REGULATIONS OF SHANGHAI MUNICIPALITY AGAINST UNFAIR COMPETITION

(Effective Date:1995.12.01--Ineffective Date:)

CHAPTER I GENERAL PROVISIONS
CHAPTER II ACTS OF UNFAIR COMPETITION
CHAPTER III SUPERVISION AND INSPECTION
CHAPTER IV LEGAL LIABILITY
CHAPTER V SUPPLEMENTARY PROVISIONS

Article 1 With a view to safeguarding the healthy development of the socialist market economy, promoting and protecting fair competition, repressing unfair competition acts, protecting the lawful rights and interests of business operators and consumers, and maintaining social economic order, these Regulations are formulated in accordance with the provisions of the Law of the People's Republic of China Against Unfair Competition and the stipulations of other relevant laws and the administrative regulations and in the light of the actual circumstances in the Municipality.

Article 2 All legal persons or other economic organizations and individuals (hereinafter referred to as business operator) that are engaged in manufacturing or selling goods or in providing profit-making services (goods as mentioned hereinafter include services too) and administrative departments and authorized organizations concerned that exercise administrative control must abide by the present regulations.

Article 3 The unfair competition referred to in these Regulations means the act or practice of a business operator in market transactions that goes against the principles of voluntariness, equality, fairness, honesty and good faith and against generally accepted commercial ethics with the result that the lawful rights and interests of another business operator are infringed upon and social economic order disrupted.

Article 4 The industry and commerce administrations at municipal, district or county level shall exercise supervision and inspection of acts or practices of unfair competition. If the laws and administrative regulations provide for supervision and inspection by other administrative departments the provisions thereof shall be followed.

A government administrative department in charge of a trade or industrial sector and a society in charge of that may draw up a code of behavior of a self-regulatory nature for fair dealings within the trade or industrial sector and cooperate with supervisory and inspecting departments in performing their duties.

Article 5 Government offices in Shanghai Municipality shall encourage, support and protect all organizations and individuals in the exercise of social supervision over unfair competition acts.

Supervisory and inspection departments shall guard the secret of organizations and individuals that bring to light, report, and assist in investigating unfair competition acts and may reward them according to the pertinent rules and regulations.

Article 6 No government officials may support, cover up or engage in unfair competition acts.

CHAPTER II ACTS OF UNFAIR COMPETITION

Article 7 A business operator shall not engage in the following acts involving counterfeit registered trademark:

1. Using, without the permission of the owner of a registered trademark, a trademark that is identical with to the former on goods of the same or similar kind;

2. Knowingly selling goods bearing counterfeit registered trademarks; or

3. Forging or making without authorization labels of a registered trademark of another person or selling labels of a registered trademark that is forged or made without authorization.

Article 8 A business operator shall not use without authorization the unique name, package or decoration of well-known goods or use a name, package or decoration that resembles that of well-known goods thereby confusing the goods with the well-known goods and misleading the purchasers into mistaking its goods for the well-known goods concerned.

The term "well-known goods" as mentioned in the preceding clause refers to:

1. Goods that bear a certified famous or well-known trademark;

2. Goods that have won international prize that is recognized by the pertinent state administrative organs and the general society of the trade; or

3. Goods that are well-known to the relevant consumers, having a certain market share and a relatively high popularity.

Article 9 A business operator shall not use without authorization the name of another enterprise or person or the symbol, logo, verbal expression or code representing the enterprise or person so as to mislead people into taking a product for that of others.

A business operator shall not without authorization transfer or lease out to others the name of its own enterprise.

A business operator shall not engage in business activities under a fraudulently assumed business name.

Article 10 A business operator shall not resort to the following means with its goods or packaging so as to mislead people with fraudulent statements:

1. Counterfeiting or fraudulently using quality marks such as accreditation marks or famousbrand marks, etc., or using quality marks that have been revoked;

2. Counterfeiting or fraudulently using patent marks, or using patent numbers that are already invalid;

3. Counterfeiting or fraudulently using quality inspection certificates, license numbers, production permit numbers or the name of a supervising organization;

4. Counterfeiting or fraudulently using the place of production, place of manufacture or place of processing of the goods;

5. Making false statements of the performance, usage, specifications, grade, ingredients or contents of the goods; or

6. Forging dates of production, time for safe use and dates of expiring or giving blurted dates.

Article 11 A public utility enterprise or other business operator that has monopoly status according to law shall not resort to the following acts for restricting competition:

1. Restricting consumers to buy or use goods that are provided by it only or by a business operator designated by it and disallowing goods of the same kind from another business operator that have been tested by statutorily approved organizations and found to be up to the required technical standards;

2. Forcing consumers to buy unneeded goods or accessories that are provided by it or by a business operator designated by it; or

3. Refusing, discontinuing, delaying or decreasing the supply of necessary goods to consumers that resist the above practices or charging them excessive fees.

