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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
by Paul JONES, Peter JIANG and Daniel Arthur LAPRÈS
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Under State planning, the distribution of goods in China was controlled by the State and functioned solely for the purpose of allocating goods. Producers sent their goods to the Ministry of Commerce Central Distribution Centres, where they were classified and distributed. Only the Ministry of Commerce and its local offices ran wholesale and retail operations. Stores could only buy from designated sources and only at prices set by the State Price Bureau. The development of a tertiary sector, including for the supply of commercial intermediation services, was frustrated.1
But since 1978, with the launching and progress of reform, the economy has been shifting to market mechanisms and correspondingly, the distribution sector has revived and developed gradually.2
With China’s accession to the World Trade Organization (WTO) at the end of 2001, the regulatory framework has been further reformed to integrate China’s internal market into the global economy.
In contemporary social thought in China, State planning and markets are viewed as complementary mechanisms for the achievement of the goals of socialism. The displacement of emphasis on State planning toward emphasis on markets is thus not an abandonment of socialism.3
The evolution was consecrated by the constitutional reforms4 declaring that:
The adoption of markets has, however, entailed a radical transformation of ownership of the whole people to accommodate private ownership and independent management of the means of production and distribution.7 A major vector of reform proved to be the town and village enterprises which grew in number from 1.5 million in 1978 to 22 million by 1995.8
The pursuit of a unified national market has required that regional barriers to trade be dismantled.
By 1995, 30% of retail sales were generated by individual and private enterprises, while collectively owned stores and State-owned stores accounted for 30% and 40% respectively. At the same time, only 10% of gross sales of industrial consumer goods and some 30% of sales of means of production were fixed administratively. Production quotas imposed administratively on industrial units had been reduced from 95% of output value to only 7%.9
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The former system for handling imports was as rigid as that applied to domestic goods. Foreign products entered the country only via State-run foreign trade corporations, which would purchase and import foreign goods according to central directives.
The PRC started to open the foreign trade corporation system in 1984, when foreign companies were permitted to deal directly with newly created import-export enterprises. In 1986, the domestic distribution system was further deregulated when factories were allowed to sell goods directly to end-users.
Before 1986, as much as 80% of all goods in China travelled through the State-run system. By 1997, most Chinese distribution companies had spun off from local and provincial offices of the former Ministry of Commerce.
Prior to 1991, sino-foreign joint ventures engaged in manufacturing could sell a portion of their production on the local market, usually limited to 30% of their output, though much higher quotas were sometimes claimed. Most of these sales were made through domestic trading companies acting as sales agents. The more aggressive and well-connected joint ventures were however able to tap the retail market by setting up exclusive sales counters at leading department stores in the major cities.
Foreign manufacturers were not generally allowed to engage in the distribution of products other than their own.
Pursuant to a decision of the Central Committee of the Communist Party with respect to the accelerated development of the tertiary sector, the State Council, in June 1992, issued rules creating an experimental regime for foreign investment in the retail sector in six cities (Beijing, Shanghai, Tianjin, Guangzhou, Dalian, Qingdao) and in the Special Economic Zones (Zhuhai, Shantou, Shenzhen, Xiamen).
Throughout the 1990s, the State Planning Commission designated, as of “restricted access” for foreign investment:
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Wholly foreign-owned enterprises for their part were excluded from certain sectors: press, publishing, radio and television stations, film, wholesaling and international trade, insurance, postal services and telecommunications.10
As in other contexts of legal reform, though rarely so graphically, the role of experimentation proved to be crucial in the distribution sector, as new ideas were approved at the local level, which fitted in more or less comfortably with announced national policies.
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When it opened Special Economic Zones (SEZs) to investment by foreign enterprises, China did not open its domestic markets to their products.
The conditions of foreign access to the Chinese market were a major point of negotiation of the terms of China’s return to the GATT.
China essentially committed to open its market to foreign competition by December 11, 2006, and it may reasonably be estimated that the commitments have been substantially transposed into laws and regulations, though the conditions of their implementation over the whole territory remain subject to criticism.
In connection with its accession to the WTO, China made a range of commitments on lifting restrictions on the right to trade.
Article 5 of the Protocol on the Accession provided that the country would progressively liberalize the availability and scope of the right to trade (i.e. to import and export goods), so that, within three years following accession, all enterprises in China would have the right to trade in all goods throughout the customs territory of China, except for certain goods subject to State trading. Also, except as otherwise provided for in the Protocol, all foreign individuals and enterprises, including those not invested or registered in China, were to be granted rights to trade treatment no less favourable than that accorded to domestic enterprises.
According to paragraph 84 of the Report of the Working Party on the Accession of China, China confirmed that it would eliminate its system of examination and approval of trading rights within three years after accession. Since that time, all enterprises in China and foreign enterprises and individuals may export and import all goods throughout the customs territory of China, except for those products reserved for importation and exportation by State trading enterprises.
In addition to the above commitments with respect to the distribution of goods inside its territory, China also adopted commitments with respect to the distribution of services under the Schedule of Specific Commitments on Services to the General Agreement on Trade of Services.
2.1.1. Agencies and wholesaling
By December 11, 2004, foreign service suppliers were to be permitted to establish joint ventures to engage in commission agents’ business and wholesale business in all imported and domestically produced products except chemical fertilizers, processed oil and crude oil, for which trading rights were to be opened by December 11, 2006.11
Before December 11, 2004, wholly foreign ownership was to be permitted in enterprises engaged in distribution of all products except chemical fertilizers, processed oil and crude oil that were to be opened by December, 11, 2006.
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2.1.2. Retailing
By December 11, 2004, all restrictions on retailing services were to be lifted subject to the following exceptions:
It is further provided that foreign service suppliers were to be permitted to provide the full range of related services, including after-sales services.
According to the Schedule of Specific Commitments, by December 11, 2004, all limitations were to have been lifted on foreign franchisors in China. Foreign service providers should be permitted to engage in franchising in China by setting up either joint ventures or wholly foreign-owned enterprises.
2.1.3. Logistics
According to China’s Schedule of Specific Commitments, there is no limitation on foreign liners’ provision of cross-border liner shipping services or bulk, tramp or other international shipping services (including passenger transportation) to customers in China. It is also stipulated that foreign service suppliers may establish joint venture shipping companies in China for the purpose of operating fleets under the national flag of China, but such foreign participations may not exceed 49% of the total registered capital, and the chairman and the general manager must be appointed by the Chinese side.
Chinese-foreign joint ventures are permitted in maritime cargo-handling services and container station and depot services, and the foreign side may hold majority ownership. Chinese-foreign joint ventures may also be established to provide maritime agency services, but the foreign equity share may not exceed 49%.
Chinese-foreign joint ventures may be established to provide rail or road transportation services, provided that the foreign investment does not exceed 49%. However, for rail transport, since December 11, 2004, foreign majority was to be permitted and by December 11, 2007, wholly foreignowned subsidiaries were to be permitted. In road transportation, by December 11, 2002, foreign majority ownership was to be permitted, and by December 11, 2004, wholly foreign-owned subsidiaries were to be permitted.
Upon China’s accession on December 11, 2001, Chinese-foreign joint ventures were to be allowed to provide storage and warehousing services, provided that foreign investment did not exceed 49%. Within one year, foreign majority ownership was to be permitted and within three years, wholly foreign-owned subsidiaries were to be permitted.
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Upon China’s accession, foreign freight forwarding agencies with at least three years’ consecutive experience were to be permitted to set up joint ventures in China, provided that the foreign participation not exceed 50%. By December 11, 2002, foreign majority ownership was to be permitted and by 11 December 2005, wholly foreign-owned subsidiaries were to be permitted.
The minimum registered capital of such joint ventures was to be set at USD 1 million provided that within four years after accession, national treatment would be accorded in this respect. The terms of such joint ventures could be limited to 20 years.
The MOFCOM administers the review and supervision of foreign investments in accordance with the Industry-specific Guidance Catalogue for Foreign Investment. In addition, numerous ministries regulate specific commercial activities.
2.2.1. The Industry-specific Guidance Catalogue for Foreign Investment
An Industry-specific Guidance Catalogue for Foreign Investment is issued by the central government authorities responsible for governing foreign investment, and is updated from time to time. The issuing authorities are now the NDRC and the MOFCOM. The Catalogue provides several categories of industries:
On October 31, 2007 the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued a revised Foreign Investment Industrial Guidance Catalogue that became effective as of December 1, 2007. The new Catalogue contains numerous significant changes of orientation compared with the previous version adopted in 2004.
The new Catalogue covers are 478 activities, of which 351 are encouraged (94 more than in the 2004 version), 87 are restricted (9 more) and 40 prohibited (5 more). In general, the new Catalogue improves access of foreign investors to commercial and financial services, to activities contributing to environmental protection, and to advanced manufacturing activities, while increasing restrictions on foreign investments in real estate, in media-related activities and in producton activities for which foreign investment is no longer considered necessary to assure future development.
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In terms of encouraged investments, the new policy admits into this category:
On the other hand, in conventional manufacturing industries, where domestic enterprises have fully mastered the technology, such as the dairy industry, foreign investment is no longer encouraged. In response to the country’s mammoth trade surplus, the encouragements for 100% exportoriented investments have been dropped.
The revised policy restricts or prohibits foreign investments in high energyconsuming and pollution-generating projects. Foreign investments in the commodities business are no longer prohibited but remain subject to restrictions.
In line with its WTO accession commitments, the limit on foreign ownership in domestic and international basic telecommunications business should be raised from 35% to 49% no later than December 11, 2007.
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2.2.2. Distribution
The Measures for Regulating Foreign Investment in the Commercial Sector were promulgated by the MOFCOM on April 16, 2004 and came into effect on June 1, 2004 (the Commercial Sector Foreign Investment Measures).13
The regulations allow foreign investment in the distribution sector by way of implementing certain of China’s WTO accession commitments. The regulations provide that foreign companies, other business entities and natural persons may engage in trading in China. On December 11, 2004, geographical restrictions were cancelled.14
Under the Regulations’ article 3, permitted trading activities include:
Foreign companies, enterprises, and other economic organs or individuals carrying on these activities in China must do so through foreign-funded enterprises established within its territory.15
Foreign investors in commercial enterprises must have good credit standing and they must not have violated Chinese laws and regulations.16
Foreign investors with economic strength, advanced experience in business management and marketing technologies, as well as broad international marketing networks, are encouraged.17
Article 7 limits the term of operation of a foreign-funded commercial enterprise to 30 years, except in central and western regions, where the limit is 40 years.
Where a foreign-funded commercial enterprise applies to establish additional stores, its registered capital must be fully paid and it must have passed the joint annual examination on enterprises with foreign investment.18
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Under article 9 of the Measures, foreign-funded enterprises may operate the following businesses upon approval:
Foreign-funded wholesale commercial enterprises may:
Foreign-funded commercial enterprises may authorize others to open stores by way of franchising. Foreign-funded commercial enterprises may, upon approval, undertake one or several kinds of sales businesses. The kinds of commodities they trade must be specified in their business scopes as prescribed in their constituting contracts or articles of association.19
Activities of foreign-funded commercial enterprises are subject to the jurisdiction of the competent level of the MOFCOM.20
Under article 10 of the Measures, investors in foreign-funded commercial enterprises submit their applications to the competent commercial department of the province of their registration which, after a preliminary examination, reports to the MOFCOM within one month. The latter decides whether to approve the application within a further three months. Reasons must be given for refusals. Certificates of Approval for Foreign-funded Enterprise are issued to successful applicants. Within one month, the investor must register with the competent office of the SAIC (State Administration of Industry and Commerce).21
Where a foreign-funded retail commercial enterprise opens stores in regions under the jurisdiction of the provincial government of its locality, and meets the following conditions, and where its business scope does not involve sales via television, telephone, mail order, internet, automated machines or sales of certain commodities, the provincial competent commercial department renders a decision, which is reported to the MOFCOM:
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Where a foreign-funded commercial enterprise opens stores in a province, the opinion of the competent commercial department of the provincial government where the planned stores are located must also be solicited.
Foreign-invested trading enterprises engaging in the sale of books, newspapers and magazines must comply with the Measures for Regulating Foreign-invested Enterprises Engaging in the Distribution of Books, Newspapers and Magazines.
Foreign-invested wholesale enterprises may not trade in or manage fertilizers, processed oil and crude oil, until December 11, 2006. Foreigninvested wholesale enterprises may not engage in or manage trading of salt and tobacco and foreign-invested retail enterprises may not sell tobacco.22
If the same foreign investor opens more than 30 stores in China, and the goods sold include books, newspapers, magazines, medicines, pesticides, mulching films, fertilizers, processed oil, foodstuffs, vegetable oil, edible sugar or cotton, and these goods are sold under different brands from different suppliers, the portion of the foreign investor’s investment may not exceed 49%.23
2.2.3. Advertising
According to China’s Schedule of Specific Commitments under the GATS, establishment of foreign-majority ownership advertising enterprises was to be permitted by December 11, 2003, and the establishment of wholly foreign-owned subsidiaries was to be permitted no later than December 11, 2005.
The WTO accession commitment has been implemented by enacting the Measures for Regulating Foreign-invested Advertisement Enterprises, which were issued by the SAIC and the MOFCOM on March 2, 2004. These measures stipulate the procedures and formalities for establishing a foreigninvested advertisement enterprise. Foreign majority ownership advertising enterprises were permitted as of its effective date, but the portion of the foreign investment could not exceed 70%. Wholly foreign-owned advertising enterprises have been admissible since December 10, 2005.
However, special treatments have been given to investors from Hong Kong and Macao respectively under the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland and the Macao Closer Economic Partnership Arrangement (the CEPAs). To reflect the special treatments in respect of advertising, it was additionally provided in the Measures for Regulating Foreign-invested Advertisement Enterprises that advertising service suppliers from Hong Kong and Macao would be permitted to establish wholly owned advertising enterprises on the mainland from January 2004.
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2.2.4. Media
Access to media activities was traditionally closed to private initiative in the PRC, both local and foreign. However, in the fashion typical of the reform movement, small-scale experimentation in deregulation has opened the way for private initiative, including foreign, in the distribution of magazines as well as in television programme production and wholesaling, and retailing of press and audio-visual products. While the market for foreign feature films remains almost hermetically closed, the local market would appear more accessible to sino-foreign co-productions realized in China. Chinese television grids may be comprised of up to 35% foreign programmes, an opportunity that some foreign television operators have exploited by offering programmes in exchange for advertising spots.
