In this article, we will talk about the unfair competition behaviors that are easy to ignore for market operators based on specific cases.
Author | Zhang Ying is a practicing lawyer/patent agent at Jiangsu Kunxiang Law Firm
Edit | Bruce
With the development of the market economy, business operators have shown their magic in order to be more competitive in the market, and business models have been updated and emerged in an endless stream, while some seemingly "normal" business models are actually acts of unfair competition, which will make enterprise operators face administrative penalties, civil compensation, and even criminal liability. In this article, we will talk about the unfair competition behaviors that are easy to ignore for market operators based on specific cases.
Behavior 1: The sale of counterfeit and confusing goods
【Links to legal provisions】
Article 6 of the Anti-Unfair Competition Law of the People's Republic of China
Article 14 of the Interpretation of the Supreme People's Court on <中华人民共和国反不正当竞争法>Several Issues Concerning the Application
Article 6 of the Anti-Unfair Competition Law stipulates that business operators shall not use the same or similar marks as the names, packaging, decorations, etc. of goods that have a certain influence on others without authorization, leading people to mistakenly believe that they are other people's goods or have a specific connection with others......”
Compared with the direct production and manufacture of counterfeit and confusing goods, it is easier to ignore the sale of counterfeit and confusing goods. Article 6 of the Anti-Unfair Competition Law stipulates that the act of confusing and unfair competition mainly regulates the act of "unauthorized use" of the mark of another person with a certain degree of influence, and this kind of "use" is generally carried out by the manufacturer of the goods, but for the seller of counterfeit and confusing goods, it only carries out the act of sale, is it also an act of unfair competition regulated by the Unfair Competition Law? In the 2022 annual report on intellectual property cases released by the Supreme People's Court, this issue is legally determined.
【Typical Cases】
Bairui Runxing (Beijing) Science and Technology Development Co., Ltd. and Xintai Pilot Decoration Engineering Co., Ltd. Civil Retrial Case of Unfair Competition Dispute (2022) Gao Gao Fa Min Zai No. 230
Bairui Runxing Company is the trademark owner of the "submarine" series of trademarks approved for use on faucets, floor drains and other goods. Pilot Decoration Company sells floor drain products marked with the words "Ningbo Submarine Sanitary Ware Co., Ltd." in the stores it operates. Bairui Runxing Company believes that the sales behavior of Pilot Decoration Company constitutes an act of unfair competition of "unauthorized use of the same logo as the name of the commodity with a certain influence on others, leading people to mistakenly believe that it is another person's goods or have a specific connection with others", so it filed a lawsuit with the court, requesting that Pilot Decoration Company be ordered to stop selling the floor drain products involved in the case marked with the relevant logo of "Ningbo Submarine Sanitary Ware Co., Ltd.", and compensate for the economic loss of 50,000 yuan.
(This picture is from the Internet, only to illustrate the case)
The courts of first and second instance held that the products involved in the alleged infringing floor drain products were unfair competition products, but the confusion carried out by the business operator as stipulated in Article 6 of the Anti-Unfair Competition Law refers to the act of use, which is the act of direct use, that is, the producer's act of producing, manufacturing and selling the allegedly infringing product, and does not include the sales act of merely acting as the seller of the allegedly infringing product, so the act of Pilot Decoration Company does not constitute an act of unfair competition as stipulated in the Anti-Unfair Competition Law of the Mainland. In addition, if it is determined that the seller constitutes unfair competition, it will increase the seller's duty of care, which will obviously impose a duty of care on the seller beyond its own ability, and will also greatly increase the transaction cost of the commodity and hinder the normal flow of the merchandise.
Dissatisfied with the judgments of the first and second instance, the company appealed to the Supreme People's Court. The Supreme People's Court held that both sellers and producers are entities involved in market operations, and both are business operators within the meaning of the Anti-Unfair Competition Law. Therefore, both unfair sales and production behaviors have an adverse impact on market competition and damage the legitimate interests of business operators and consumers, and sales behaviors should be regulated by the Anti-Unfair Competition Law. Where the goods sold by the seller are sufficient to mislead people into believing that they are the goods of others or have a specific connection with others, it constitutes an act of unfair competition as provided for in the Anti-Unfair Competition Law. In the end, the case ruled that the seller of the unfair competition product, Pilot Decoration Company, should bear the responsibility to stop the infringement and compensate for economic losses. In addition to case support, Article 14 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application, which came into effect on March 20, 2022, <中华人民共和国反不正当竞争法>also stipulates that if a business operator sells counterfeit and confusing goods, leading people to mistakenly believe that they are the goods of others or have a specific connection with others, and the party claims that the seller has violated the Anti-Unfair Competition Law, the people's court shall support it.
To sum up, the current Anti-Unfair Competition Law also puts forward higher requirements for business operators who only engage in sales behavior, as a seller, they should inspect and screen the products they sell, avoid selling counterfeit and confused goods, and also pay attention to preserving evidence that can prove that the goods were legally obtained (such as purchase contracts, purchase orders, etc.) when purchasing goods, so as to avoid bearing high economic compensation liability.
