By GLO Life Science and Healthcare Practice Group

 

On May 14, 2018, China’s State Administration for Market Regulation (the "SAMR") published a notice discussing its prioritization of certain enforcement actions against unfair competition (the “Notice[1]”), in an effort to further implement the newly revised Anti-Unfair Competition Law effective as of January 1, 2018. These nationwide enforcement actions will be carried out from May to October 2018, and will focus on industries and sectors such as online transactions, rural markets, healthcare and medicine, and education. The main goal is to remediate prominent issues of high social concern such as market confusion, commercial bribery, false advertising, and unfair competition online.

 

The Notice includes three specific areas of focus, summarized below:

 

1. Market Confusion; Infringement of Trade Secrets

 

The Notice emphasizes the importance of investigating infringements of intellectual property rights by way of acts of confusion and infringements of trade secrets, and strengthening the protection of property rights of industry leaders, well-known trademarks, enterprise names with influence and enterprises that owns extensive trade secrets.

 

The specific actions under strict scrutiny are:

 

• Using, without authorization, logos identical with or similar to others' product names, packaging or decoration that has certain influence;

 

• Using, without authorization, others' enterprise names (including abbreviations, trade names, etc.);

 

• Using a registered trademark of another party as the trade name in its enterprise name to mislead the public.

 

2. Commercial Bribery in Healthcare and Educational Industries

 

The Notice gives a particular emphasis on commercial bribery acts in areas of purchasing and distribution of drugs and medical devices in the medical industry, and industries of education and public utilities. Any actions to use cash, property or other means to seek transaction opportunities or competitive advantage by bribing employees of a transaction counterparty, entities or individuals entrusted by a transaction counterparty to handle relevant affairs, or entities or individuals that use authority or influence to influence a transaction will receive prioritized investigations by the authority.

 

3. False or Misleading Commercial Publicity Campaigns

 

The Notice also gives special attention to false or misleading commercial publicity campaigns to defraud or mislead consumers, and acts of helping other business operators to carry out false or misleading commercial publicity campaigns.

 

The targeted acts of investigations are:

 

• falsely increasing the number of sales and improving credit ratings in internet sales;
• fake products or fake credit ratings of business operators;
• false or misleading publicity campaigns in direct selling;
• false or misleading publicity campaigns in health care products.

 

Meanwhile, the Notice expressly emphasizes the role of industry associations in establishing industry code of conduct and ethics with a purpose to guide the industry participants to perform competition in a legal and orderly manner.

 

The newly established SAMR, which merges and undertakes some of the administrative enforcement functions previously held by the China Food and Drug Administration (the “CFDA”), the State Administration for Industry and Commerce (the “SAIC”) and the National Development and Reform Commission (the “NDRC”), has a broad mandate, overseeing everything from drug safety supervision, quality inspection, fair competition and commercial bribery, management of intellectual property rights and comprehensive supervision and management of the market order. This first law enforcement priority document released by the single most powerful market regulator should ring an alarm to pharmaceutical and medical device companies in China. Pharmaceutical and medical device companies are recommended to take a closer look at its compliance procedures to ensure its conformity with the Anti-Unfair Competition Law and the messages that the new SAMR conveys in this Notice.

 

1. In Chinese “市场监管总局关于开展反不正当竞争执法重点行动的公告”