The Measures for Regulating Foreign-invested Enterprises Engaging in Distribution of Books, Newspapers and Magazines were issued by the General Administration of Press and Publishing (GAPP) and the MOFCOM on March 17, 2003, and became effective from May 1, 2003. According to these measures, foreign investors are allowed, either solely or in cooperation with Chinese partners, to establish enterprises for distributing books, newspapers and magazines, including wholesaling, retailing, internet sales, chain-store sales and “readers’ clubs”. The registered capital for a foreign-invested book, newspaper and magazine wholesale enterprise must be at least RMB 30 million, and for a retail enterprise, no less than RMB 5 million.
2.2.5. Logistics
Foreign-invested logistical enterprises refer to those foreign-invested enterprises that combine the functions of goods transportation, warehousing, loading/unloading, processing, packaging, distributing, information processing and import/export, so as to provide integrated multi-functional services to customers. Foreign-invested logistical enterprises must take the form of Chinese-foreign equity joint ventures or Chinese-foreign contractual joint ventures. The first regions where foreign-invested logistical enterprises were allowed to set up were Beijing, Tianjin, Shanghai, Chongqing, Zhejiang, Jiangsu, Guangdong and Shenzhen.
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China has been a pioneer in the legal control of product quality. As early as the country’s first unification under the Qin dynasty (221–207 B.C.), written regulations governing product quality control were promulgated and enforced. The earliest codification in China regarding the liability of producers for their products dates back some 2000 years, when the selling of utensils and wooden carts not conforming to required specifications was proscribed by law.
In contemporary China, the first Product Quality Law was promulgated on February 22, 1993.
The major legal norms governing product standards and product liabilities and consumers’ rights include:
Product quality supervision administrations at and above the county level have the powers:
Product quality testing organizations must be approved by the quality supervision and control departments under the people’s governments at and above the provincial level or by organizations the latter have authorized.25
Article 20 of the Product Quality law provides for the creation of product quality testing and certification institutions independent of all administrative or State organs. Their determinations must be objective and fair and they may only issue certifications in accordance with the law and relevant criteria.26 Their principal role is to test products that have been given certification marks. In cases of serious unremedied defects, the certification mark may be revoked.
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3.1.1. The Product Quality Law
Unlike its counterparts in most western countries, China’s Product Quality Law covers not only product liability but also product quality control. Guaranteeing product quality in a developing economy is a difficult challenge to assume. In order to guarantee the upgrading of product quality in general and to make Chinese producers more competitive with their foreign counterparts in the world market, vigorous legal instruments governing both product quality and product liability have been adopted. The product quality supervision and administration departments of the State Council are responsible for the administration of the Product Quality Law at the national level, while each department of the State Council oversees the quality of products within its jurisdiction. Local administration is carried out at and above the county level.27
According to its article 2, the Product Quality law applies to all production and marketing activities within the territory of China.28
Producers and sellers are responsible for the quality of the products they produce and sell.29
It is forbidden to forge or infringe upon quality marks, to forge the place of origin, forge or infringe upon factory names and locations, to produce or market adulterated products or to present non-genuine goods as genuine, or sub-standard products as standard.30
Staff members of the people’s governments at all levels and other State organs may not neglect their duties or abuse their power for private interests, cover up or tolerate violations in the production or sale of products.31
Any entity or individual may report violations to the product quality supervision administrations or other competent departments. Such denunciations may be rewarded and the anonymity of complainants may be protected.32
Foreign products that meet required quality standards may not be excluded from the Chinese market.33
Hazardous industrial products must respect State-defined standards or, in the absence thereof, the minimum requirements for preserving human health and property.34
3.1.2. The Standards Law
The Standards Law and its Standards Implementation Rules provide the legal basis for determining whether a marketed product is in compliance with the proper standards. Standards are formulated at four levels:
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Enterprise standards may be formulated by manufacturing enterprises in connection with matters not covered by local standards. Provincial governments in matters not covered by industrial standards formulate local standards. Industrial standards are formulated by the State Bureau of Technical Supervision (SBTS), but they may not interfere with State or national standards. All enterprise, local and industrial standards must be reported to and approved by the SBTS.
National standards and industrial standards are divided into compulsory and recommended standards. Compulsory standards guarantee human health and safety and protect property.35
Compulsory standards must be implemented by all enterprises. Products that fail to meet compulsory standards may not be manufactured, sold or imported. Violations are sanctioned by penalties imposed by supervisory authorities.36
Technical standards and requirements for exported products are defined and implemented by the parties in accordance with their contracts. When products normally intended for export are sold on the Chinese domestic market, they must comply with the requirements of any applicable compulsory standards.37
The codes, serial numbers and names of the standards used must be marked on products or on their package, or written in accompanying technical manuals.
The Chinese government administers systems for certifying the quality control systems of enterprises as well for certifying the quality of products. In each case, the objective is to implement generally accepted international standards.38
A monitoring system based on random inspection is applied to dangerous products, to those that have a considerable effect on the national economy and to those that have been reported to be defective. The quantity of samples may not exceed what is reasonably necessary, and no fees may be collected by the authorities. Where the producer or seller does not accept the results of a sample test, it may within 15 days appeal to the product quality supervision departments at the next higher level.39
Where any product is found to be unfit, the producer or seller is ordered to make corrections within a certain time; otherwise, the failure to do so is publicized by the product quality supervision administration of the people’s government at or above the provincial level. In the absence of a solution, the producer or seller may be ordered to suspend its business until the situation is remedied, and otherwise, its business licence may be cancelled.40
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The Product Quality Law stipulates that producers are responsible for manufacturing products that meet the following conditions:
The Product Quality Law does not directly define the term “unreasonable danger”. However, it defines the term “defect” as any lack of conformity with respect to compulsory national or industry safety standards. It is thus incumbent upon producers to use reasonable preventive measures to avoid defects and to clearly warn users and inform them how to prevent any potential hazard associated with their products. In the absence of applicable standards, products must meet average socially acceptable safety standards.
Under the Product Quality Law, products except certain food produce must contain certificates of quality inspection. The SBTS is in charge of the overall administration of quality certificates in accordance with “internationally advanced product standards and technological requirements”. Its local offices at and above the county level are directly responsible for allocating certificates within their administrative jurisdictions.
According to the SBTS, foreign-made products must be inspected and certified by the competent authorities in charge of import-export commodity inspection in accordance with applicable standards and regulations.
All products or their packaging must contain the following items in Chinese:
According to the SBTS, the Chinese-language requirements for packaging information apply to imported as well as to domestic products.
Articles such as food which typically do not have packaging are exempted from labelling requirements.
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Sellers essentially have the same obligations as producers,though they are not responsible for ensuring that products conform to national or industrial standards. In addition, sellers are obligated:
Under Chinese civil law, when a product with an inherent defect causes personal injury or damage to property, the producer and seller are liable to pay monetary compensation to the victim.
3.5.1 Strict liability
In traditional liability for tort, the injured party must prove the existence of a duty, its breach, the causality and foreseeability of the ensuing injury, whereas in product liability, the injured party need only prove that he or she has suffered personal or property damage caused by the defective product manufactured or sold by the defendant; that is to say, the plaintiff need not prove the fault of the producer or seller.
Third parties may also be liable for defective products. If a product suffers deterioration during transportation or storage, the party responsible for the transportation or storage will be liable for the damage caused by the deteriorated products.
A technology licensor may be held liable for damage caused by a defective product made with the licensed technology where the licensor not only provides the technology but is also directly involved in the production and sale of the products, as would be the case, for instance, for joint ventures with the licensee.
3.5.2. Liabilities of producers and sellers
Under the Product Quality Law, both producers and sellers have certain obligations for product quality.
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The principal obligations of producers are the following:
A producer is liable to compensate consumers who are injured or whose property is damaged after using a defective product, unless the producer can prove that:
Consumers may seek compensation from enterprises which have taken over the rights and obligations of firms liable for defective products, for instance, in the context of mergers.
Under both the Product Quality Law and Consumer Protection Law, sellers must not market deteriorated or expired goods. They must not sell lowquality or imitation products as if they were quality or genuine products. Generally, the seller is responsible for repairing, replacing or refunding defective products sold by it, and for compensating losses in either of the following circumstances:
Where responsibility lies with the producer, sellers have a right of recovery. The matter of whether the responsibility lies with the seller or the producer is to be decided by the SBTS or its local offices. When retailers are unable to locate the producer of a defective product, they bear the ultimate responsibility for compensating consumers. Therefore, it is important for retailers to ensure that they deal with reputable manufacturers.
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3.5.3. Limitation periods
In accordance with Article 33 of the Product Quality Law, the limitation period for claiming damages due to defective products is two years from the time the injured party knows or should have known that its rights and interests were harmed.
The injured party has no right to claim damages for the injury caused by a defective product if:
3.5.4. Settlement of disputes
The authorities for industry and commerce supervise the marketing operations of producers and sellers. Where violations of the Product Quality Law occur, they may impose fines, order stoppages of production, confiscate property and revoke business licences.
Where a dispute arises over product quality, or product liabilities and the relevant compensation, there exist several different means of settlement under Chinese law.
3.5.4.1. Extra-judicial recourses
In civil disputes between buyers and sellers/producers over product quality, the parties may attempt conciliation through consultation between themselves or through an ad hoc mediation, or through a mediation institution, the SBTS or its local offices, the local authorities for industry and commerce, or the import-export commodity inspection authorities.
Another channel for settling disputes is to apply for arbitration by the SBTS pursuant to an agreement between the disputed parties. However, the procedures for filing and handling such arbitration have not been determined, though they are expected to be based on the principles of the Arbitration Law.
If an agreement to arbitrate cannot be reached, legal proceedings may be commenced before the competent people’s court.
3.5.4.2. Litigation
Many product liability disputes cannot be solved in any of the above ways. Legal proceedings may then be initiated in a people’s court. Consumer organizations may intervene on behalf of consumers.
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Both the Product Quality Law and the Consumer Protection Law require the party responsible for the injury to pay the victim’s medical fees, nursing charges during treatment, loss of income due to absence from work, living subsidies, disability compensation and dependants’ living expenses. Victims who suffer property damage are to be compensated, or the damaged property is to be repaired or restored. Unfortunately neither law provides clear rules on how to calculate damages. The methods stipulated in the general principles of civil law define the legal basis for such calculations.
Enterprises found to be profiting from the sale of defective goods may be fined amounts ranging between two and five times the amount of income generated from the sale of the defective goods. In cases of serious injuries, the responsible enterprises’ business licences may be revoked and the enterprises may be subject to criminal charges.
In this area of the law, as in many others, the contradiction between the legal texts and their actual enforcement is striking.
The Food Hygiene Law was adopted by the 16th Session of the Standing Committee of the Eighth NPC on October 30, 1995 and it was promulgated on the same date with immediate effect. It sets up a comprehensive regulatory framework.
But considering that in 2007 the former head of the national food and drug regulation body was sentenced to death in a high-profile corruption case and that local operatives of the French multinational hypermarket chain store Carrefour are under investigation for taking bribes from suppliers, 41 and considering the observations that any passer-by can make directly on the spot, the variances from the norm in matters of food distribution are in fact substantial.
To restore the image of China’s products, in particular its food products, the SAIC has anouncd measurse to come into effect by January 1, 2008 to oblige all grocery stores, convenience stores and roadside stalls to keep records, including invoices or other notes. The SAIC claims that its inspectors have uncovered and shut 9,098 unlicensed food makers and other types of vendors in the first seven months of 2007. More than 187,000 food and product safety inspectors were scrutinising 370,000 businesses and more than 17,000 markets.42
All manufacturing, sales and management of food within the territory of the PRC are subject to the Law. Within its scope are included all foods, food additives, food containers, packaging materials, as well as food utensils, equipment, detergents and disinfectants. Its scope extends to all sites, facilities and related environments for food manufacturing, managing and selling.43
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3.6.1. Administrative authority over food safety
The supervision of food safety is a State concern.44 The health department oversees the nation’s food safety inspection and supervision.45 It formulates national hygienic standards46 while the governments at the level of the provinces, autonomous regions and municipalities directly under the central government may adopt standards to regulate activities conducted within their jurisdiction.47 The local SAIC department oversees and enforces food-safety requirements on urban and rural market fairs.48
The people’s governments at various levels enforce the laws and regulations governing food manufacturing and marketing.49 Food safety supervision with respect to railways and other means of transport is exercised by agencies set up by competent railway, communications and other concerned administrative departments jointly with the Ministry of Health.50
Supervision by public organizations and individuals over food hygiene is encouraged.51
The hygienic requirements for food vendors and food dealers in urban and rural market fairs are stipulated by the standing committees of the people’s congresses of provinces, autonomous regions and municipalities directly under the central government.52
Before engaging in food manufacturing, handling and selling, enterprises must obtain a hygiene license issued by the health administrative department. Regulations for the issuance of hygiene licenses are formulated by the health administrative departments under the people’s governments of provinces, autonomous regions and municipalities directly under the central government.53
3.6.2. Food safety standards
Food must be non-toxic, harmless, it must meet its inherent nutritional requirements and present the appropriate natural properties, in terms of color, smell, taste, etc.54
Article 7 of the Law requires that staple and non-staple foods, especially those intended for infants, meet the nutrition and hygienic standards set by the Ministry of Health.
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Article 8 of the Law requires that the manufacturing, management and selling of food must comply with the following requirements:
Under article 9 of the Law, the State sets mandatory standards with respect to foods containing pathogenic parasites and microorganisms, or microbial toxin. Meat products must pass veterinary inspections. Trade is prohibited in adulterated or counterfeited food that adversely affects nutrition and safety. Food may not be processed with non-food raw materials and it may not contain additives not approved by the Ministry of Health or pesticide residues beyond national limits.
