Unfair Competition

Overview

Unfair competition is governed principally by the Anti-Unfair Competition Law (反不正当竞争法), most recently amended in 2019. It targets conduct that harms other businesses or consumers through means other than lawful market competition — deception, misappropriation, and confusion rather than mere "hard competition."

For overseas companies, the most important provisions are those on trade secrets and on confusion/passing off, because these are the weapons of choice for local competitors against foreign entrants.

The prohibited acts

• Confusion / passing off (混淆行为) — using a name, packaging, decoration, domain name, or business sign that is identical or confusingly similar to another's well-known marks, product names, or trade dress.
• False or misleading advertising (虚假宣传) — making deceptive claims about a product's quality, origin, ingredients, or performance.
• Commercial bribery (商业贿赂) — paying bribes to win business or favour.
• Trade-secret misappropriation (侵犯商业秘密) — acquiring, disclosing, or using another's trade secrets by theft, bribery, fraud, coercion, or in breach of a confidentiality obligation.
• Unfair online conduct (网络不正当竞争) — technical means such as malicious pop-ups, false clicks, or misleading prompts that disrupt another's online business.

Trade secrets — the 2019 shift

A trade secret is technical or business information that is not publicly known, has commercial value, and is subject to reasonable confidentiality measures. The 2019 amendment materially strengthened protection:

• Burden shift — once the rights holder shows the information qualifies as a trade secret and that the defendant had access, the burden can shift to the defendant to prove the information was lawfully obtained.
• Higher damages — statutory damages up to RMB 5 million, and punitive damages of one to five times for wilful, serious infringement.
• Interim measures — the ability to seek injunctions and evidence preservation early.

The lesson for foreign companies is that trade-secret protection depends on actually having confidentiality measures: NDAs, access controls, marking of confidential material, and employee policies. Without those, a court may find there was no "trade secret" at all.

Common scenarios

• Former employee or partner takes your secrets — customer lists, formulas, source code, or manufacturing know-how walk out the door to a competitor.
• Passing off your brand — a competitor adopts a near-identical Chinese name, logo, or packaging to ride on your goodwill.
• False advertising against you — a competitor disparages your product or inflates its own to win customers.
• Unfair online interference — malicious actions that divert or disrupt your traffic or listings.

Enforcement routes

• Administrative enforcement — complain to the State Administration for Market Regulation (SAMR), which can investigate, order cessation, and impose fines. Often the fastest route to stop passing off or false advertising.
• Civil litigation — sue for injunctions and damages in the people's court. Trade-secret cases are among the most technically demanding to prepare.
• Criminal referral — serious trade-secret misappropriation can be referred to the public security authorities for criminal prosecution.

What you need to win

1. Establish the right exists — for trade secrets: secrecy, value, and confidentiality measures. For passing off: your prior reputation or registration.
2. Prove the conduct — the defendant's confusing use, deceptive statements, or misappropriation.
3. Show harm or risk — actual or threatened damage to your business.
4. Preserve evidence — notarise online conduct, preserve documents, and consider interim measures before the competitor covers its tracks.

Practical guidance

• Put confidentiality measures in place before a dispute — NDAs, access controls, and clear marking are what make a trade secret a trade secret.
• Register your Chinese-language marks and names so passing off is easier to attack.
• Move fast on employee defections to competitors — evidence degrades quickly.
• Combine administrative and civil routes: a SAMR action can stop the conduct quickly while a civil suit pursues damages.