Article 12 Governments and their subordinate departments shall not abuse their administrative powers to restrict people to buy goods from business operators designated by them or impose limitations on the legitimate business activities of other business operators.

Governments and their subordinate departments shall not abuse their administrative powers to restrict the entry into local markets of goods produced in other places, or to restrict the outflow of locally made goods to markets of other places.

Article 13 A business operator shall not resort to bribery, by offering money or goods or by any other means, in selling or buying goods. A business operator who offers off-the-book rebate sales commission in secret to the other party, an organization or an individual, shall be deemed and punished as offering bribes; any organization or individual accepting off-the-book rebate sales commission in secret shall be deemed and punished as taking bribes.

A business operator may, in selling or buying goods, expressly allow a discount to the other party and pay a commission to the middleman. The business operator that offers a discount to the other party or pays a commission to the middleman must truthfully enter the sums concerned in the account book. The business operator that accepts a discount or a commission must also truthfully enter the sums concerned in the account book.

Article 14 A business operator shall not, by using advertisement or other means, make false or misleading statements with regard to the price, quality, function, ingredients, usage, producer, duration of validity, place of production or after-sale service of goods or with regard to the types and quantities of gifts to be given for promoting the sale of goods or for the rendering of service.

The term "other means" in the preceding clause refers to the following acts:

1. Hosting false appraisals or holding out deceptive inducements to promote sale;

2. Using, on the premises, false statements, explanations or other written expression, in an attempt to mislead the customers;

3. Making false on-the-spot demonstrations and explanations in an attempt to mislead the customers;

4. Posting, distributing or mailing false goods descriptions, pictures and other types of promotional material in an attempt to mislead the customers; or

5. Seeking to gain publicity through mass media in a fraudulent way in an attempt to mislead the customers.

Advertising firms and advertisement issuers shall not, when they know or should know the falsity, act as agents for, design, make or issue fraudulent advertisements.

Article 15 A business operator shall not resort to any of the following means to infringe upon trade secrets:

1. Obtaining an obligee's trade secrets by stealing, luring, intimidating or any other unfair means;

2. Disclosing, using or permitting others to use the trade secrets obtained from the obligee by the means mentioned in the preceding paragraph; or

3. In violation of an agreement or against the obligee's demand for confidentiality, disclosing, using or permitting others to use the trade secrets it possesses.

Obtaining, using or disclosing another's business secrets by a third party who knows or should know the act falls under the unlawful acts set forth in the preceding clause shall be deemed as infringing upon business secrets.

The term "trade secrets" in this article refers to any technical information or business operation information that is unknown to the public, capable of bringing about benefits to the obligee, and has practical applicability and concerning which the obligee has taken security measures, including such information as ingredients and formulas, technological processes, know-how, design documents, management methods, marketing strategies, customer information, source of supply, etc.

Article 16 A business operator shall not, for the purpose of ousting a competitor, sell goods at below-cost prices, except in one of the following cases:

1. When selling live things;

2. When disposing of goods near expiration of their validity duration or overstocked goods;

3. When making seasonal sales; or

4. When selling goods at reduced prices for the purpose of clearing off debts, change of business, closing down or for relocation.

Article 17 A business operator shall not, against the will of the purchasers, conduct tie-in sale of goods or attach any other unreasonable conditions in selling its goods.

The term "unreasonable conditions" in the preceding clause refers to restrictions as to the price, place of sale, targeted customs, etc. of the goods.

Article 18 A business operator shall not engage in any of the following prize-attached sale activities:

1. Falsely claiming that prizes will be given;

2. Using illicit means to give prizes to privately selected persons;

3. Making false statements about types of prizes, winner percentage, methods of winning, date of announcing winners, etc.;

4. Putting on the market at different times goods or lottery tickets with and without prize-winning marks, or putting on the market at different times goods or lottery tickets with different kinds of prize- winning marks; or

5. Using prize-winning sale as a means to promote the sale of low- quality at a high price.

In lottery prize-winning sale, the sum of money for the highest prize shall not exceed 5,000 yuan; in cases where the prizes are in the form of goods or other economic benefits, their monetary value, as computed according to the prices of the same goods in the same region, at the same time and of the same grade, shall not exceed 5,000 yuan.

Article 19 A business operator shall not fabricate or spread false information to injure the business reputation or goods reputation of its competitors.

Article 20 Bidders shall not collude in any of the following means to infringe upon the interests of the tender-inviters or the interests of the public.

1. Boosting or forcing down the tender price;

2. Using high tender price or low tender price to win the tender in turn; or

3. Other means that infringe upon the interests of the tender-inviters or the interests of the public.

Bidders and tender-inviting parties shall not collude to push rival bidders out of the fair competition.