Behavior 2: Implicit commercial bribery
【Links to legal provisions】
Article 7 of the Anti-Unfair Competition Law of the People's Republic of China
Interim Provisions of the State Administration for Industry and Commerce on the Prohibition of Commercial Bribery
In some highly competitive industries, commercial bribery has gradually developed into "industry rules" and "unspoken rules" for enterprise operation, but its existence does not mean that it is reasonable, and commercial bribery is an act of unfair competition expressly prohibited by law. The more common means and forms include: giving a certain percentage of kickbacks to the buyer or its handlers, paying a certain amount of benefit fees (or hardship fees, referral fees, remuneration fees, activity fees, information fees, etc.) to intermediaries, offering bribes to the staff of the counterparty in the name of gifts or cash gifts on holidays or according to various customs, and reimbursing various expenses to the counterparty. In response to these obvious acts of commercial bribery, many enterprises have already taken the corresponding legal awareness, and when the enterprise is compliant, it has avoided commercial bribery through various methods such as employee anti-corruption training and setting up internal corruption handling systems. However, what enterprises tend to ignore is that some seemingly normal "business cooperation" may also be commercial bribery.
【Typical Cases】
Commercial bribery case of Suzhou Central Branch of China Continent Property & Casualty Insurance Co., Ltd. (Typical case of commercial bribery and unfair competition of the State Administration for Market Regulation)
In December 2018, an insurance company signed a three-year motor vehicle insurance cooperation agreement with an automobile trading company (hereinafter referred to as 4S store). During the cooperation period, the insurance company pays the service fee to the 4S store according to a certain percentage of the insurance premium when selling insurance in the 4S store, so that the 4S store can use the preferential policy when selling vehicles to affect consumers, and if the consumer does not buy the insurance of the insurance company, he will not enjoy the vehicle purchase discount given by the 4S store.
After investigation, the Market Supervision and Administration Bureau held that the service fees paid by the insurance company to the 4S store were commercial bribery, and this so-called cooperation model allowed the insurance company to seek more insurance transaction opportunities, which was an act of unfair competition, and finally, the Market Supervision Bureau imposed an administrative penalty of confiscation of illegal gains and fines on the insurance company in accordance with Article 7 of the Anti-Unfair Competition Law.
There are some "gray areas" in business operations, which require operators to strictly screen whether business activities have the risk of constituting commercial bribery. Generally speaking, the constitutive elements of commercial bribery are: 1. the subject element, the bribe giver is the business operator and its staff, and the bribe taker is the other party's unit or individual, including the staff of the counterparty, the unit or individual entrusted by the counterparty to handle relevant affairs, and the unit or individual who uses his authority or influence to influence the transaction; 2. the purpose element, which is to seek a transaction opportunity or competitive advantage; 3. the means element, and the two parties have a transfer or exchange of interests.
In addition, it should be noted that there are discounts or commissions paid to counterparties in commercial activities, and it is necessary to distinguish between these two and commercial bribery. The main boundary between normal discounts or commissions and commercial bribery lies in whether they are explicitly stated and recorded, and if the business operator clearly and truthfully records the discounts and commissions in accordance with the provisions of the financial accounting system on the financial accounts established in accordance with the law to reflect its production and business activities, it can effectively avoid being mistaken for commercial bribery. However, accounting cannot completely avoid all commercial bribery behaviors, such as some acts of giving property to the counterparty of the transaction under various names (promotional fees, publicity fees, sponsorship fees, scientific research fees, labor fees, consulting fees, reimbursement payments, etc.), even if it is truthfully recorded, if the purpose of the payment is to seek transaction opportunities or competitive advantages, it may still be recognized as commercial bribery.
Conduct 3: Comparative advertising that implies commercial defamation and false publicity
【Links to legal provisions】
Articles 8 and 11 of the Anti-Unfair Competition Law of the People's Republic of China
The Anti-Unfair Competition Law stipulates that business operators shall not make false or misleading commercial promotions of their goods, deceive or mislead consumers, and shall not fabricate or disseminate false or misleading information to damage the commercial reputation and reputation of their competitors. In order to choose a large space for the commodity, operators will take various ways to advertise in order to promote their own goods, and in many advertising schemes, the use of graphic analysis, field experiments, unpacking evaluation and other forms of comparative advertising caters to the preferences of consumers "shop around", which is a more efficient advertising method. However, because comparative advertising involves competitors' products, disputes can easily arise, and once false publicity and defamation of competitors are implied in comparative advertising, it will violate the Anti-Unfair Competition Law and constitute infringement.
【Typical Cases】
Unfair competition dispute between Xiaomi Technology Co., Ltd. and Chongqing Tianji Meike Technology Co., Ltd. (2020) Yu 01 Min Chu No. 755
Tianji company publicly broadcasts live on the website it operates,Respectively, the glory wisdom screen and Xiaomi TV disassembly,And evaluate in the form of comparison,The evaluation content includes startup、Picture quality、Sound quality evaluation and disassembly evaluation(Internal layout design,Components、Workmanship materials,Audio,LCD module、Backlight part),And made"Xiaomi TV boot speed is slow","Xiaomi TV picture quality is poor","Glory wisdom screen's electrical design、Component selection is more sincere"," Xiaomi TV reduces costs but sacrifices safety and maintainability", etc., which obviously have a more negative evaluation of Xiaomi products. Xiaomi believes that the video released by Tianji has seriously damaged its business reputation and product reputation, so it sued the court, demanding that Tianji delete the video and related articles, apologize, and compensate 10 million yuan for economic losses.