Except for traditional raw materials, condiments or nutrition fortifiers, medicinal products may not be mixed with food.55
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The manufacturing, marketing and use of food additives are subject to specific regulations and the marketing of non-compliant products is prohibited.56
Only raw and semi-finished materials meeting the applicable hygienic requirements may be used in the production of food containers, packaging materials, utensils and equipment. These products must be easily washed and disinfected.57
3.6.3. Risk prevention measures
Pesticides, chemical fertilizers and other agricultural chemical substances must be approved by the Ministry of Health. Standards for veterinary health inspections applicable to the slaughter of livestock and poultry are adopted by the Ministry of Health and other concerned ministries.58
In site selection and designing for new works, enterprises engaged in food-related activities should consult with the local health administrative department.59
New food varieties and new food additives produced from new sources, new food containers, packaging materials, utensils and equipment produced with new raw and semi-finished materials must be submitted for approval in accordance with the applicable food hygienic standards.60
Prepackaged foods and food additives must bear labels indicating the product’s name, their place of production, the factory’s name, their date of production, their batch or code number, their specifications, their formulation or major ingredients, the duration of their quality guarantees, and their methods of use. The use instructions may not contain exaggerated or deceptive promotional information. Labels must be clearly printed and easy to read. Labels on foods sold on domestic markets must be in Chinese.61
Foods claimed to have specific health functions may not be hazardous to human health. Their functions and ingredients must correspond to those announced in the use instructions.62
Prior to their dispatch or sale by their producers, food, food additives and containers, packaging materials and other utensils specially used for food must be subjected to examination to ensure that they satisfy applicable hygienic standards and regulations.63
In purchasing foods and raw materials, food manufacturers must obtain copies of the certificates of inspection or laboratory tests in compliance with the applicable regulations.64
Personnel involved in producing, handling and selling food must undergo annual examinations before assuming their functions and annually thereafter. Those found to be victims of diseases adversely affecting food hygiene are excluded from work involving contact with food intended for direct consumption.65
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3.6.4. International trade in food
According to article of the Food Hygiene Law, imported foods, food additives, containers, packaging materials, utensils and equipment must comply with national hygienic standards and regulations. They are subject to safety control and inspection conducted by the imported food safety control and inspection agency of the entry port.
Where there are no national hygienic standards, the importer must provide the safety evaluation carried out by the health authority or organization in the exporting country (region) that must ultimately be submitted to the Ministry of Health for final approval.
Exported foods must be subjected to safety control and inspection conducted by the State administration of import and export commodity inspection and the production of their certificates is a condition of clearance by Customs offices of foods for export.66
3.6.5. Enforcement
Operators of food markets are responsible for the safety of their markets including that of the food offered for sale. They must set up necessary public sanitary facilities and maintain a healthy environmental.67
Anyone has the right to denounce violations of the Food Hygiene Law.68
The health administrative department under the people’s government at or above the county level appoints food safety inspectors. They must be qualified professionals holding certificates issued by the health administrative department at the same level.69 Food safety inspectors must justly enforce the law, be devoted to their duties and refrain from abusing their power for personal gain. In carrying out their tasks, they may make inquires from food producers, handlers and sellers, ask for necessary materials and enter production and operational sites to conduct inspections. They may remove samples without compensation. The producer, manager and seller may not refuse to answer or to cooperate with food safety inspectors nor may they conceal facts. Food safety inspectors must respect the confidentiality of technical data provided by operators.
Health administrative departments under the State Council and those at the level of the people’s governments of provinces, autonomous regions and municipalities directly under the central government may designate qualified units as food safety testing laboratories.70
Any unit where food poisoning occurs as well as any unit that treats victims of food poisoning must promptly report the incident to the local health administrative department that must promptly conduct an investigation and implement appropriate measures.71
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Manufacturers and marketers of food in violation of hygienic standards that causes food poisoning or other food-borne diseases may be ordered to cease the activities, to destroy the food in question, to surrender their illegal gains, to pay fines one to five times the amount of their illegal gains and they might have their business licenses revoked. When the harm caused to human health by food poisoning is serious, as well as when harm arises from the mixture of food with toxic and harmful non-food raw materials, criminal pursuits may be brought before the people’s courts.72
Those who produce, handle and sell food without obtaining a hygiene license or do so using a forged a hygiene license may be banned from the business, their illegal gains may be confiscated and they may be ordered to pay fines of one to five times their illegal gains. Those who alter and lend hygiene licenses may have their licenses revoked and their illegal gains confiscated and they are subject to fines of one to three times their illegal gains.
Those who fail to meet the applicable hygienic requirements in food production and marketing may be ordered to implement corrective measures and they may be issued warnings and fined up to RMB 5,000. In serious cases and when the operator refuses to amend, the hygiene license may be withdrawn.73
Prohibited products may be ordered withdrawn from circulation and their sellers may be ordered to make public announcements of their recall.74
When other violations of the Food Hygiene Law occur, the authorities responsible for health administration may issue orders to stop the illegal activities, they may confiscate illegal gains, impose fines and cancel licenses.75
In addition to administrative sanctions, violators of the Food Hygiene Law bear civil liability toward those to whom their products have caused harm.76
Where a party refuses to accept an administrative decision imposing sanctions, it may, within 15 days after receiving notice, file an application for reconsideration to the government agency at the next higher level or it may, within 15 days, directly bring a suit before the people’s court. The reconsidering organization must render a decision within 15 days from receipt of the application. Were the party concerned to refuse to accept the reconsidered decision, it might file a suit before the people’s court within 15 days from receipt of the reconsidered decision. When the person concerned fails to apply for reconsideration and does not bring an action before the people’s court, but does not execute the administrative decision, the administrative organ may apply to the people’s court for compulsory execution.77
Health administrative department officials who cause unqualified producers and managers to obtain licenses illegally are subject to disciplinary sanctions. If they accept bribes, they may be exposed to criminal pursuits.78
Food safety inspectors and other supervisory personnel who abuse their powers, neglect their duties or engage in malpractice for their own benefit with major consequences may be subject to criminal pursuits.79
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Since the Price Law came into force in 1998,80 a range of regulations on price have been enacted. The pricing regime consists of market-determined, government-guided and government-fixed prices.
The Price Law81 provides a basic pricing regime for both goods and services sold on the territory of China.82
Under article 3 of the Law, prices are mainly determined by market forces and the government concentrates on macroeconomic policy, while guiding or fixing the prices of a limited number of goods and services.
The Government is to support competition on fair, open and lawful markets.83 Business operators are to be guaranteed independence in deciding their prices.84
Where necessary, the government may implement mandatory or recommended prices with respect to:
Government-set and guided prices must be published.86
The State Council department in charge of prices is responsible for the administration of prices throughout the territory.87 Price departments of the people’s governments at and above the county level are responsible for prices within their jurisdictions.88
In fixing prices, business operators must respect the principles of fairness, lawfulness, honesty and trustworthiness89 based on costs of production or operation and market supply and demand.90 Business operators set reasonable prices in pursuit of lawful profits.91
Business operators must accurately record the costs of production of their merchandise or services and avoid deception and forgery.92
When their right of independent pricing is violated, operators may file reports and make claims against those responsible.93
Article 13 requires that business operators clearly disclose places of origin, specifications, grades, price units, prices and accessory items, and price collection standards and they must not sell merchandise at prices above the marked prices or collect unspecified fees.
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Government-set and -guided prices are based on average cost, market supply and demand, the state of economic and social development and the ability of the public to pay, rational differentials between buying and selling, between wholesale and retail sales, and among different regions and different seasons.94 The scope and level of government-set and -guided prices are adjusted in accordance with the evolution of the national economy.95 In determining prices, competent departments may carry out investigations and concerned units must provide true records.96 The price departments of the people’s governments at and above the county level monitor pricing activities and may sanction illegal behaviour.97 Refusals to comply with investigating authorities may entail the imposition of fines.
In fixing government-set and -guided prices for public utilities, public welfare services and prices for goods under government monopolies that are of immediate public interest, public hearings presided over by government price department officials must be convened to solicit views from consumers, business operators and other quarters to explore their necessity and feasibility.98 Consumers and business operators may put forward their recommendations with regard to adjustments of governmentset and -guided prices.99
Where prices of important goods or services are rising or may rise significantly, the State Council or provincial governments may intervene, such as by fixing prices or rates of profit.100
Article 14 of the Price Law prohibits a number of pricing practices:
In the event of violations of the Price Law, the administrative authorities may issue remedial orders, confiscate illegal receipts, impose fines in amounts of up to five times the illegal proceeds and, in serious cases, suspend business licences.101 Victims of price violations may obtain orders of restitution and damages where the violations have caused actual harm.102
Local people’s governments and government departments that fix or adjust prices beyond their terms of reference or refuse to implement price intervention measures or emergency measures may be ordered to correct the situations, and those directly responsible are subject to administrative sanctions.103
If government personnel in charge of prices disclose State secrets, commercial secrets or abuse their powers, resort to deception for personal gains, commit derelictions of duty or accept bribes, and where the cases are serious, criminal pursuits may be initiated.104
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Based on the provisions of the Price Law, regulations have been enacted to provide more detailed rules, including:
Overlaps appear to exist in these regulations.
4.2.1. Fraudulent pricing
Article 3 of the Regulations Prohibiting Fraudulent Pricing Activities of 2001 defines fraudulent pricing activities as enticing buyers into transactions through false or misleading price labelling or pricing measures.
Article 5 requires that businesses expressly label prices in connection with purchases or sales of goods or supplies of services.
Article 6 proscribes the following price labelling activities as fraudulent:
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Other fraudulent pricing activities sanctioned under article 7 include:
4.2.2. Monopoly pricing
Article 2 of the Provisional Regulation on the Prohibition of Pricing-related Monopoly Activities as collusions or abuses of dominant positions on markets, manipulations of market prices, disruptions of orderly production and trading, impairments of the lawful rights and interests of consumers and other businesses and causing harm to public interests.
Its article 4 provides that businesses may not conduct the following pricing-related monopoly activities through agreements, resolutions or other forms of collusion:
Its articles 5 to 8 require that businesses do not take advantage of their dominant positions in the market:
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4.2.3. Hearing procedures for government pricing
The Measures for Hearings with respect to Government Pricing Decisions, issued by the former State Development Planning Commission in 2002, provide that hearings are held about prices included in the central and local government pricing catalogues when they concern public utilities and public services and goods subject to natural monopoly that are closely related to the fundamental interests of the people. The pricing authorities formulate and publish the catalogues of the items subject to hearings. Where the government pricing authorities consider it necessary, hearings may be convened about the pricing of goods or services not included in a catalogue but nonetheless related to the fundamental interests of the people.
According to article 7, hearings about prices are convened by the central or provincial authorities depending on which level is competent over the issue; if a pricing issue within the jurisdiction of the central authority only relates to goods or services in a certain region, the central authority may delegate the convening of hearings to local authorities.
Article 15 provides that pricing hearings may be initiated upon application of concerned enterprises or their governing authorities, as well as upon application by consumers’ organizations.
Except where State secrets or commercial secrets are involved, article 5 requires that hearings be open to the public.
According to article 9, participation in pricing hearings is intended to be broad and to include representatives of enterprises, consumers, concerned departments of the government and experts.107
Article 26 requires that the pricing authorities publish the final results of pricing hearings.
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In 1952, the private component of sales within the distribution sector in China represented 64% but by 1957 that share had shrunk to only 3%.
At its nadir during the Cultural Revolution (1966-1976), the distribution sector accounted for only 3% of all employment.
The reform of the distribution sector was launched as early as 1978 with the opening of some one million private retail stores. By 1992, the number of private stores had rocketed to 10 million and the share of private distributors corresponded to some 20% of all sales. Through the 1990s, total retail sales doubled every five years while growing at some 10% per year in real terms.
Since the inception of reform movement in 1978, China has gradually lifted the controls on distribution of goods and services and this process has been accelerated since the country’s accession to WTO in December 2001.
The concept of agency is introduced into Chinese law in Chapter 4 section 2 of the General Principles of Civil Law (GPCL).109 Three types of agency are covered: entrusted agents exercise powers conferred by the principal, statutory agents are appointed by the law, and appointed agents are designated by the courts.
Under the terms of article 66 of the GPCL, entrusted agents may engage the principal only within the limits of their authority, unless the principal knows of an unauthorized act and fails to repudiate it. Acts outside the scope of an agent’s authority engage the agent’s liability. Third parties are liable for acting knowingly in collusion with an agent beyond the scope of the agent’s authority.
Agents are liable toward their principals when their failures to perform their duties cause them harm.
Agents and third parties may not collude to harm the principal’s interests.110 Agents should obtain the consent of their principals before delegating their powers to sub-agents but, if that is not done, then the principal should be informed promptly about the delegation. Should the principal disapprove, the agent is liable for the acts of the transferee, except in the case of acts carried out in emergency circumstances to safeguard the principal’s interests.111
Article 69 provides that entrusted agencies terminate:
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Brokerage contracts are those whereby the broker presents to the customer an opportunity for entering into a contract or provides intermediary services in connection with its conclusion, and the customer remunerates the broker.112
Brokers must not harm their customers’ interests by intentionally concealing any material facts or by providing false information.113
If the remuneration due to a broker is not clear and cannot be ascertained, it is fixed at a reasonable level in light of the amount of its labour. In cases of debate over liability to pay a broker’s remuneration, it is split equally between the parties.114
In facilitating the formation of contracts, brokers bear their own expenses.115
Where no contract is formed despite a broker’s effort, no remuneration is due, but the customer may be required to reimburse necessary expenses.116
China allowed pyramid selling until 1998, when the State Council issued the Circular on Prohibition of Pyramid Selling Activities.118 Since then, the Circular on Certain Issues concerning Foreign-invested Pyramid Selling Enterprises has been issued by the Ministry of Foreign Trade and Economic Cooperation (now the MOFCOM), the SAIC and the State Bureau of Domestic Trade. The latter Circular sets down the conditions and formalities for foreign invested pyramid selling enterprises to convert to fixed store selling or selling through employee representatives whose remuneration was to be based on their individual performances.119
On August 23, 2005, the State Council adopted the Regulations on the Administration of Direct Selling (the Direct Selling Regulations) and the Regulations Banning Pyramid Sales (the Pyramid Sales Regulation).120
The Direct Selling Regulations apply to all methods of sale whereby a direct seller recruits salespeople to promote products directly to end consumers anywhere other than in a fixed place of business.121
The SAIC and its competent offices regulate direct sales activities.122
5.3.1. Access to direct selling activities
Only enterprises established in China may apply for licences to carry on direct selling. A direct seller may only offer its own products or those produced by its parent company.123
Applicants are required to have a minimum registered capital of RMB 80 million and to pay a bond at a local bank.124 The initial amount of the bond is RMB 20 million, which is adjusted monthly to levels equal to 15% of revenues during the previous month up to a maximum of RMB l00 million.125
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Applications are presented to the competent department of the MOFCOM in the province, autonomous region or municipality under direct administration of the central government where the applicant is located. The application is forwarded to the MOFCOM under the State Council and, after soliciting the opinion of the SAIC, it renders a decision within 90 days from receipt of the application.126 Factors to be taken into consideration are national security, the public interest and the state of development of the direct selling business.127
Article 10 of the Direct Selling Regulations requires that direct sellers set up branches or sub-branches in the provinces, autonomous regions or municipalities directly under the central government where their activities are extended as well as service outlets to relate with consumers and direct salespeople, to explain product prices, and to accept returns or exchanges of goods.