1. Opening tender documents without authorization to obtain information about the tender price or other terms offered by other bidders;

2. Illegally obtaining or disclosing the information that are not to be made public for the time being, such as minimum tender price, etc.; or

3. Using unfair means such as bribery for discriminatory treatment against the same bidding documents in the process of examining and evaluating tender documents.

CHAPTER III SUPERVISION AND INSPECTION

Article 21 Acts of unfair competition shall be investigated and dealt with by the supervisory and inspection departments at the municipal and district or county level according to their respective authority and in conformity with the established procedures.

Article 22 In supervising and inspecting acts of unfair competitions, the supervisory and inspection departments have the authority to exercise the following functions:

1. Interrogating a business operator under investigation, interests- concerned parties and attestors and demanding that they produce testimonies or materials such as agreements, account books, invoices, documents, records, business letters and facsimiles, etc. that concern acts of unfair competition;

2. Making inquiries about or duplicating materials that concern acts of unfair competitions as mentioned in the preceding clause;

3. Inspecting property that is involved in acts of unfair competitions and, when necessary, ordering a business operator under investigation to explain the source and quantity of the said property, to suspend its sale, to hold it in readiness for inspection and not to remove, hide or destroy the said property; or

4. For property involved in acts of unfair competitions, such measures as seizure, custody under seal, etc., may be taken and a decision on its disposal shall be made within three months.

Article 23 While the supervisory and inspection departments are proceeding with the supervision and inspection of acts of unfair competitions, the business operator under investigation, the concerned parties and the attestors must provide the required materials and information in a truthful manner and must not refuse, delay or provide false statements.

Article 24 In supervising and inspecting acts of unfair competitions the staff members of the supervisory and inspection departments must show their certificates for the investigation.

In case no certificates for investigation are shown, a business operator, concerned parties and attestors have the right to refuse.

Article 25 In the course of investigating acts of unfair competitions, the supervisory and inspection departments must preserve the trade secret of the business operator concerned.

Article 26 A business operator who violates the stipulations of these Regulations and causes damage to the infringed business operator is liable for paying a compensation for the damage; if the damage to the infringed party is difficult to calculate, the compensation shall amount to the profits of the infringer gained as a result of and during the period of the infringement. The infringer shall also bear the reasonable expense of the infringed business operator for investigating the infringer's unfair competition act against his/her legitimate rights and interests.

An infringed business operator whose legitimate rights and interests have been infringed upon may file a suit with the people's court.

Article 27 A business operator who violates the stipulations of these Regulations shall be punished by the supervisory and inspection departments in accordance with the following provisions:

1. Those who violate Article 7 of these Regulations shall be punished in accordance with the provisions of the Mark Law of the People's Republic of China;

2. Those who violate Article 8 of these regulations shall be ordered to stop the illegal acts and shall have their illegal gains confiscated, the product labels, packaging materials and decorations used without authorization seized and destroyed and may be subjected to a fine that is more than the total of but less than double their illegal gains; in a serious case, a fine that ranges from double to treble of their illegal gains may be imposed and their business license may be revoked; those whose sale of counterfeit and low-quality goods constitute a crime shall be charged with criminal liability;

3. Those who violate Articles 9 and 10 of these Regulations shall be ordered to make corrections in public, shall have their illegal gains and the tools used in committing the offense confiscated, and may be subjected to a fine that amounts to one to two times the illegal gains; in a serious case, a fine that ranges from double to treble of the illegal gains shall be imposed;

4. Those who violate Article 11 of these Regulations shall be ordered by the supervisory and inspection departments at the municipal level to stop their illegal acts and may be subjected to a fine of more than 50,000 yuan and less than 100,000 yuan; in a serious case, a fine of more than 100,000 yuan and less than 200,000 yuan shall be imposed. The business operator that has been designated and has sold low-quality and overpriced goods or has charged excessive fees shall have its illegal gains confiscated and may be subjected to a fine that is more than the total of but less than double the illegal gains; in a serious case, a fine that from double to treble of the illegal gains shall be imposed;

5. Those who violate Article 12 of these Regulations shall be ordered by a superior administrative department to make rectification; in a serious case, the administrative department in charge at the same or higher level shall impose the administrative sanction on those directly responsible for the violation(s). The business operator that has been designated and has sold low-quality and overpriced goods or has charged excessive fees shall have its illegal gains confiscated and may be subjected to a fine that is more than the total of but less than double the illegal gains; in a serious case, the fine imposed shall range from double to treble of the illegal gains;

6. Those who violate Article 13 of these Regulations and whose offense constitutes a criminal act shall be charged with criminal liability; in case the offenses do not constitute a criminal act, the illegal gains shall be confiscated and a fine of more than 10,000 yuan and less than 100,000 yuan may be imposed; in a serious case, the fine imposed shall be more than 100,000 yuan and less than 200,000 yuan;

