks related to online unfair competition.

For more information or comments, please contact lesliexu@changtsi.com.