Revision to the Anti-Unfair Competition Law of the People's Republic of China

In order to conform to the trend of market development, the new revision to the Anti-Unfair Competition Law was adopted at the 30th Session of the Standing Committee of the 12th National People's Congress on 4 November 2017. The revision focused on detailed methods and investigation procedures relating to acts of unfair competition as well as the corresponding punitive measures, which came into effect on 1 January 2018.

The revision establishes several changes with regards to the following employment issues:

Trade secrets

• A new definition in Article 9 has clarified that a trade secret is technical or operational information which has "commercial value". In contrast with the "economic benefits and practical value" definition in the 1993 revision, the new revision has removed the requirement of practical value to offer wider protection for the information owned by businesses. Thus, certain trade secrets which seemingly have no practical use, but which have potential economic value, may also be protected under this article.
   
• Furthermore, the illegal acts that a third party knows or should know of when determining such third party's infringement have been made clear. These include acts of an employee or former employee of the rightful owner of trade secrets or any other entity or individual. Therefore, although certain businesses may not have obtained trade secrets directly from an employee, they could be punished in accordance with this article if the employee or former employee discloses the trade secret unlawfully.
   
• More importantly, the cost of the penalty has increased significantly. Article 21 indicates that the penalty for violation of Article 9 will range from RMB 0.1 to 3 million. The maximum penalty has therefore increased considerably compared to the 1993 limit of RMB 0.2 million.

Commercial Bribery

• The original clause which regulates taking bribes and offering bribes has been deleted from Article 7 of the new revision. Under the new law, only the offering of bribes is regulated, which is distinguished from the articles found in Criminal Law. Importantly, the new revision has added "to seek a transaction opportunity or competitive advantage" as the purpose of commercial bribery. This emphasises the competition requirement for this kind of bribe; bribes without such purpose or effect cannot be identified as commercial bribes even if they are made in the course of commercial activities.
   
• In addition, the potential subjects or parties who may be considered to receive bribes in a commercial bribery situation have been specified, namely:

1. any employee of the counterparty in a transaction;
2. any entity or individual entrusted by the counterparty in a transaction to handle relevant affairs; or
3. any other entity or individual that take advantage of their power or influence to manipulate a transaction.

• A new clause states that any employee's act of commercial bribery shall be deemed to be an act of the business operator which employs such employee, unless there is evidence to the contrary. "Business operator" is widely defined as a natural or legal person, or an organization that is not a legal person which is engaged in the manufacturing or trading of commodities or the provision of services. As a result, businesses should be concerned about the risk of being held liable for their employees' acts and pay more attention to the drafting of employment contracts in order to attempt to mitigate such risks.