FDI: Heavier Sanctions to Be Implemented on Price-related Violations

FDI: Heavier Sanctions to Be Implemented on Price-related Violations

I. Legal News:

1. FDI: Heavier Sanctions to Be Implemented on Price-related Violations

Recently, the State Administration for Market Regulation has drawn up the Provisions on Administrative Penalties for Price-related Violations (Revise Draft for Comment) (the “Draft for Comment") for public comments by August 2, 2021.

(1) New sanctions introduced

a. Price Discrimination Using Big Data

Compared to the current version, the Draft for Comments newly adds that Price Discrimination Using Big Data shall be sanctioned. It means that e-commerce platform operators shall not use big data to set different prices for the same commodity/service to consumers according to their interests, hobbies and consumption habits.

For example, some takeaway platforms, ticket booking platforms set unreasonable higher price for frequent consumers compared to new consumers on the same food or ticket.

b. Price Dumping

In order to exclude competitors or monopolize the market, some e-commerce platform operators use subsidies and other forms to dump at a price below cost, disrupt the normal order of production and operation, and harm the national interest or the legitimate rights and interests of other operators.

For example, some ride-hailing apps granted huge subsidies to drivers for their customers to enjoy a lower price when entering the market. Once other ride-hailing apps are shut down due to this kind of price dumping, they will increase/monopolize the price afterwards.

Price dumping is now clearly sanctioned under the Draft for Comments.

(2) Major changes on sanctions

2. Cyber Security: New Rules to Be Released on Cyber Security Review

Recently, Didi App, which is China’s leading ride-hailing platform with 377 million active users, has been removed from the app store due to its initial public offering (“IPO”) in New York Stock Exchange. It is reported that DIDI had data security problem, as overseas listing would inevitably involve the cross-border transfer of data and the data might be controlled or even maliciously exploited by the foreign government. Therefore, the PRC authority ordered DIDI to correct the problems. This is the first time that China’s internet regulator has cited national security as a reason for launching a cybersecurity review based on the Cybersecurity Law.

As a follow up from the legislation point of view, on July 10, 2021, the Cyberspace Administration of China has issued the Draft Measures for Cybersecurity Review (the “Draft Measures") for soliciting public comments by July 25, 2021. It clearly pointed out that if an enterprise plans an IPO in overseas stock market, and if the enterprise possesses more than one millionusers’ personal information, it must conduct a cybersecurity review before applying an IPO.7

(http://www.cac.gov.cn/2021-07/10/c_1627503724456684.htm)

II. Case:

IP Infringement: L’OCCITANE Won RMB 9 Million in Compensation Against Its Counterfeit

Recently, Zhejiang Higher People’s Court made a judgement of second instance in which M&L, a French company which created the “L’OCCITANE/L’Occitane" brand, was awarded RMB 9 million for its bottle packaging of body lotion was counterfeited by two Chinese local companies (the “Defendants”).

The products produced by the Defendants completely imitated the trademark and packaging of M&L’s well-known L’OCCITANE Sakura body milk series products, and the malicious intention of the Defendants was very obvious.

The court found that the Defendants violated both the PRC Trademark Law as well as PRC Anti-unfair Competition Law:

(1) The Defendants used a logo identical/similar with a registered trademark of L’OCCITANE on identical goods without being licensed by L’OCCITANE , which cause confusion to customers.8

(2) The Defendants used without permission the similar packaging of L’OCCITANE’s commodity with certain influence.9

Therefore, the court found trademark infringement and unfair competition acts were established.

According to PRC Trademark Law and PRC Anti-unfair Competition Law10, the court shall determine the compensation based on (1) the actual loss of the plaintiff as well as (2) the illegal revenue of the defendant. However, both are hard to be determined in this case.

Considering the following factors, the court finally awarded a total compensation of RMB 9 million:

(1) L’OCCITANE Sakura body milk series products are well-known in China, and the company has invested a lot in the marketing and advertisement.

(2) Although it is hard to determine the illegal revenue of the Defendants, but the sales volume of the counterfeit of the Defendants is huge.

(3) The malicious intention of the Defendants is obvious. The bottle packaging of counterfeit is basically the same as the L’OCCITANE’s.

(https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=8e156fca71fd4e49881cace100bad625

https://m.thepaper.cn/baijiahao_13016573)

As always, Asiallians remains at your service and our teams are currently mobilized in all our offices in Mainland China, Hong Kong and Taipei.

 

1. Article 18 and 77 of E-Commerce Law

2. Article 13 of Draft for Comment

3. Article 5 of Provisions on the Administrative Punishment of Price-related Violation (2010 version)

4. Article 6 of Draft for Comment

5. Article 9 of Provisions on the Administrative Punishment of Price-related Violation (2010 version)

6. Article 10 of Draft for Comment

7. Article 6 of the Draft measures

8. Article 57 of PRC Trademark Law

9. Article 6 of PRC Anti-unfair Competition Law

10. Article 63 of PRC Trademark Law and article 17 of PRC Anti-unfair Competition Law

 


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