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18 January, 2018
China’s amended Anti-Unfair Corruption Law (AUCL) has been in force only a matter of weeks, yet the body charged with investigating potential AUCL violations, the State Administration for Industry and Commerce (SAIC), has already announced two investigations. China’s Nanjing and Hefei AICs are the municipal arms of SAIC reported to be investigating separate alleged breaches of the “acts of confusion” offences under Article 6. The investigations involve alleged theft of characters / writing style and misuse of brand names and product design, respectively. The investigations appear to capitalise in part on the looser criterion for confusion under the new law (sufficiency to mislead).
Background – “Acts of Confusion” under the AUCL 2018
Article 6 of the AUCL prohibits businesses from misleading people about their products. In particular, they are prevented from using, without permission:
- a label identical or similar to the name, packaging or decoration of another.
- another person or company’s name (including abbreviations and trade names).
- the principal part of a domain name, the name of a website, or a web page.
Finally, Article 6(4) prohibits a business from performing "confusing acts" which could cause people to mistake a business' products for the products of another, or lead people to believe that there is a relationship between that business' products and those of another.
Article 6 amends the ambit of the old AUCL “acts of confusion” offences in a number of ways. In particular, offences now address online breaches but remove reference to trade mark theft (which is dealt with in other legislation). Article 6 has also been bolstered by Article 6(4), which creates a residual offence for other acts of confusion which mislead people. It is noteworthy that the current investigations appear to involve this provision. It is understood that SAIC believes that the AUCL’s clarification of “misleading conduct” under Article 6 will help local AICs further curb anticompetitive conduct.
Regulatory action taken under Article 6
Press releases issued by SAIC indicate that the Nanjing AIC in Jiangsu is investigating a fertiliser company which is alleged to have used, via digital and distribution channels, the words and marks of competitors, resulting in dealers and farmers being misled.
Meanwhile, Hefei AIC in Anhui is investigating the alleged unauthorised use of well-known liquor brand names, packaging and bottle shape. Investigators have seized more than 2000 bottles of liquor, at various wholesale markets. Law enforcement officers are now investigating the sale and purchase records.
Comment
When new legislation is passed, there can often be a significant hiatus before its provisions are invoked. Due the investigative prowess of the SAIC and its local AICs, we should perhaps not be surprised to see the AUCL’s new provisions being deployed immediately. The SAIC’s investigative, disciplinary and regulatory powers over corporates are far-reaching and we should expect an uptick in both investigations and administrative penalties as a result of the new law. We also anticipate that SAIC and local AICs will publish implementation rules this year, which will help clarify the AUCL's revisions.
We will continue to follow developments closely, particularly whether other long-awaited provisions of the AUCL are enforced in the coming months. In any event, companies should ensure they are familiar and compliant with the requirements of the amended AUCL.
For further information, please contact:
Kyle Wombolt, Partner, Herbert Smith Freehills
kyle.wombolt@hsf.com
