Newly Revised Anti-Unfair Competition Law to Cut Off "Chokehold" of "Internal Vortex"

By Du Hengfeng, a commentator for EveryNews

On June 27th, the Standing Committee of the 14th National People's Congress passed the revised Anti-Unfair Competition Law, which will take effect on October 15th this year. As China's first law to promote fair competition, regulate market order, and ensure the healthy operation of the market economy, it has been in force for over 30 years since its implementation in 1993. Over the years, it has undergone two revisions in 2017 and 2019, with the latest revision being completed at this year's National People's Congress meeting.

As the market continues to evolve, unfair competition behaviors also manifest new forms, calling for corresponding updates to legal provisions. Compared to the 2019 version, I believe that the revised law precisely addresses the difficulties of "internal vortex" competition and has the potential to root out problems related to "internal vortex" from a legal system perspective.

To address "internal vortex" competition, it is first necessary to resolve the issue of low-price vicious competition. Low-price competition means that companies' profits are meager or even in deficit, making it difficult for them to sustain themselves from a commercial perspective. However, why does low-price competition continue to occur? On one hand, there is the phenomenon of inferior products driving out superior ones, where low-cost products with lower quality can still gain profits through low-price sales, harming consumers and normal businesses. On the other hand, large platforms use their dominant positions to force platform merchants to participate in various promotional activities at low prices and set unreasonable conditions such as "only refund" for them. Platforms thus expand their transaction scale and obtain more profits, while small and medium-sized businesses suffer greatly. To address this issue, the revised law explicitly states that operators shall not make false or misleading commercial propaganda about their products' performance, function, quality, sales status, user ratings, or previous awards, which is equivalent to strengthening the supervision of "inferior products". For platforms, the revised law specifically prohibits them from forcing platform merchants to sell goods at prices lower than cost through rules set by the platform.

To address "internal vortex" competition, it is also necessary to resolve the issue of "chain leaders" abusing their market position. Large enterprises in industries such as manufacturing and engineering have a monopoly on the pricing power of final products and supply chains. Some "chain leaders" use methods such as delaying payments, constantly demanding suppliers reduce prices, and pressing down-stream wholesalers for goods to concentrate the benefits and resources of the entire industry chain to themselves, thereby gaining an asymmetric competitive advantage and launching marketing wars against their peers. To address this issue, the revised law adds new provisions: large enterprises shall not abuse their advantageous positions in terms of funds, technology, transaction channels, and industry influence, requiring small and medium-sized businesses to accept clearly unreasonable payment periods, methods, conditions, and breach-of-contract responsibilities.

To address "internal vortex" competition, it is also crucial to resolve the issue of mutual squeezing between enterprises. The more intense the competition, the more serious the phenomenon of products becoming homogeneous. Mutual squeezing between enterprises then becomes more prevalent. Under the influence of benefits, various online water armies or black mouths may deliberately belittle their opponents' products or fabricate various "small essays" to smear companies, and even directly attack entrepreneurs, seriously disrupting market order. The revised law states that operators shall not fabricate, disseminate, or instruct others to fabricate or disseminate false information or misleading information, which harms the business reputation and product image of other enterprises.

In addition, addressing "internal vortex" competition also requires resolving non-market factors that disrupt market order. A reasonable profit margin is a key factor for companies to decide whether to expand investment and continue production. However, non-market factors changed the costs for companies, providing space for "internal vortex" competition. For example, local businesses receive customized subsidies, excluding out-of-town enterprises; artificial tax havens allow companies to maintain operations even at low prices; or specific enterprises receive low-priced land, capital, labor, and other production factors to create unfair competitive advantages. The revised law includes the establishment of a comprehensive review system for fair competition, aiming to eliminate these non-market factors' interference and ensure that all types of businesses use production factors in accordance with the law and participate fairly in market competition.

"Internal vortex" competition is a manifestation of market disorder, which cannot be fundamentally resolved through self-regulation by enterprises or industry self-discipline. Only legal safeguards can effectively maintain market order and commercial ethics. The revised law expands the scope of supervision over violative behaviors, allowing any unit or individual to report suspected unfair competition activities to the supervisory department, and the supervisory department should handle reported cases according to law in a timely manner; it also increases the intensity of punishment for violative behaviors, such as increasing the maximum fine for commercial bribery from 3 million yuan to 5 million yuan, establishing new rules for platform forced sales, with fines ranging from 50,000 to 2 million yuan; and strengthening the supervisory hierarchy, such as requiring provincial-level or higher government departments to order corrections within a certain time frame for abuses of advantageous positions.

Revising the Anti-Unfair Competition Law has long been a topic of great concern for society. Legal prohibitions are the red lines that companies cannot exceed, and exceeding them will result in legal sanctions, which have significant social guidance implications. In terms of governing "internal vortex" competition, the newly revised Anti-Unfair Competition Law is bound to play a huge role.