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China's New AUCL Clarifies the Definition of Commercial Bribery

2019-01-29 15:17 Tuesday


For the first time in more than two decades, Chinese regulators have revised the Anti-Unfair Competition Law to give companies a clearer picture of what constitutes commercial bribery, a development that increases compliance risks for multinational corporations in China.

Commercial Bribery

On January 1, 2018, China's new Anti-Unfair Competition Law (AUCL) officially went into effect, the first technical change to the law since its implementation in 1993, which incorporates lessons from the past two decades into the law. Although the AUCL's main purpose is to regulate unfair competition, it is also China's main law dealing with commercial bribery.

"The revision of the AUCL is an important step in establishing a long-term mechanism for curbing corruption in China," said Kevin Jones, head of China Labor and Employment at the Shanghai Office of Faegre Baker Daniels.

"The first few years of the anti-corruption campaign focused on corruption within the government, where it had a profound and widespread impact, and the AUCL addresses this in a business environment."

The most important change is that the amended AUCL has clarified the definition of commercial bribery, clearly stipulating that companies should bear vicarious responsibilities, and significantly increased the administrative penalty for commercial bribery.

Both national and local regulators have a responsibility to enforce the law in China. In the early years of the 1993 AUCL, the definition of "commercial bribery" was vague, leading to inconsistent interpretations by national and local regulators.

Wendy Wysong, head of Asia Pacific Anti-Corruption and Trade Regulation at law firm Clifford Chance, said: "payments that were not traditionally seen as bribes are now being seen as bribes."

The amended AUCL seeks to clarify some definitions. "These definitions could lead to more consistent enforcement of the law," Wendy Wysong said. However, she said further clarification from the State Administration for Industry and Commerce was needed if the inconsistent practices were to be regulated.

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