China market regulator issues draft regulations on unfair competition by digital platforms
China market regulator issues draft regulations on unfair competition by digital platforms

The State Administration for Market Regulation (SAMR), China’s top market regulator, on Tuesday issued draft regulations for banning unfair competition on the internet and restricting the use of user data. The regulations have been drafted under the Law Against Unfair Competition, the Electronic Commerce Law, and the Administrative Punishments law.

Business operators have been prohibited from implementing or assisting unfair competition on the internet, including but not limited to disrupting the order of market competition, affecting fair transactions in the market, or directly or indirectly damaging the lawful rights and interests of other operators or consumers.

Businesses are further prohibited from confusing customers through unauthorized usage of the same or similar logos, product names, designs, etc. They are also prohibited from employing false or misleading commercial publicity on attributes such as performance, function, quality, honors, sales status and business data of the operators themselves or their products. Additionally, they cannot use the internet to fabricate or spread false or misleading information to damage the commercial reputation and product reputation of competitors.

Market Supervision Departments at the county level have been empowered to investigate and deal with acts of unfair online competition. Units or individuals have the right to report suspected acts of unfair online competition and industry associations have been encouraged to conduct research and analysis to guide compliance towards the regulations. For new and difficult cases, the departments may hire expert observers to assist in the investigation.

The SAMR stated that these regulations have been brought with the objective to “stop and prevent acts of unfair competition on the Internet, maintain fair competition in the market order, protect the legitimate rights and interests of operators and consumers, and promote the sustainable and healthy development of digital economy regulations.”

Soon after the publication of these regulations, shares of listed technology stocks in Hong Kong, such as Tencent and Alibaba, declined sharply. The move falls within a recent series of actions by the SAMR against tech giants. In April, Alibaba was hit a fine of CN¥ 18 billion (US $2.75 billion), the largest in the country’s history. In July, Tencent was fined CN¥ 500,000 (US $77,000) and ordered to relinquish all exclusive music label rights.

The rules are open for public feedback until 15 September. When adopted, they will join another set of rules against digital monopolies that were issued in February.