In this case, the court analyzed the technical indicators of Tianji's video evaluation one by one, and finally determined that 4 of the 7 technical indicators evaluated by Tianji were misleading information, which damaged Xiaomi's business reputation and product reputation, and Tianji violated Article 11 of the Anti-Unfair Competition Law of the People's Republic of China, constituting commercial defamation, and finally ruled that Tianji Company should bear the responsibility of eliminating the impact and compensating for economic losses of 2 million yuan.
Comparative testing can visually highlight the similarities and differences or advantages and disadvantages of the compared goods, provide consumers with more information, and at the same time motivate commodity operators to increase the price of the goods, so mainland law does not prohibit comparative advertising. However, on the other hand, there is also the possibility that comparative advertisements may be improperly used by business operators, so the law puts forward higher requirements for business operators who use comparative advertisements for publicity. The author suggests that operators should pay attention to the following points if they adopt the form of comparative advertising for publicity:
(1) Ensure that the comparative test in the comparative advertisement is objective, true and fair, and that the comparative test process is true, the position is neutral, the conditions are equal, the method is professional, and the comparison content is comprehensive;
(2) Avoid direct, obvious and affirmative comparison of the advantages and disadvantages of similar products, and it is not appropriate to blindly highlight their own advantages and elevate themselves in a way that derogates others;
(3) The content of the comparison should be limited to the general consumer use scenario, and excessive comparison or meaningless comparison should be avoided;
(4) Try not to appear the trademark or product appearance of the product being compared in the comparison advertisement, so as to avoid associating the relevant public with the product to be compared with the specific operator.
Behavior 4: Unauthorized capture and use of data and information
【Links to legal provisions】
Articles 2 and 12 of the Anti-Unfair Competition Law of the People's Republic of China
With regard to online production and operation, the Anti-Unfair Competition Law specifically provides that business operators are prohibited from using technical means to obstruct or undermine the normal operation of network products or services lawfully provided by other business operators by influencing user choices or other means. Common acts of unfair competition on the Internet include: inserting links or forcing target redirection into the network products or services lawfully provided by other business operators without their consent, misleading, deceiving, or forcing users to modify, close, or uninstall network products or services lawfully provided by other business operators, and maliciously making incompatible network products or services lawfully provided by other business operators.
In addition to the above-mentioned common situations, almost every Internet platform contains a large amount of data information, which has been operated and maintained by Internet platform operators for a long time, and the platform data information contains huge commercial value.
【Typical Cases】
Shanghai Hantao Information Consulting Co., Ltd. v. Beijing Baidu Netcom Technology Co., Ltd., a dispute over unfair competition in data and information (2015) Pu Min San (Zhi) Chu Zi No. 528
Hantao is the operator of Dianping.com, which collects a large amount of business information and attracts a large number of consumers to post reviews through experience. Baidu is the operator of "Baidu Map" and "Baidu Know", and "Baidu Map" also provides the review information of the merchant to network users when providing the geographic information of the merchant, of which most of the review information of the catering merchant mainly comes from Dianping.com. When Internet users search for the name of a restaurant on "Baidu Map", Baidu will directly provide the Internet user with review information from Dianping.com. Hantao argued that Baidu's massive capture and use of Dianping.com's review information constituted unfair competition, so it sued the court, requesting that Baidu be ordered to stop the unfair competition, compensate for economic losses and reasonable expenses, and eliminate the impact.
After the trial, the court held that there was a competitive relationship between Hantao and Baidu, and the user review information of Dianping.com was one of the core competitive resources of Hantao, which could bring competitive advantages to Hantao and had commercial value. Although Baidu's search engine crawled the information involved in the case on Dianping.com, it did not violate the Robots Agreement, but this does not mean that Baidu could arbitrarily use the information crawled by the search engine. Baidu's extensive and full-text use of the review information involved in the case substantially replaced Dianping.com to provide information to users, causing damage to Hantao, and its behavior violated the generally accepted principles of business ethics and good faith, constituting unfair competition.
At the time of the judgment, there was no provision in the Anti-Unfair Competition Law that specifically regulates unfair competition in the Internet field, so the case was decided in accordance with Article 2 of the Anti-Unfair Competition Law. With the rapid development of the Internet and AI technology in recent years, such cases have emerged one after another, and at present, such unauthorized data scraping behaviors are generally identified as "other acts that hinder or undermine the normal operation of network products or services lawfully provided by other business operators" in Article 12, Paragraph 4 of the Anti-Unfair Competition Law.
At the same time, they should also be vigilant against the unfair competition behaviors of competitors in the same industry, safeguard their legitimate rights and interests in a timely manner, and jointly protect the blue sky of market operations.
(This article only represents the author's point of view and does not represent the position of intellectual property)
封面来源 | Pexels
Illustration source | Author provided