The MOFCOM posts the list of direct sellers and their branches on its website.128
Only approved direct sellers may recruit direct salespeople, whose sales promotion activities may not be pursued for operating without a licence.129
5.3.2. Duties of direct sellers
Direct sellers may not advertise the remuneration rates of direct salespeople nor make the payment of access fees or the purchase of merchandise conditions for being enrolled as a direct salesperson.130 No one may engage in direct selling activities without having executed a contract with a direct seller.131
Direct sellers may not recruit as direct salespeople:
Direct sellers must provide free vocational training to recruits. After they have passed an exam, direct salespeople are issued certificates. No one may engage in direct selling activities without a direct salesperson certificate. Only direct sellers may provide vocational training to direct salespeople.133 Trainers must have been employees of the direct seller for at least one year, and they must have at least an undergraduate education as well as relevant legal and marketing knowledge. They must not have records for intentional crimes or major violations of business laws.134
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Direct sellers must mark their prices on their products and they must be consistent with prices displayed in their service outlets.135
Article 24 imposes that direct sellers pay remuneration to their direct sales personnel based only on products they sell directly to consumers. Team-based commissions that constitute the underlying principles of so-called multi-tier sales networks are prohibited.136
5.3.3. Rights and duties of direct salespeople
In promoting their products, direct salespeople may not forcibly enter premises and they must always present their salesperson certificates and contracts. They must provide detailed explanations of their products and issue invoices for sales that indicate the price as well as the conditions of after-sales service.137
A direct salesperson may not offer products at prices other than those indicated thereon by the seller.138
Remuneration must be paid at least once a month.139
The commission rate on direct sales, including bonuses and other incentives and benefits may not exceed 30% of the value of sales.140
Within 30 days of purchasing products from direct sellers, and provided that they have not been opened, direct salespeople and consumers may return them on the strength of the invoices or sales receipts issued by the direct sellers. Amounts indicated on the invoices or sales receipts must be repaid within seven days.
5.3.4. Settlement of disputes
In the event of disputes between direct sellers and their salespeople or consumers, the burden of proof is on the former.141
Direct sellers are jointly and severally liable for the direct selling acts of their salespeople in connection with activities on their behalf.142
A direct seller’s bond may be drawn down if:
Direct sellers may recover their bonds upon cessation of their activities, provided that all their obligations have been fulfilled.144
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Article 35 invests the competent SAIC departments with the powers :
SAIC offices publish telephone numbers for denunciations of violations. Informants’ anonymity is guaranteed and they may be given rewards.146
SAIC offices may order that direct selling activities be suspended.147
Civil servants who commit violations of the laws and regulations in the performance of their duties are liable to administrative sanctions and in serious cases to criminal pursuits.148
In cases of violations of the laws and regulations, SAIC offices may:
If a criminal offence has been committed, pursuits may be brought before the courts.149
In connection with the implementation of its WTO accession commitments, China adopted in the course of 2007 three new regulations with respect to franchising:
None of these texts contains a provision canceling the Measures for Regulating Commercial Franchising that had been issued by the MOFCOM on December 30, 2005 and implemented on February 1, 2005 (the MOFCOM Franchising Measures). One viewpoint of the situation is to consider the 2005 measures repealed by implication or that in any case explicit repeals will ultimately be issued. This conclusion seems to coincide with the MOFCOM’s current practice.
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Of course, in cases of conflict, the State Council’s edicts would rank higher then the MOFCOM’s. But not all the differences are conflictual and operators might find it opportune to invoke or exploit some elements of the MOFCOM Franchising Measures not found in the State Council Regulations.
In fact there are points of difference between the two texts. For instance, under the MOFCOM Measures, franchise operations in China must be conducted under local law150 whereas this requirement is omitted from the State Council Measures. The MOFCOM Measures prohibit franchisors from carrying on “illegal direct marketing”, but the State Council Measures make no mention of the matter.151 Franchises may not give rise to market monopolies or impede fair competition.152
The later MOFCOM measures would override the earlier in the event of conflicts in their provisions, and the more specific would prevail over the general text of 2005. The point is not devoid of interest since the later texts in fact change some of the earlier text’s provisions. For instance, the period within which a franchisor must disclose required information is extended to 30 days by article 4 of the MOFCOM’s Franchising Disclosure Measures, from the earlier text’s stipulation of 20 days in its article 18.
Article 3 of the State Council Franchising Measures defines commercial franchises as:
business operations by which an enterprise that possesses a registered trademark, enterprise mark, patent, know-how or any other business resource (the franchisor) confers it to any other business operator (the franchisee) through contract, and the franchisee conducts business operations under the uniform business model as stipulated by the contract, and pays franchising fees to the franchisor.
The parties to a franchising arrangement must abide by the principles of free will, fairness, honesty and good faith.153 They must avoid causing harm to consumer interests.154
Neither franchisors nor franchisees may use trademarks, or other franchise signs, in a misleading or confusing manner.155
The State Council Franchising Measures specify that the SAIC is responsible for overseeing franchising activities all over the country, while the commerce department of each province, autonomous region, or municipality directly under the central government and those of the cities divided into districts take charge of regulating franchising activities within their jurisdictions.156
Anyone is entitled to denounce to the commerce department violations of the franchising regulations, and the latter has an obligation to handle the matter promptly.157
Existing franchises must comply with filing requirements within a period of one year.158
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5.4.1. Qualifications as franchisors and franchisees
According to article 7 of the MOFCOM Franchising Measures, only a legally established enterprise or other economic organization is qualified to carry on business as a franchisor. In addition, a franchisor must satisfy the following conditions:
Article 7 of the State Council Franchising Measures adds to these requirements that the franchisor must possess a “mature business model”.
A franchisee must:
5.4.2. Franchisors’ disclosure obligations
Pursuant to article 3 of the MOFCOM Franchising Disclosure Measures, the disclosure obligations apply to the franchisor’s parent, subsidiary and affiliated companies.
Article 5 of the MOFCOM Franchising Disclosure Measures obliges the franchiser to disclose information falling into twelve categories:
1. basic information about the franchiser and its franchising activities :
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2. basic information on its business resources:
3. basic information about the expenditures entailed by joining the franchising network:
4. information about the prices and conditions of sale of the products, services and equipment provided to the franchisee:
5. information with respect to the services provided to the franchisee on an ongoing basis:
6. information about the methods and contents of the guidance and supervision by the franchisor over the franchisee’s activities:
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7. information about the amount of investment required to join the franchise network:
8. information about franchisees in the PRC:
9. abstracts of the franchiser’s financial and accounting reports and of the audit reports covering the previous two years audited by accounting or auditing firms;
10. information on litigation and arbitration concerning franchises of the franchiser in the previous five years and involving more than RMB 500,000, including basic information about such cases and their outcomes;
11. information about any observed major illegal operations of the franchisor or of its legal representative, records of major illegal operation entailing:
12. information about the franchise contract(s) to be signed by the franchisee, including a sample or samples thereof.
Franchisers may not cheat or mislead potential franchisees, and their advertisements may not disclose an individual franchisee’s profits.161
Franchisors may require potential franchisees to sign non-disclosure agreements.162
If a franchisor conceals information that is required by law to be disclosed, the franchisee may rescind the franchise contract.163
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The MOFCOM Franchising Measures of 2005 additionally provide that franchisors must communicate to potential franchisees:
Franchisors must provide franchisees with true (zhen shi), accurate (zhun que) and complete (wan zheng) information, and, where any significant change has occurred to the information provided by a franchisor to any of its franchisees, the franchisor must promptly give them notice.165
5.4.3. Franchise contracts
Article 13 of the MOFCOM Franchising Measures requires that franchise agreements include the following matters:
Article 11 of the State Council Franchising Measures complements these requirements by obliging the franchisor to include in the contract:
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5.4.4. Filing requirements
Where commercial franchising is conducted within a province, autonomous region, or a municipality, the filing obligations are fulfilled with the commerce agency of that province, autonomous region or municipality. However, in the case of operations beyond one province, autonomous region or municipality, filing is accomplished at the commerce department under the State Council. Filing may be carried out online on the site of the MOFCOM at www.mofcom.gov.cn.166
The documents that must be filed by franchisors include:
Franchisers must accomplish their filing duties within 15 days of signing a franchising contract. Franchisers engaged in franchising before May 1, 2007 have one year from the implementation of the Measures to complete their filings.168
In the event of changes in the information on file, amendments to the filings must be carried out within 30 days.169
Before March 31 of each year, franchisers must report to the filing agency the signing, cancellation, renewal, and modification of their franchising contracts during the course of the previous year.170 Such information must be true, accurate, and complete.171 The information must be processed within ten days of its receipt and posted on the website of the MOFCOM.172
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The MOFCOM is expected to make available on its website:
Overseas franchisors conducting their activities in the PRC are expected to comply with the filing requirements as are those from Hong Kong, Macao, and Taiwan.174
National franchising associations are encouraged to participate in the supervision of the performance of franchisors’ filing obligations.175
5.4.5. Rights and obligations of franchisors
Under the MOFCOM Franchising Measures, franchisors enjoy the rights:
Under article 10 of the MOFCOM Franchising Regulations, a franchisor has the following obligations:
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Except for monopolized goods and those goods that have to be supplied by the franchisor or its designated suppliers to ensure the quality of the franchise operations, a franchisor may not impose itself upon franchisees as supplier of franchised goods. However, franchisors may stipulate standards of quality for the franchise goods or impose a list of suppliers from which franchisees may choose.178
In promoting their franchises to potential candidates, franchisors may not resort to false or misleading advertising or misrepresentations.179 Franchisors may be required to compensate franchisees for their losses arising from their inadequate disclosures or misrepresentations.180
The quality and standards of the franchised products and services must comply with the laws, administrative regulations and requirements of the State.181
Where a franchisor requires a franchisee to pay expenses before the conclusion of the franchise contract, it must justify in writing their purpose as well as the conditions governing their refund.182
Promotional and publicity expenses collected by franchisors from franchisees must be used for the purposes identified in their contracts and franchisors must keep their franchisees informed in a timely manner about these matters. Franchisors may not resort to fraud or misleading statements in their promotion or publicity, and their advertisements may not include claims that any franchisee has profited from joining the franchise.183
5.4.6. Rights and obligations of franchisees
Article 11 of the MOFCOM Franchising Measures invests franchisees with the following rights:
Franchisees have the following obligations:
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Upon termination of a franchise agreement without the consent of the franchisor, the franchisee may not continue to use the trademarks, trade names and other signage of the franchisor, register the franchisor’s trademarks with respect to similar products or services, use words identical with, or similar to, the franchisor’s registered trademarks as part of a trade name, or use signage identical with, or similar to, the franchisor’s trademarks or trade names, or store décors for identical or similar products or services.185
During the term of the franchise agreement as well as after its termination, the franchisee and its employees may not, without the consent of the franchisor, use, disclose or allow others to use the trade secrets of the franchisor.186 The obligation of confidentiality extends to parties engaging in negotiations with franchisors.187
5.4.7. Term and termination of franchise agreements
The term of franchise agreements is “generally” at least three years. Upon the expiration of a franchise agreement, the parties may negotiate the terms of its renewal based on the principles of fair dealing and reasonableness.188
Franchise contracts must stipulate that the franchisee may unilaterally terminate the contract within a certain term after its signature.189
Unless the franchisee specifically consents, the franchise term as stipulated in the franchise contract may not be less than three years.190
5.4.8. Foreign-invested franchises
FIEs may not engage in franchising involving sectors to which access is prohibited in the Industry-specific Catalogue Guidance for Foreign Investment.191 When FIEs intend to begin franchising, they must apply to the original approval authority to extend their business scope.192
Whether a foreign franchisor that has not established a FIE may licence others to open stores in China is not answered specifically in the State Council Franchising Measures.
On the other hand, article 3 of the Measures for Regulating Foreign Investment in the Commercial Sectors requires foreign companies, enterprises and other organizations and individuals intending to engage in franchising in China to establish a FIE for such purpose. Also, article 7 of the MOFCOM Franchising Measures requires that the FIE must have at least two self-owned stores and must have been in operation for more than one year in China, or have two such stores established by its subsidiary companies or holding companies.
In contrast, China’s Schedule of Specific Commitments under the GATS requires that China place no limitations on cross-border supply of foreign franchising services. Therefore, foreign franchisors should be allowed to franchise others to set up business in China, although they do not establish any entity in China.
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5.4.9. Violations of franchise regulations and agreements
In the event of failures by franchisors or franchisees to meet the minimum qualifications required by the law, or if they are in default of their disclosure obligations, then under the MOFCOM Franchising Measures, the competent department of the SAIC may issue orders to comply, may impose fines of up to RMB 30,000 and may close the infringing business.193
The State Council has promulgated a series of sanctions for specific violations of its Franchising Measures.
Where unqualified parties undertake franchising activities, they are liable to administrative sanctions ranging from remedial orders, confiscation of illegal gains, public notices and fines of more than RMB 100,000 but less than RMB 500,000.194
Where a franchisor is not up-to-date in its registration obligations, it is ordered to remedy the situation and it may be fined up to RMB 50,000.
