China’s new Anti-Unfair Competition Law (the New Law) was promulgated by the Standing Committee of the National People’s Congress on November 4, 2017 and will take effect from January 1, 2018, by which date the current version of the law promulgated back in 1993 will cease to be effective.
Whilst the New Law covers different forms of unfair competition practices, this briefing only focuses on the provisions with regard to bribery in commercial transactions.
Since the first draft of the New Law was published for public consultation in early 2016 (the First Draft Amendments), there have been a few amendments made to the draft and the final version of the New Law has deviated significantly from the First Draft Amendments as far as the provisions on bribery are concerned.
By way of background, the current Anti-Unfair Competition Law had long been subject to market criticism due to the fact that it failed to set out clear parameters for the offence of commercial bribery1. Although some clarity was provided in the Interim Provisions on Banning Commercial Bribery (SAIC Provisions) issued by the State Administration for Industry and Commerce (SAIC, being one of the anti-bribery enforcement agencies in China) in 1996, the line had never been clear between permissible business incentives offered to transaction counterparties and impermissible commercial bribery1. As a result, SAIC’s local counterparts exercised great discretion in the interpretation and enforcement of the law in practice and different opinions often existed as to whether or not a particular act amounted to bribery.
The market therefore expected the New Law to clarify what exactly would be treated as bribery in the commercial arena.
To provide a complete picture, we compare in this article the relevant provisions in the current Anti-Unfair Competition Law, the Frist Draft Amendments and the New Law in order to better understand the implications of the New Law. We focus on three elements which are most relevant in this context: (i) what practices would constitute bribery, (ii) whether a business counterparty would be a briber-taker, and (iii) whether a corporate would bear liability for its employees’ bribery activities.