China publishes online unfair competition regulations

Out-Law News | 19 Aug 2021 | 4:16 am | 1 min. read

Chinese regulators have issued draft regulations for internet companies, banning unfair competition and restricting the use of people’s data.

The regulations target types of unfair competition made possible by new technologies.

Internet operators “must not implement or assist in the implementation of unfair competition on the internet, disrupt the order of market competition, affect fair transactions in the market,” according a statement of the State Administration for Market Regulation (SAMR).

The draft summarises new forms of unfair competition including online false advertising, false trading and online defamation.

Under the draft regulations companies will be banned from fabricating or circulating misleading information to damage a competitor's reputation and will be required to stop marketing practices including false reviews, and coupons, card vouchers or ‘red packets’ used to induce positive reviews.

The draft prohibits the use of technical means to commit acts of unfair competition including obstruction and interference, and other unfair competition on the internet. Specifically, business operators must not use data or algorithms to hijack data traffic or influence users' choices. They must not use technical means to unlawfully capture or use the data of other business operators.

The draft also would ban on “two-choose-one”, which e-commerce companies use to ban merchants from listing on rival platforms by way of incentives or hidden suppression or to engage in exclusive deals.

It is reported that the rules are currently open to public feedback till 15 September.

E-commerce expert Leo Xin of Pinsent Masons, the law firm behind Out-Law, said: “The draft regulations clarify certain controversial issues in practice and unifies the criteria on what actions of internet-based companies are prohibited from unfair competition law perspective. In the long run, this will protect the customers’ rights and facilitate the health development of the internet sectors.”