If a franchisor commits fraud or engages in misleading advertising or promises returns from its franchise, remedial orders are issued and it may be fined up to RMB 300,000 when the circumstances are serious. Public notice is given. If a crime is committed, a complaint is filed with the procuratorate.195
Where a franchise complains to the commerce department about disclosure violations of its franchisor and where, upon verification, the complaint is grounded, the commerce department orders the franchisor to remedy the situation and imposes fines up to RMB 100,000 and may order public notice may be ordered.196
Defrauding anyone of their property using franchising in circumstances that amount to a crime is reported to the procuratorate.197
Personnel of the commerce department may not abuse their authority, neglect their duties or commit fraud and, were the infraction to amount to a crime, it would be reported for pursuit before the people’s courts.198
Where a franchiser is found to have committed any of the following acts, the competent agency may cancel the filing, and publish the fact on the MOFCOM website:
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Where a franchiser is remiss in performing its filing obligations, the commerce department under the State Council and the commerce agency of the people’s government at the level of the province, autonomous region or municipality where the franchiser is located, may request the franchiser to complete the record filing within a specific period of time, impose, in serious cases, fines between RMB 10,000 and RMB 100,000, and publication thereof may be ordered.200
5.5.1. Contracts for the carriage of cargo
Contracts for the carriage of cargo are those whereby the carrier carries the cargo from the place of departure to the prescribed destination, and the consignor or consignee pays the fare or freight.201
A common carrier may not refuse any normal and reasonable requirement of a consignor.202
Carriers must carry their cargo safely to the agreed destination and do so within the stipulated time or, if none is stipulated, within a reasonable time.203 They must use the contracted route or, otherwise, the normal route.204
Consignors or consignees must pay the freight. Where the carrier fails to use the prescribed or normal route, consignors or consignees may refuse to pay any excess fares or freight.205
Consignors are responsible for providing correct names of consignees, as well as any necessary information relating to carriage of the cargo, such as the designation, nature, weight, and quantity of the cargo and the place for taking delivery. They are liable to carriers that sustain losses due to their provision of false information or their omission of any material information.206
Where carriage of the cargo is subject to any procedures, such as approval or inspection, the consignor must provide the carrier with evidence of their completion.207
The consignor must pack the cargo in the prescribed manner. Where a packing method was not prescribed or clearly prescribed, the subject matter must be packed in the manner that is customary, or, if there is no custom, in a manner adequate for its protection. If the packing is inadequate, the carrier may refuse to accept the cargo.208
In consigning any hazardous material which is inflammable, explosive, toxic, corrosive, or radioactive, etc., the consignor must use proper209 packing and affix upon it notices and warnings for hazardous materials, and must identify it in writing to the carrier and indicate its nature as well as the appropriate precautionary measures. Otherwise, the carrier may refuse the cargo, and charge the consigner for its expenses.210
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Subject to compensating the carrier for any loss, the consignor may at any time prior to the carrier’s delivery of the cargo to the consignee require the carrier to suspend the carriage, return the cargo, change the destination or deliver the cargo to another consignee.211
Upon arrival of the cargo, and where the consignee is disclosed, the carrier must promptly send it notice. Where the consignee delays in taking delivery, it must pay the consequent charges.212
Upon taking delivery of the cargo, the consignee must inspect the cargo within the contractual deadline or, if none is agreed, then within a reasonable time, lest the omission be deemed prima facie evidence of delivery in compliance with the description in the transportation documents.213
In principle, the carrier is liable for loss of or damage to the goods during their carriage, but the carrier may avoid liability by proving that the damage or loss was imputable to an event of force majeure, to the cargo’s characteristics, to reasonable depletion, or to a fault of the consignor or consignee.214
Unless otherwise provided by law or administrative regulation, where the parties agree on an amount of compensation in the event of damage to or loss of the cargo, that amount is due. Otherwise, it is calculated based on the prevailing market price at the destination when the cargo was or should have been delivered.215
Where two or more carriers jointly carry the cargo using the same method of transportation, the carrier contracting with the consignor is responsible for the whole course of carriage. Where the loss occurred at a particular segment, the carrier contracting with the consignor and the carrier for such segment are jointly and severally liable.216
Where the cargo was lost in the course of carriage due to force majeure, the freight is not due or, if paid, must be reimbursed by the carrier.217
Where the consignor or consignee fails to pay the freight, storage or other expenses connected with the carriage of the cargo, the carrier may place a possessory lien on the corresponding portion.218
Multi-modal carriage operators enjoy the rights and assume the obligations of a carrier throughout the course of carriage.219
Multi-modal carriage operators and individual segment carriers may agree upon their duties toward each other with respect to any segment.220
Upon receipt of the cargo delivered by the consignor, the multi-modal carriage operator must issue a multi-modal carriage document. It may be negotiable or not, as required by the consignor.221
Where a multi-modal carriage operator suffers a loss due to the fault of the consignor, the latter remains liable for damages notwithstanding its subsequent assignment of the multi-modal carriage document.222
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5.5.2. Warehousing contracts
Warehousing contracts are those whereby the warehouseman stores goods delivered by the depositor, and the depositor pays a warehousing fee.223
Warehousing contracts become effective upon their formation.224
Where the depositor intends to store hazardous materials or any items subject to deterioration, it must describe the nature of the goods and provide relevant information. Warehousemen accepting such materiel must be appropriately equipped.225
Warehousemen are responsible for overseeing the condition of goods in their custody. They must report any anomalies to their depositors lest they be held liable for consequent damages.226
Warehouse receipts must be signed or sealed by the warehouseman and they must bear:
Warehouse receipts represent vouchers with which to retrieve the goods. The right to retrieve the goods may be assigned where the depositor or the warehouse receipt holder have endorsed it and the warehouseman has signed or sealed it.228
The holder of a warehouse receipt may inspect the goods or take samples.229
If a warehouseman discovers that goods in storage are deteriorating or are otherwise damaged, it must in a timely manner notify the depositor or holder of the warehouse receipt.230
Where the warehouseman discovers that goods in storage are deteriorating or are otherwise damaged, thereby endangering other goods and normal safekeeping, it must demand that the depositor or the holder of the warehouse receipt dispose of them. In an emergency situation, the warehouseman may itself dispose of the goods.231
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Where the warehousing period was not prescribed or clearly prescribed, the depositor or holder of the warehouse receipt may retrieve the goods at any time, and the warehouseman may require the depositor or holder of the warehouse receipt to retrieve the goods at any time.232
At the end of the warehousing period, if the depositor or holder of the warehouse receipt does not retrieve the goods, the warehouseman may demand retrieval within a reasonable period, and if the goods are not retrieved at the end of such period, the warehouseman may place the goods in escrow.233
The warehouseman is liable if the goods are damaged or lost during the warehousing period due to improper safekeeping. The warehouseman is not liable if the deterioration or damage is due to their nature, inadequate packing, or storage beyond their shelf life.234
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The first advertisement published after the extinction of the activity during the previous decades appeared on Shanghai Television on January 28, 1979, promoting a medicinal herb. The first foreign advertisement appeared in the Wenhui News on March 15, 1979. The first foreign advertising agency opened in 1986 and numerous competitors have since followed. The Advertising Law was adopted in 1994 and became effective in 1995,235 providing a general framework for advertising activities. The Measures for Regulating Foreign-invested Advertising Enterprises were adopted in 2004 to cover foreign investment in the advertising sector.
The purposes of the Advertising Law are stated in its article 1:
The Advertising Law in its article 2 has clarified the identity and obligations placed upon advertisers, advertising agents and advertisement publishers.
Advertiser is defined as a legal person, economic organization or individual that designs, produces and publishes by its own efforts or through commissions, advertisements intended to promote the sale of goods and services.
Advertising agents are legal persons, economic organizations or individuals that provide on a commission basis services consisting in the design and production of advertisements or related services.
Advertisement publishers are legal persons or economic organizations that carry out advertising on behalf of advertisers or on behalf of advertising agents commissioned by advertisers.
Advertisements are commercial announcements that publicise, directly or indirectly, through media or other means, suppliers of commodities or services.
The industry and commerce administrative departments of the government at the county level and above are responsible for administering and supervising advertising activities.
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The contents of an advertisement must be true and lawful;236 it may not contain false information or cheat or mislead consumers in any way.237 Advertisements must comply with socialist spiritual values.238 Advertisers, advertising agents and advertisement publishers must respect the principles of fairness, honesty and creditworthiness in carrying on their activities.239
Advertisements must not harm physical or mental health and must promote the quality of commodities or services, protect the legitimate rights and interests of consumers, respect social, public and professional ethics and safeguard the dignity and interests of the State. They may not contain any of the following:
Advertisements must distinctly and clearly state as regards goods their specifications, place of origin, conditions of use, quality, price, manufacturer, expiration date and warranties, if any, and, as regards services, their contents, form, quality, price and warranties, if any.241
Data, statistics, survey results, excerpts and quotations used in an advertisement must be true and accurate, and their sources clearly indicated.242
Advertisements involving patented products or processes must clearly indicate the patent number and category.243
Advertisements must not contain any content that denigrates the goods or services of other producers or operators.244
Advertisements must be clearly recognizable by consumers as advertisements.245
There are special rules for advertisements concerning pharmaceuticals and medical apparatus,246 agro-chemicals,247 tobacco248 and alcoholic drinks.249
The subject of an advertisement must fall within the advertiser’s business scope, which must accordingly be verified by the advertising agent and the advertisement publisher.250 The submission of all required supporting documentation is an affirmative requirement of the Advertising Law. A list of required supporting documentation is provided in article 24 of the Law.
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Advertising activities must be conducted on the basis of written contracts, not just verbal agreements.251
In conducting advertising activities, advertisers, advertising agents and advertisement publishers must not engage in any form of unfair competition.252
Advertisers must commission advertising agents and publishers with lawful operating qualifications to design, produce and publish advertisements.253 When using the names and images of others in advertising, advertisers and advertising agents must obtain their prior written approval.254
Advertising agents must have the necessary professional staff and equipment. They must have completed enterprise registration and advertising management registration before conducting advertising activities.255
Article 27 of the Advertising Law requires that advertising agents verify the contents of advertisements and prohibits their participation in the production or publication of advertisements the contents of which are inaccurate or the documents of certification for which are incomplete.
Advertisement publishers, such as radio and television stations, newspapers, periodicals and publishers, must designate special departments to handle their advertising business, and must comply with registration procedures.256
Fees collected for advertising must be reasonable. Standards and methods of fee collection must be reported to the State Commodity Price Bureau and the administrations for industry and commerce. Advertising agents and publishers publicly disclose their fee rates and collection methods.257
The extent of media coverage, television viewing ratings and distribution announced by advertising publishers to advertisers and advertising agents must be true and current.258
No one may design, produce or publish advertisements for commodities or services that are prohibited by laws or regulations or for commodities or services the advertisement of which is prohibited.259
Outdoor advertising is prohibited in areas such as cultural and scenic sites.260
Certain advertisements such as those for medicines, medical apparatuses, pesticides, and veterinary medicines are subject to prior examination.261 In such cases, advertisers applying for examination of an advertisement submit relevant certificates from the advertisement examination authority. The authority must examine the advertisement and render a decision according to the applicable laws and regulations.262 No organizations or individuals may forge, alter or transfer advertisement documents of approval.263
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In the event of false advertising of goods or services, the administrative authority may order the advertiser to cease publication and to spend an amount equal to the amount spent on the advertisement to issue a public correction informing the same audience of the violation. The advertising fees collected by a guilty advertising agent or publisher may be confiscated and a fine ranging from twice to no more than five times the amount collected for the advertisement may be imposed. In very serious cases, a guilty party’s advertising business may be terminated. If the case is serious enough to constitute a crime, criminal liability may be imposed in accordance with the law.264
For false advertising intended to deceive or mislead consumers that causes damage to the legal rights and interests of consumers who have purchased such commodities or services, advertisers bear civil responsibility, and advertising agents and publishers bear joint liability if they have designed, produced or published the advertisement with knowledge of, or if they should have known of, falsehoods in the advertisement.265
Where advertisements contain illegal contests, the advertising supervision and administrative organizations may order the advertisers, advertising agents and publishers responsible to stop publication and publish corrections and they may confiscate advertising expenses and impose fines ranging from twice to less than five times the amount of the advertising expenses. If the case is very serious, the licence of the advertising enterprise may be withdrawn. If a case is sufficiently serious, criminal pursuits may be brought before the people’s courts.266
Personnel of advertising supervision and administration authorities and of advertising examination authorities are subject to administrative sanction if they commit derelictions of duty or abuse their powers for personal gain. In serious cases, criminal pursuits may ensue.267
Advertisers, advertising agents and advertisement publishers bear civil liabilities for their torts in violation of the Advertising Law.268
Parties dissatisfied with an administrative sanction may apply for review at the next higher level or bring the case directly before the people’s court within 15 days. The administrative review organ must render a decision within 60 days from receipt of the application for review. Cases may then be brought before the people’s court within 15 days from receipt of the notice of the administrative review. If a review organ fails to render a decision within the time limit, the party concerned may bring the case before the people’s court within 15 days from the date of expiry of the review period. If a party fails to apply for review or bring the case before the people’s court but does not implement the decision, the organ that has taken the decision may apply to the people’s court for compulsory enforcement.269
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According to the China Internet Network Information Centre (CNNIC), at the end of 2007, there were 210 million internet users in China. The penetration rate of the internet in China corresponds to 16% of the population compared with a world average of 19% (70% in the United States, Japan and South Korea and 40% in Europe). The internet has become the leading method in China for seeking financial, travel and employment services. China has allocated 118,000,000 IP addresses, ranking third in the world with 4.4% of the total, after the United States (59.7%) and Japan (6.6%).
Businesses outside China may engage in electronic commerce with counterparties on its territory provided that they obey applicable Chinese laws and regulations.270 For instance, since the entry into effect of the Electronic Signature Law in April 2005, foreign electronic signature certification services may, subject to reciprocity and approval by the Ministry of Information Industry (MII), obtain recognition for their certificates in China.271 Since 2001, foreign banks may petition the People’s Bank of China (PBOC) for authorization to offer banking services online within the Chinese territory.272 Foreign online merchants concluding business with parties in China will note that, under articles 30 and 34 of the Consumer Protection Law, the Chinese courts will accept jurisdiction over disputes arising from contracts with local consumers.