7. Those who violate Section 1 of Article 14 of these Regulations shall be ordered to stop their illegal acts and clear up the consequences and may be subjected to a fine of more than 10,000 yuan and less than 100,000 yuan; in a serious case, the fine imposed shall be more than 100,000 yuan and less than 200,000 yuan. Those who violate Section 3 of Article 14 of these Regulations shall be punished according to the Advertisement Law of the People's Republic of China;

8. Those who violate Article 15 of these Regulations shall be ordered to stop their illegal acts and may be subjected to a fine of more than 10,000 yuan and less than 100,000 yuan; in a serious case, the fine imposed shall be more than 100,000 yuan and less than 200,000 yuan;

9. Those who violate Article 16 of these Regulations shall be ordered to stop their illegal acts and may be subjected to a fine that is more than the total of and less than double the amount of proceeds from below-cost sales of goods; in a serious case, the fine imposed shall range from double to treble of the total amount of proceeds from such sales;

10. Those who violate Article 17 of these Regulations shall be ordered to stop their illegal acts, have their illegal gains confiscated and may be subjected to a fine of less than 10,000 yuan; in a serious case, they shall be ordered to suspend their business for rectification and may have their business license revoked;

11. Those who violate Article 18 of these Regulations shall be ordered to stop their illegal acts or practices and may be subjected to a fine of more than 10,000 yuan and less than 50,000 yuan; in a serious case, the fine imposed shall be more than 50,000 yuan and less than 100,000 yuan;

12. Those who violate Article 19 of these Regulations shall be ordered to stop their illegal acts and to clear up the consequences and may be subjected to a fine of less than 10,000 yuan;

13. Those who violate Article 20 of these Regulations shall have their accepted tender invalidated and may be subjected to a fine of more than 10,000 yuan and less than 100,000 yuan; in a serious case, the fine imposed shall be more than 100,000 yuan and less than 200,000 yuan; those involved with the said business operators and responsible for the violations may be subjected to a fine of more than 1,000 yuan and less than 10,000 yuan;

14. Those who try to obstruct the supervisory and inception departments in performing their duties as stipulated in Item 3 of Article 22 of these Regulations shall be subjected to a fine one time of more than the total of but less than treble the total monetary value of the property sold, removed, hidden or destroyed; or

15. Those who try to obstruct the supervisory and inspection departments in performing their duties as stipulated in Article 23 of these Regulations and refuse to produce the required materials or information shall be subjected to a fine of more than 1,000 yuan and less than 10,000 yuan.

Those whose illegal acts are covered in Item2, Item3, Item4 or Item5 in the preceding Section but who have not derived any illegal gains shall be subjected to a fine of less than 100,000 yuan.

In imposing fines in accordance with this Article, the supervisory and inspection departments must give signed receipts for money fined or confiscated and the receipts must be those that are uniformly printed by the municipal organ responsible for financial matters. All money fined or confiscated shall be handed over to the State Treasury.

Article 28 The term "a serious case" in the Regulations refers to one of the following cases:

1. When the total turnover of illegal business exceeds 500,000 yuan or when the amount of illegal gains exceeds 50,000 yuan, but in a case where Article 10 of these Regulations is violated, the total turnover of illegal business is more than 200,000 yuan or the amount of illegal gains is more than 20,000 yuan;

2. When engaging in acts of unfair competition within one year after being administratively punished for engaging in such acts; or

3. When obtaining economic gains is more than 50,000 yuan by exercising official functions and powers;

4. When causing serious economic losses to or entailing serious consequences for the party whose rights have been infringed upon.

Article 29 The party concerned who finds unacceptable a specific administrative act may apply for administrative review or file a suit in accordance with the Regulations on Administrative Review and Administrative Litigation Law of the People's Republic of China.

When a party concerned does not, within a statutorily stipulated period of time, apply for administrative review or file a suit but fails to carry out a decision on administrative penalty, the department making the decision on administrative penalty may apply to the people's court for enforcement in accordance with the Administrative Litigation Law of the People's Republic of China.

Article 30 Staff members of the supervisory and inspection departments must abide by law and be impartial in its enforcement. Those who neglect their duties, abuse their powers, play favouritism and commit irregularities, ask for or accept bribes, intentionally shelter someone that has done wrong or pervert the law in enforcement shall be subjected to administrative sanctions; in case such offenses constitute a crime, the criminal liability of the offenders shall be charged with.

CHAPTER V SUPPLEMENTARY PROVISIONS

Article 31 The Shanghai Municipal Industry and Commerce Administration is responsible for the interpretation of these Regulations in their applications.

Article 32 These Regulations shall become effective on December 1st,1995.