Reed Smith Client Alerts

The first half of 2018 saw a number of significant changes to the Chinese anti-corruption regime, including amendments to the Anti-Unfair Competition Law and formation of new anti-corruption regulatory bodies. Amidst an anti-corruption campaign in China that continues to gain traction, companies operating in the country should continually evaluate whether current business models run afoul of the latest regulations. This article discusses several of these key changes to the anti-corruption landscape and the implications for multinational corporations operating in China.

Authors: Calvin Chan Victor Huang Steven Li Yang Bai

1. Revamped Anti-Unfair Competition Law

Last year, the Standing Committee of the National People’s Congress passed revisions to the Anti-Unfair Competition Law (AUCL), the primary legislation that regulates commercial bribery by individuals and entities in China. This revised AUCL (the Amended AUCL), which came into force on 1 January 2018, represents the first time the AUCL has been revised since its introduction in 1993. The Amended AUCL makes a number of significant changes, but we have limited our discussion to the three amendments relating to anti-corruption that may have significant implications for companies operating in China.

A. Broadened definition  of ‘commercial bribery’

Expanded purposes of commercial bribery

While article 8 of the 1993 AUCL limited commercial bribery to bribing “by offering money or goods or by any other means, in selling or purchasing commodities” (emphasis added), article 7 of the Amended AUCL now prohibits bribery “by offering money or goods or by any other means . . .  in order to seek a transaction opportunity or competitive advantage” (emphasis added).

Expanding on the differences between the 1993 AUCL and the Amended AUCL, the Director of the Anti-Monopoly and Anti-Unfair Competition Bureau of the State Administration for Industry and Commerce (SAIC), Yang Hong Can, explained, during an interview on 9 November 2017, that ‘competitive advantage’ refers to “obtaining an unfair competitive advantage in business activities through the offering of property or other means to induce the bribe recipient to commit acts that violate the integrity of the recipient’s official duties or business ethics”.

This effectively expands the circumstances in which conduct may be found to constitute bribery. For example, whereas paying a tax bureau official in order to reduce one’s tax liability may not have previously fallen within the ambit of ‘commercial bribery’ under the 1993 AUCL, the same act would certainly give the party offering the bribe a competitive advantage and so could potentially violate the Amended AUCL.