Since December 11, 2004, foreign enterprises may establish wholly foreign-owned enterprises to carry on commercial activities on the Chinese web while respecting all applicable laws, in particular those with respect to the approvals of foreign investments (with MOFCOM) and those specific to online activities (such as with the MII).273
Enterprises carrying on commercial activities on the internet in China are confronted with norms issued by a plethora of authorities on a wide variety of subjects, as evidenced by the list below:
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As is frequently the case in Chinese law and practice, the bifurcation of power between the central authorities and those at the level of the provinces, autonomous regions and municipalities under direct administration of the central government induces legal strategies which arbitrage their differences against the increased risk to legal certitude. On numerous occasions, authorities at lower levels have taken initiatives that complement without contradicting higher norms, giving rise to speculation about their eventual extension to the national plane. On some occasions, the central authorities have called into question the validity of arrangements concluded in the interstices of the regulatory edifice.274
Activities on the internet are subject to the Telecommunications Regulations, which cover “all activities which exploit electromagnetic, optoelectronic, wired or wireless systems to transmit or to receive information whether as voice, text, data, images or in other forms”.275 Article 8 of the Telecommunications Regulations distinguishes between “basic services”276 and “value added services”.277
Only enterprises constituted in China may apply for licences to provide value added services.
Generally, the MII offices at the level of the provinces, autonomous regions and municipalities subject to direct administration by the central government attribute licences for intra-provincial and intra-regional communications, whereas interprovincial and inter-regional communications licences are subject to the jurisdiction of the MII under the State Council.
FIEs intending to undertake online commercial activities in China are subject to the jurisdiction of the central government.
As telecommunications service providers, electronic commerce entrepreneurs must respect business ethics and they must provide their clients with “rapid, accurate, secure, convenient services at reasonable prices”.278
Article 6 of the Telecommunications Regulations prohibits all activities which threaten national security, the public interest or the rights or legitimate interests of third parties.279
State secrets online are protected according to the principle of “those who go online shall bear responsibility”.280
Prior to establishing an online bulletin board system, chat room or network newsgroup, permission must be obtained from the competent secrecy protection entity. Operators of such services must conscientiously perform their duties to monitor activities of their systems for breaches of State secrets and, upon discovering any such information, they must in a timely manner report the matter to the local secrecy protection agency and take appropriate measures.
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Internet access providers are subject to the Revised Provisional Regulations Governing the Management of Chinese Computer Information Networks Connected to International Networks,281 complemented by the Implementation Measures of February 13, 1998. Articles 6 and 10 of the Regulations oblige access providers as well as all internet users to communicate via government-approved carriers to access international networks.282
Connections between telecommunications networks must be provided at prices that take account of technical and economic factors, on the basis of impartiality, fairness and mutual cooperation.283
Only enterprises constituted in China with adequate technical and long-term financial capacities may qualify to carry on business as internet access providers.
Article 13 of the Regulations requires that they maintain their equipment and systems in condition to provide proper and secure services. They must maintain records of sites visited by their customers for 60 days while keeping them available to public security authorities.
Contents on the internet are governed by the Measures for Managing Internet Content Provisions, issued on September 25, 2000 by the State Council.284
The MII exercises general jurisdiction over website contents, while other authorities exercise powers granted under provisions, such as the Ministry of Education’s competence over pedagogical contents or the CSRC’s competence over online trading of shares, or the PBOC’s exercise of jurisdiction over online banking activities.285
Websites must post their licence references on their home pages. They warrant the legality of the information they communicate.
Article 15 of the Regulations prohibits websites from posting information:
Article 16 of the Regulations imposes upon site operators a duty to discover information contrary to these requirements, to remove it and to inform the authorities.
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For instance, access to Google’s subsidiary YouTube, which does not hold an internet content provider license from the Chinese government, was temporarily blocked in 2007. On the other hand, Google’s China web site, www.google.com.cn, apparently holds such a license and is reported to block access to dissident sites.
The Regulations on the Administration of Internet Access Service Business Establishments adopted by the State Council on September 29, 2002 set down the framework governing places of access to the internet, such as internet cafés, to the exclusion of libraries and educational institutions. Perhaps as many as 30% of all web users in China connect to the internet from such sites.
Article 23 of the Regulations provides that such establishments must examine, register, and keep records of the identification card or other valid documents of customers going online. The contents of the registration and records must be maintained for at least 60 days and they must be made available to cultural and public security agencies for examination in accordance with the law. Registration contents and records may not be altered or destroyed during this period.
Before applying to the competent office of the SAIC for registration of their activities, they must obtain the authorization of the Ministry of Culture.
During a crackdown in 2002, some 150,000 internet cafés were closed.286
The MPS has prohibited the use of the internet to produce, copy, look up or transmit rumours or information that disrupts the social order or that harms the credibility of a government agency.287
Under article 9 of its Provisions on the Administration of Internet Electronic Bulletin Services issued in 2000, no one may post on an electronic bulletin service information that harms the honour or the interests of the nation, that spreads rumours, disturbs social order or disrupts social stability.
Commercial encryption is defined in the Regulation of Commercial Encryption Code288 to cover all products used for encrypting, to the exclusion of those used by the State and encryption systems included in other software.289
The central government is responsible for regulating research, production and sales of commercial encryption products.
The National Commission on Encryption Code Regulations (NCECR) is responsible for the implementation of the Regulations. It grants licences to sell commercial encryption products.
Under article 13 of the Regulations, commercial encryption products imported for resale as well as imported products that contain commercial encryption must be approved by the NCECR. Article 16 requires that foreign users of commercial encryption products declare them to the NCECR.
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As early as 1999, the reform of Chinese contract law facilitated the development of online contracts. Unless otherwise stipulated in a law or a regulation, the conclusion of contracts is not subject to any conditions of form.290 Article 9 of the Contract Law defines electronic exchanges of data and electronic mail as “written”.
A contract is formed based on the effective exchange of an offer and acceptance. Under articles 16 and 26 of the Contract Law, offers and acceptances are effective upon their receipt by the intended party. When a contract is concluded by exchanges of electronic messages, if a party has designated a specific system to receive its messages, the moment of introduction of a message into such specific system is deemed to be that of its receipt. Where no specific system has been designated by the intended party, the moment of introduction of the message into any of its systems amounts to receipt. Accordingly, it is incumbent upon each party to identify its preferred system of electronic mail.
Pursuant to article 33 of the Contract Law, each of the parties may require a letter of confirmation as a condition precedent to entry into effect of the contract. Under article 34, in the case of an electronic contract, the place of its formation is the principal establishment of the intended party; where the latter has no principal establishment, its place of residence is considered to be the place of formation of the contract.
In the Electronic Signature Law, electronic signatures are defined as “data contained in or attached to electronic documents in electronic form, which are used to ascertain the identity of the signatory, and to indicate that the contents contained are recognized by the signatory”. 291 It is further provided that electronic data documents refer to information created, sent, received or deposited by electronic, optic, magnetic or another similar means.292
Parties in civil affairs may agree to use or not to use electronic signatures or electronic data documents.293 Where the parties agree to use electronic signatures or electronic data documents, the validity of a document may not then be denied solely because the documents are electronic data or because they bear electronic signatures, except for the following documents:
The provisions of the Law are intended to guarantee the integrity of messages communicated compared with their original contents (while allowing for variations in formatting) and to identify senders and intended parties, to record the time of transmission and to confirm receipt.295
Candidates for carrying on electronic signature certification activities must present their applications to the MII. Beyond the operational capacities customarily required, electronic certification providers must first apply to the public security authorities for authorizations of their use of encryption.296
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Certification service providers must maintain websites on which their operating standards and the extent of their responsibilities must be posted.
They must keep records of the identities of their customers and examine their documentation.297
They warrant that the contents of the certificates which they issue are complete and accurate throughout their term.
The Electronic Signature Law refines the conditions governing the conclusion of contracts online. Subject to the autonomy of the will of the parties:
Electronic messages may be used as means of proof in court.301 To appreciate their probative value, account is taken of the reliability of their methods of creation, storage and transmission, of the methods of protection of the security of their contents, and of the methods of identification of their senders.302 For an electronic signature to be considered reliable, the data signed must belong to the signatory at the time of its apposition, the signature must have been affixed subject to its sole control and any and all modifications of the signature or of the data must be apparent.303
Improper conduct in relation to electronic signatures and electronic data documents may incur civil or administrative liabilities.
If an electronic signatory knows that the data for producing its electronic signature have been revealed or may have been revealed, but fails to notify the concerned parties and does not stop using the data, or fails to provide the electronic certification service provider with true, complete and precise information, or otherwise commits misconduct, while causing losses to the party relying on it or the electronic certification service supplier, it is liable for the damages.304
When losses are incurred while engaging in civil affairs based on an electronic signature certificate, the electronic certification service provider bears the burden of proving its innocence.305
In the event of the supply of electronic certification services without a licence, the MII may order cessation of the illegal activities, the confiscation of illegal income and, if the illegal income exceeds RMB 300,000, fines of up to three times the illegal income or, where the illegal income is less than RMB 300,000, fines of RMB 100,000– 300,000.306
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If an electronic certification service provider suspends or terminates its services without notifying the MII, it may be fined up to RMB 50,000.307
If an electronic certification service provider does not respect the rules with respect to certification, fails to retain required information, or conducts other illegal activities, the MII may issue remedial orders subject to time limits. In the absence of remedy, the electronic certification licence may be revoked and the directly responsible managing person and other directly responsible personnel may be banned from the activity of electronic certification services for up to ten years.308
Falsifying, imitating and making unauthorized use of others’ electronic signatures may incur civil and criminal liabilities.309
Some local governments have adopted e-commerce regulations covering a broad range of internet transactions. For example, the Beijing government adopted the Provisional Measures for Regulating Electronic Commerce, which regulates both business-to-consumers and business-to-business internet transactions. The regulation particularly provides protection for consumers against risks that might arise as a result of the “remote shopping”, which is inherent in internet transactions.
However, there have been no comprehensive nationwide regulations for internet transactions.
7.7.1. Advertising
Providers of online advertising fall within the general scope of the Advertising Law. Websites offering online advertising are treated as publications and if such enterprises participate in the conception or the preparation of the advertising contents they are deemed to be advertising agencies. In each case, a licence must be obtained from the competent office of the SAIC.
7.7.2. News reporting
By virtue of the Interim Provisions for the Administration of Online News Transmitting, issued jointly by the State Council News Office and the MII on November 1, 2000, Chinese websites may only communicate reports based on information disclosed in media controlled by the government.310
Article 4 vests in the State Council’s Information Office general authority over the nation’s online news sites, while the people’s government’s news offices for the provinces, autonomous regions and independent municipalities carry out local administration and supervision.
Online news may be posted by legally established and authorized websites of central news units, news units of all departments of the central government’s agencies and the news units directly under the provinces, autonomous regions and independent municipalities and the municipal people’s governments for the provinces and autonomous regions.
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Other news units may not independently establish news websites and only after receiving authorization may they post news, which must originate with a central news unit or a news unit of a province, autonomous region or independent municipality.311
Even “general interest non-news websites” may not post news from their own sources.312 They must enter into signed contracts with one of the news units mentioned above.313
Internet news may not commit any of the acts prohibited in article 15 of the Internet Content Provider Regulations cited above.314
Online news dispensers that violate registration requirements or that directly access foreign networks or that post news from foreign sites may be ordered to remedy the situation and, in serious cases, their licences may be revoked.
Xinhua’s monopoly on news reporting is alleged to have given rise to complaints in particular from overseas suppliers of financial information. Though several are known to have obtained licenses to sell information to Chinese banks, government agencies and other institutions, their complaints concern the lack of an independent regulator and the restrictive conditions applicable to the conduct of their activities.
7.7.3. Audiovisual products
On March 27, 2000, the Ministry of Culture issued its Notice on Online Trading of Audiovisual Products, which provides that exchanges of such products may only be undertaken by holders of a special licence and only holders of licences to carry on activities in publishing, wholesale or retail sales or rentals may apply for the special licence. The licence’s references must be posted on the website. To distribute television programmes on the internet, a licence must be obtained from the SAFRT.315
The Regulations on the Administration of Television Dramas of June 15, 2000 require that imported programmes be covered by a licence issued by a Television Programme Examination Organ established by a broadcast television executive department at the provincial level or higher.
On January 7, 2003, the State Council adopted the Measures on the Administration of Broadcasting Audio/Visual Programmes over the Internet or Other Information Networks. Its article 5 invests the SAFRT with the authority to implement a licensing regime for operators of internet broadcasting of audio/visual programmes.
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Under article 8 of the Measures, anyone intending to carry on the activity of web casting news-related audiovisual programs must:
Article 10 requires that enterprises setting up an information network audiovisual program broadcasting business be sponsored by a radio/ television, news, publishing, cultural or propaganda unit at the local level or higher.
On January 3, 2008, the MII and the SARFT jointly issued regulations with effect as of January 31, 2008, 2008, reserving the online broadcasting and streaming of video products to State-owned or State-controlled companies, in effect treating video web sites on an equal basis with television broadcasters and newspapers, which also are controlled by the State. The regulations confirm that licensed online video broadcasters must take the initiative to censor and report any video content that involves national secrets, hurts the reputation of China, disrupts social stability or promotes pornography, violence, gambling, or religious cults.
7.7.4. Cultural products
On March 4, 2003, the Ministry of Culture adopted the Interim Provisions on the Administration of Internet Culture, which came into force on July 1, 2003 (the Online Cultural Products Provisions).
The provisions cover cultural products produced, disseminated and circulated online, including audio and video products, games, programmes, works of art and cartoons.316 Online activities include:
The Provisions distinguish between activities intended to be lucrative and those that are not.318
The Provisions apply to online commerce of cultural products on Chinese territory.319
To carry on internet cultural activities, an entity must be approved by the MII and by the Ministry of Culture.
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The Ministry of Culture has the following responsibilities:
The administrative departments of culture under the people’s governments of the provinces, autonomous regions and municipalities directly under the central government are responsible for the day-to-day administration of online cultural activities.320
Article 7 of the Provisions imposes upon applicants for licences that they comply with the plans governing the total number, the structure and the distribution of online cultural entities.
Applications to undertake lucrative cultural activities online are filed with the administrative department of culture under the people’s government of the province, autonomous region or municipality directly under the central government for initial review and subsequent transfer to the Ministry of Culture for approval.321 Applications to carry on not-for-profit activities are approved at the level of the province, autonomous region or municipality directly under the central government and are sent to the central government for the record. Refusals must be justified in writing.322
Sites for cultural activities must prominently post the numbers of their licences from the MII and from the Ministry of Culture.323
Approved operators of cultural sites must commence their activities within 180 days of the issue of their licences.324
Prior to importation of online cultural products, the Ministry of Culture must approve their contents. The Ministry must reply within 30 days of applications, and refusals must be justified.325
In addition to the prohibitions reiterated in most legislation concerning online activities, these provisions also outlaw information that infringes upon national customs and habits or that endangers public ethics or folk culture.326
Online cultural entities bear civil liability for their violations of the Provisions.327 They must have specially qualified personnel monitor the contents of their sites to avoid infractions.328 When such infractions do occur, they must immediately suspend their supply, save the relevant records, and report to the administrative department of culture with a copy to the Ministry of Culture.329 They must make a record of the litigious contents, of the time of their discovery and suspension of support, and of relevant web addresses and domain names. The records must be kept for 60 days, and turned over on request to any investigating department.330
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Persons undertaking lucrative cultural activities online without the required licences are subject to remedial orders, confiscation of illicit gains, administrative fines, suspensions of their activities, and in serious cases, revocation of their licences.331
Operators of for-profit online cultural activities that offer illegal contents, or imported cultural products not approved by the Ministry of Culture may be ordered to remedy the situation and are exposed to fines of up to RMB 30,000. In serious cases, their business licences may be suspended by the administrative department of culture under the people’s government at the provincial level or above.332
Failures to keep required records of illicit contents and activities may give rise to remedial orders of the MII office of the province, autonomous region or municipality directly under the central government. Where violations are serious, the MII office may order suspensions of online activities.333
7.7.5. Publishing
The GAPP is responsible for the supervision and administration of publishing nationwide, and internet publishing in particular. Its functions and duties include:
The press and publications bureaus of provinces, autonomous regions and directly administered municipalities are responsible for routine administrative work in relation to internet publishing within their respective administrative regions.335
The GAPP has prohibited debunking the leadership of Marxism, of Mao Zedong’s and of Deng Xiaoping’s theories, interferences in the broader work of the Communist Party or of the nation and other violations of the Party’s line336 as well as articles that have severe political errors.337 It has prohibited periodicals from wilfully transmitting news or information taken from the internet without having first verified its authenticity.338
Online publishers are governed by the Interim Regulations on the Administration of Internet Publishing issued jointly by the MII and the GAPP on July 8, 2002 (the Online Publishing Regulations), which require that a special licence be obtained before undertaking such activity.339
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Article 5 of the Regulations defines internet publishing as the online transmission of works to users for them to browse, read, use or download including:
Those engaging in internet publishing activities must be approved by the administrative departments in charge of press and publications and the organs responsible for the administration of telecommunications.340
Without approval, no unit or individual may engage in internet publishing activities. 341
Internet publishing organizations that act in accordance with the law are free from interference by any organization or individual.342
Candidates must have established adequate editing and publishing systems, employ specialized professional personnel and dispose of have appropriate funds, equipment and premises.343
Applications are submitted to the press and publications administrative department of the province, autonomous region or directly administered municipality in which the principal operator is located. If it is approved at this level, the application is sent to the GAPP for approval.344 A decision is rendered within 60 days. Where an application is rejected, reasons must be given.345 Upon final approval, the applicant must register with the competent office of the MII.346
Internet publishers must post the approval number issued by the press and publications administrative department on the homepage of their websites.347
Changes and cessations of internet publishing activities must be reported to the press and publications authorities for cancellation of their internet publishing licences as well as to the MII for cancellation of their internet information service licence.348
Article 16 requires that when works involving major and important topics such as national security and social stability are to be published online, a report must first be filed with the GAPP.
Internet publishers must employ trained editors to be specifically responsible for monitoring the contents of publications to ensure their legality.349
Internet publishers must keep records of their publications for 60 days.350
They must clearly indicate the copyrights to works they publish or transmit.351
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Internet publishers of false or unjust contents that cause harm to the rights and interests of others are exposed to administrative and civil pursuits.352 In serious cases, criminal pursuits may be initiated.
Those who engage in internet publishing without approval are subject to sanction by the press and publications administrative department of the relevant province, autonomous region or directly administered municipality or by the GAPP. Their equipment and any illicit gains may be confiscated. In addition, fines of up to RMB 50,000 may be imposed.353
Publishing or transmission, without prior filing, of works that involve major and important topics may give rise to administrative warnings as well as to fines of up to RMB 50,000 and, in serious cases, orders to suspend business for reorganization within a stipulated time period may be issued or business licences may be revoked.354
Internet publications may not include contents that violate the prohibitions in article 15 of the Internet Content Provisions, nor may they contain material that induces minors to imitate criminal behaviour or acts that contravene social virtue or that contain horror or violent material that jeopardizes their physical and mental health.355
Where an internet publisher discovers illegal contents, it must immediately stop their publication or transmission, make a record thereof, and report the matter to the press and publications administrative department and send a copy to the GAPP.356
Moreover, any illicit gains from such activities may be confiscated by the press and publications administrative department of the relevant province, autonomous region or directly administered municipality or the GAPP. Administrative fines of up to RMB 50,000 may be imposed and, in serious cases, the administrative authorities may order suspension of activities or revocations of licences.357
Publishers who fail to keep conform records may be ordered to suspend their activities.358
7.7.6. Education
On July 5, 2000, the Ministry of Education issued its Provisional measures for the Administration of Educational Websites and Online Schools, which cover educational databases and connections to audiovisual educational programmes. Online training at all pedagogical levels must be authorized by the competent office of the Ministry of Education. Candidates must possess adequate financial means and include personnel qualified to teach the programmes offered. Lists of authorized sites are published periodically.
Educational sites may not post any contents that are generally prohibited, and in addition may not include contents that invade others’ privacy.
No online school may use the word China without the prior permission of the Ministry of Education.
Under article 22, these provisions apply to foreign sites offering educational services in China.
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7.7.7. Banking359
The Provisional Measures for Regulating Internet Banking Transactions issued by the PBOC on July 9, 2001 provide that banks (including localcapital banks, foreign-capital banks and branches of foreign banks) must obtain a licence from the PBOC before engaging in internet banking. Article 4 of the Provisional Measures for Regulating Internet Banking Transactions imposes that the authorization of the PBOC be obtained before undertaking online banking activities. Foreign-based banks intending to provide internet banking services to Chinese mainland residents and local-based banks intending to provide internet banking services to foreign residents must apply to the PBOC for licences.360 The internet banking activities of branches of foreign banks are subject to the regulatory conditions applicable in the place of their headquarters.361 Virtual banks remain prohibited in China.
On January 26, 2006, the CBRC issued the Electronic Payment Guidelines.
Candidates must demonstrate that they possess adequate financial and professional capacities as well adequate computer systems and control systems.
Local branches of foreign banks must also show that their parent companies are subject to regulation in their home countries with respect to their online banking operations.
Applications are presented to the head office of the PBOC. They are accompanied by feasibility studies as well as reports prepared by PBOCapproved experts evaluating the security of their online banking systems. Additions to online banking activities must be notified to the PBOC for approval.
The PBOC attaches great importance to the security of banks’ computer systems. As early as 1998, it issued jointly with the MPS the provisional Regulations on Security Protection of the Computer Information Systems of Financial Institutions. Banks must adopt measures to protect the security of their information systems as well as the data transmitted and the identities of users.
7.7.8. Securities trading
The CSRC adopted on March 30, 2000, the Interim Regulations for the Online Securities Brokerage Sector to create a framework for relations between investors and their online brokers. Article 24 of the Regulations limits access to the activity to those investment companies that have obtained from the CSRC a special licence covering online brokering.
Chinese law does not authorize the issue of securities to the public over the web and communications of corporate reports in writing prevail.
Trading in securities must respect the principles of transparency, fairness, justice, honesty, reliability, security and efficiency.362
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Brokers must separate their online activities from their other lines of business. They decide independently upon their operating systems subject to the requirements of security and they must not transfer their customers’ information off their sites. They must store data with respect to their operations for 15 years.363 Personnel in important technical functions must obtain State approvals of their technical knowledge. 364
7.7.9. Pharmaceuticals
Online sales of pharmaceuticals are subject to the laws and regulations generally applicable to such products,365 as well as to specific regulations. The Measures for the Administration of Internet Health and Medical Equipment Information Services issued by the Ministry of Health on January 8, 2001 impose upon licence applicants that may obtain prior authorization from the MII. The Interim Provisions for the Administration of Online Pharmaceutical Information Services, issued by the SFDA on January 11, 2001 subject the undertaking of such activity to its authorization at the appropriate level.
The Interim Requirements for the Examination and Approval of Internetbased Pharmaceutical Trading Services, issued by the SFDA in October 2005, effective as of December 1, 2005, authorize online sales of drugs and define the conditions in which the activity may be carried on within China.
They apply to commercial online trading in pharmaceuticals (including medical devices, drug packaging materials and containers), among drug manufacturers, distributors and medical institutions, via their own websites with other enterprises or with consumers.
The SFDA online licences are issued for five-year terms.
No tax law or regulations specifically target commercial activities on the Chinese web, and they are therefore subject to the generally applicable rules with respect to the value added tax and with respect to business profits earned in China in accordance with the provisions of applicable tax conventions.
No law prohibits the use of personal data by operators in China. But article 38 of the Chinese constitution enshrines the “human dignity of citizens”. Article 18 of the Implementing Measures for the Provisional Regulations for the Administration of International Connection of Computer Information Networks prohibits invasions of privacy such as by propagation of slander and usurpation of identity. Article 40 protects the confidentiality of correspondence, subject to the needs of State security and criminal investigations with the approval of the public security authorities or of the procuratorate. Article 7 of the Measures for the Protection of Security and Administration of International Connection of Computer Information Networks guarantees to internet users freedom of communication and protection against breaches of their confidentiality.
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The despatch of unsolicited electronic mail is widely prohibited in internet-access contracts but it is apparently not subject to any specific prohibition by Chinese laws or regulations.
Prior to starting electronic commerce activities in China, and assuming that site technology and know how are to be imported, the foreign electronic merchant should have the importation approved by MOFCOM, lest its business licence be revoked and fines of up to five times the amounts of its illicit gains be imposed.366 Unauthorized importation of encryption software could also expose foreign electronic merchants in China to administrative and, in serious cases, criminal pursuits.
In addition to the rules governing specifically internet contents and activities, online commercial activities may also fall within the scope of those governing public security and public order, network integrity, intellectual property, and the exploitation of commercial activities.
The Law concerning the Maintenance of State Secrets,367 as well as its Implementing Measures, invest administrative authorities with a discretionary power to define State secrets.368 Its article 25 prohibits transmissions of State secrets over wired or wireless networks. Article 31 of the Law prohibits the disclosure of State secrets, and pursuant to articles 282 and 398 of the Criminal Law, serious violations may be punished by seven years’ imprisonment. On January 25, 2000, the State Secrecy Bureau announced its Provisions on Secrecy Management of Computer Information Systems on the internet.369
On February 18, 1994, the State Council adopted the Computer Information System Security and Protection Regulation, under which the MPS is responsible for protecting State secrets from violations on the internet. Its article 16 requires that distributors of software integrating encryption obtain a licence from the MPS.
Online distribution of obscene materials may be pursued under section 9 of the Criminal Law and sentences of life imprisonment may be imposed in especially serious cases. The Regulations of the Supreme People’s Court and Supreme People’s Procuratorate Concerning the Specific Application of the Law in Handling Criminal Cases Involving Obscene Articles provides a definition of obscene material.
Foreign portals have in any case subscribed to a voluntary programme of self-censure of material likely to jeopardize State security, disrupt social stability, or spread superstition or obscenity.370
It is a criminal offence to penetrate computer systems or networks without authorization, to disseminate slander, incite racial or ethnic hatred, undermine national unity, organise cults, disseminate false advertising, harm the reputation of people, of commercial enterprises or of their products, spread false information about securities, exploit pornographic sites, intercept or alter electronic messages or to commit theft or fraud.371
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Article 13 of the Revised Provisional Regulations Governing the Management of Chinese Computer Information Networks Connected to International Networks requires that access suppliers maintain the security of the information on their systems. International networks may not be used to harm State security, to disclose State secrets, to commit criminal acts or disseminate pornography. The police may order cessation of activities, may impose fines of up to RMB 15,000 and, in serious cases, criminal pursuits may be initiated before the people’s courts.
According to the Interpretations of the Supreme People’s Court on Laws For Trying Cases Involving Internet Copyright Disputes of December 20, 2000, which entered into effect on the following day, where access suppliers participate in violations of intellectual property, the people’s court may carry out an investigation under the provisions of article 130 of the General Principles of Civil Law with respect to joint liability.372 Article 5 requires that any access supplier informed of a violation of copyrights or of the right of third parties remove the incriminated information. The identity of the internet user in violation of the law must be disclosed to the authorities and if the access supplier refuses to act, it may be pursued before the people’s courts.373
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In practice, most Chinese consumers will not go directly to the courts; they will rather first have recourse to other methods of dispute resolution. If unsuccessful, they may try the courts, but usually only as a last resort.
In recent years, more and more consumer cases have been reported in the press. These generally involve expensive household goods and services. But the number of such cases remains quite small compared with the actual volume of trade.
Provisions to protect consumers appear transversally across all commercial activity regulations.
The Product Quality Law guarantees the right of consumers to answers about quality problems and they may bring complaints to the product quality supervision administrations or the administrations for industry and commerce.374 Consumer protection associations have standing before the administrative authorities.375
Consumer interests in the determination of prices set or guided by the government are protected through the obligation to conduct hearings at which they may express their views.376 They may call for hearings for violations of illegal pricing activity.377
The inspiration for the direct selling regulations is the protection of consumers, 378 whose interests are also the subject of specific concern in the franchising regulation.379
Consumers are protected from false380 and disguised381 advertisements as well as from unscrupulous advertisers.382
A fundamental principle of the Consumer Protection Law is that consumers are entitled to safety of their persons and property when using products.383 Therefore, consumers have the right to make inquiries of producers and sellers concerning the use of products, and the producers must provide any information required under the applicable labelling stipulations.384
Other consumer rights provided in the Consumer Protection Law are the following:
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Sellers must respect their contracts, which must not contain provisions contrary to the applicable laws and regulations.386 The information they supply to consumers with respect to their products must be accurate. They must warn consumers of any dangers to their health or safety or the safety of their property. They must disclose their actual names. They must issue receipts for payments. They warrant that their products are fit for their normal uses and that they are conform with advertised descriptions, they must promptly provide promised after-sales services, and they may not impose unfair or unreasonable conditions, lest their contracts be void.387
Where consumers’ rights and interests are harmed as a result of purchasing or using a product or receiving a service, they may claim compensation from their providers.
By virtue of article 35 of the Consumer Protection Law, consumers may bring actions against their sellers who may then pursue the manufacturers if they are at fault. Enterprises, which are liable toward consumers, may be obliged to pay compensation, including for the necessities of daily life.
Consumer organizations may be formed to monitor the conditions of sales to consumers and to accept their complaints. They may conduct investigations and mediation in connection with such complaints.
Consumers may register complaints with the local branch of the State Bureau of Technical Supervision (SBTS) either independently or through consumer organizations, which have the right to make proposals to government agencies regarding the handling of consumer complaints.
In the event of a dispute with a business operator over their rights and interests, consumers may resolve the dispute in the following ways:
Consumers may also demand compensation from business operators and advertisers who disseminate false information.
Enterprises that violate the rights of consumers face administrative pursuits, which may culminate in the confiscation of illegal gains, the imposition of fines and, in serious cases, suspensions of operations.388
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The Law on Combating Unfair Competition was adopted in 1993.389 The Law applies to all business operators, including legal persons, other economic organizations and individuals who engage in the sale of goods or the supply of services.390
The Law reiterates the general principles of fairness in business transactions, freedom of choice, equality and honesty.391
Free competition is pursued by stipulations in numerous laws and regulations as well as in several SAIC directives.
For instance, the Price Law is intended to promote fair and open markets392 while combating price collusion.393 Prices must be based on production or operation costs and market supply and demand.394 Arbitrary price discrimination is prohibited.395 In 2003, the State Development and Reform Commission provisionally issued the Regulations on the Prohibition of Pricing-related Monopoly Activities to combat pricing collusions, manipulations of market prices, illegal prices maintained by abuses of dominant positions on markets, and other disruptions of orderly production and trading.
Franchisors may not cause market monopolies or impede fair competition.396
Advertisers, advertising agents and advertisement publishers are prohibited from engaging in unfair competition.397
Furthermore, the SAIC has expressly prohibited a wide variety of anti-competitive practices, in particular:
After over 12 years of discussion on August 30, 2007 the 29th Session of the Tenth NPC adopted the Anti-Monopoly Law404 to come into force on August 1, 2008. The status that this law will have, and its effect on the Chinese economy and foreign investment, have been the subject of much controversy. It will be necessary to monitor developments in the implementation of the law to better understand the effect that it will have.
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The Unfair Competition Law prohibits the following acts:
The SAIC at the county level has jurisdiction to supervise and examine all acts of unfair competition. In appropriate cases, it may impose fines and other punitive measures, such as confiscation of illegal gains and withdrawals of business licences.
In cases of abuse of monopoly, fines may be adjusted in accordance with the profits of the offender (up to three times their amount, depending on the circumstances).
Decisions may be challenged either before the SAIC at the next higher level or directly before the people’s court. Decisions made upon administrative review before the SAIC at the next higher level may also be challenged before the people’s court.
Unfair competitors are also liable before the people’s court for losses suffered by other business operators as a result of acts of unfair competition.415 This also applies to consumers who sue on the basis of false or misleading publicity or prohibited conditions of sales of goods. Damages are assessed in accordance with the loss suffered by the affected competitors and if they are not easily ascertained, they may be deemed to correspond to the profits derived by the wrongdoer from the incriminated acts.416
Matters of unfair competition involving trademarks are subject to those authorities with jurisdiction over trademarks, and violations of packaging rules are subject to the control and inspection authorities.417
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Where a local government forces parties to buy the goods of designated operators, restricts the legitimate business activities of operators or restricts the normal flow of goods between regions, the higher authorities may order them to rectify the situation and they may apply disciplinary sanctions. In appropriate cases, the administrative authorities may confiscate illegal revenues and impose fines of more than twice and less than three times the illegal income.418
Where staff members of State monitoring and investigating authorities abuse their powers or neglect their duties or when they act irregularly out of personal considerations and intentionally shield an operator from prosecution, they may be subjected to administrative sanctions and, in serious cases, criminal pursuits may be brought before the people’s courts.419
In cases of violations of the Unfair Competition Law, administrative authorities may issue injunctions and remedial orders, they may confiscate illegal gains and they may impose fines (up to RMB 200,000 in cases of bribery).420
Where a party is not satisfied with a decision on punishment of an administrative authority, it may, within 15 days from receipt of the decision, file suit before the people’s courts, or it may apply to the next higher level for administrative reconsideration and, if is still dissatisfied, it may, within 15 days from the date of receipt of the written decision made after reconsideration, institute proceedings in the people’s courts.421
The SAIC’s measures against bid-rigging concern tenders in construction projects, purchases of complete sets of equipment, sub-contracts, leases, concessions of landuse rights and leasing of operating sites. Tenders are operations in which bids are invited publicly or through written invitations in accordance with special standards and conditions that are openly disclosed and that culminate in the designation of a winning bidder.
Bid-rigging refers to the use of unfair means by a caller for tenders and a bidder, or among bidders, acting in collusion to exclude competitors or harm the interests of the caller for tenders.422
Bidders may not agree to raise or lower bids, or to take turns to win bids, nor may they decide on a bid winner through competition before participating in bidding.423
Callers for tenders may not predetermine the winner of a call for tenders, reveal the bids of any bidder to others, disclose the floor price to a bidder, assist a bidder in withdrawing or changing its bid, or alter its offered price.424
Callers for tenders and bidders may not agree to raise or lower the price subject to a reversal of the position after the tender is concluded.425
Article 5 provides that tender operations vitiated by bid-rigging are invalid, that bidriggers may be fined up to RMB 200,000 by the administrative authorities and that serious cases may give rise to criminal pursuits.
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Commercial bribery refers to the supply to a unit or to an individual of property or other means in order to obtain contracts. Such property includes cash and material objects paid on such accounts as fees for promoting sales, publicity fees, support fees, scientific research fees, service fees, consultation fees, commissions or reimbursements of expenses to obtain contracts, specifically including the reimbursement of domestic or international travel.426 Secret returns of a significant proportion of payments with off-the-books cash, material objects or other means are considered to be bribery.427
Acts of bribery committed by employees in the course of their employment are imputed to the employer.
Article 2 of the Trade Secret Regulations defines trade secrets as non-public technical and operational information that the owner has taken steps to keep confidential, that is practical and that possesses economic value.428
Article 3 of the Trade Secret Regulations prohibits the obtaining of trade secrets by theft, promises of gain, coercion or other illegal means.429
Parties that are victims of violations of their trade secrets may apply to the SAIC for injunctive relief. The latter may also impose fines.430 The burden of proof is on the owner of the trade secrets.431
Serious misappropriations of trade secrets may entail criminal pursuits before the people’s courts.432
The SAIC deems illegal the use without authorization of an identical or similar name, packaging or decoration specific to a well-known product that misleads purchasers into mistaking the imitation for the well-known product.
Well known products are those that enjoy a certain reputation in the market and that are well known among the relevant public.433
Only names, packaging and decorations that are not commonly used by similar products and that are distinctive are protected.
If they are distinctive, the SAIC will protect trade names even when they have not been registered as trademarks.
Decoration refers to the script, design, colour and their combination attached to a product or its packaging so as to identify and embellish it. The name, packaging and decoration specially associated with a product are determined according to the principle of first use.
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Article 2 of the SAIC regulations targeting abuses of competition by public enterprises defines public enterprises as operators of public utilities, including postal services, telecommunications, transportation, water, electricity, heat and gas, and the like.
Public enterprises may not use their market power to impede fair competition, nor may they infringe upon the legal rights and interests of consumers.434
In particular, public enterprises must refrain from:
Public enterprises that violate these rules may be fined up to RMB 200,000 by the SAIC, and recalcitrance to submit is supposed to attract “severe punishment”.436
Operators designated by public enterprises that sell low-quality goods for excessive prices may have their illicit gains confiscated and may be subject to fines equal to two to three times their illegal gains.437
The SAIC regulations cover sales including incidental articles, money or other economic interests for purchasers, such as lottery-attributed awards for some of the purchasers, to the express exclusion of charitable lotteries approved by the authorities.
Promotions must include clear representations with respect to the prize, the probability of winning, the number of prizes and, where relevant, their categories, the time and manner of their collection, the time, location and conditions of identification and disclosure of winners, as well as the time and method of informing winners.438
Promotions may not involve such deceptive practices as false representations about the prize, the manner of its attribution, the probability of winning, the highest prize, the total value of the prize(s) or unfair methods to attribute the prizes to specific persons. Organizers of promotions may not withhold products containing the prizes from the market.
The value of prizes in lottery-attached sales may not exceed RMB 5,000.
Violations may be pursued by the administrative authorities.
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This Law applies not only within China but also to conduct outside its territory that eliminates or has restrictive effects on competition in the domestic market.439 It is applicable to entities such as industry associations,440 but does not cover alliances or concerted actions related to production, processing, sales, transportation and storage of agricultural commodities carried on by farmers or their enterprises.441
The law prohibits horizontal agreements to eliminate or restrict competition442 (such as cartels) and abuses of dominant positions.443 It requires prior notification for mergers or other methods of acquiring control of other enterprises444 and prohibits concentrations that eliminate or restrict competition.445 There is also a chapter that is particularly relevant in the context of China’s transitional economy prohibiting the abuse of administrative powers by public or State institutions to restrict competition.446
Proposals for mergers are examined in accordance with the relevant provisions of the State for national security review.447
While the law establishes what appear to be two new entities to make and enforce competition policy, there is significant uncertainty as to the degree of independence that they will have. Article 9 establishes an Anti-Monopoly Commission under the State Council to develop competition policies, organize investigations, publish guidelines and co-ordinate enforcement work. Article 10 establishes an Anti- Monopoly Enforcement Agency under the State Council that is responsible for the enforcement of the law. Thus the advocacy arm has been separated from the body that decides whether or not a particular course of conduct is anti-competitive.448
The Chapter on liabilities sets out the measures that the Anti-Monopoly Enforcement Authority may apply where it finds the law has been violated. These include fines, cease and desist orders, confiscation of illegal gains and the revocation of the registration of industrial associations. In the case of mergers or other acts of concentration, the Agency has the authority to require disposition of the acquired assets.449
In challenges to decisions of the Authority, priority is given to administrative reconsideration.450 Suits may also be brought before the people’s courts.
The Law is not applicable to the exercise of intellectual property rights, unless competition is eliminated or restricted by their abuse. For example, agreements restricting the purchase of new technology or new equipment, or restricting the development of new technology or new products are in principle prohibited.451 However, if such an agreement’s purpose is technology improvement or research or development of new products, it may be exempted. In examining the effects of a merger, the Enforcement Agency takes account of its contribution to technical progress.452
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9.8.1. General principles
Competition rules are intended to promote a “united, open, competitive, and well-ordered market system”.453
An “undertaking” is defined as including natural persons, legal persons and other organizations that carry on production or trading of goods or provide services. “Relevant market” refers to the range of products or services or the territory within which the concerned undertakings compete.454
“Monopolistic conduct” is defined as including:
The law exempts “industries belonging to the State-owned sector that are significant for the national economy and national security as well as those given exclusivity in their fields of activity in accordance with the law”. The prices applied by these undertakings and their operations are regulated by the State to protect the interests of consumers and to promote technical progress.456 Administrative agencies and organizations empowered by laws and regulations to manage public affairs may not abuse their powers to eliminate or restrict competition.457
The Anti-monopoly Commission under the State Council performs the following functions:
The structure and protocol of the Anti-monopoly Commission are decided by the State Council.458
The Anti-monopoly Enforcement Authority is set up by the State Council. It may delegate powers to government agencies at the provincial, autonomous region, and municipal levels.459
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9.8.2. Monopoly agreements
Competing firms may not agree, decide or concert to restrict or eliminate competition by:
Vertical agreements may not fix the price for resale to a third party or impose minimum resale prices.461
Exemptions may be claimed if the infringing conduct can be demonstrated:
It is also incumbent upon undertakings claiming exemptions to prove that their agreements will not substantially restrict competition on their market, and that consumers will enjoy benefits from its implementation.462
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9.8.3. Abuses of dominant market positions
Market positions are defined as “dominant” when undertakings are able to control the price or quantity of products or other trading conditions in the relevant market, or are able to block or affect access thereto.463
Whether a market position is judged to be “dominant” is a function of the following criteria:
Undertakings are presumed to occupy a dominant position on their markets when:
In the latter two situations, no undertaking with a share of less than 10% is considered to have a dominant market position.465
Undertakings are prohibited from abusing their dominant positions by:
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9.8.4. Concentrations
The Anti-Monopoly Law defines “concentrations” as arising when an undertaking:
The Law establishes a principle of notification to the Anti-Monopoly Enforcement Authority of all concentrations, the scopes of which reach beyond thresholds set down by the State Council.467
Undertakings are exempt from filing notices of their concentrations in internal operations within groups, in particular:
The notice of concentration is accompanied by copies of the relevant agreements, a report on the effects on the market and financial reports.468
For a period of 30 days following the filing of a complete report of concentration, the Anti-Monopoly Enforcement Authority conducts a preliminary investigation and decides whether to carry out further examination and notifies the undertakings of its decision in writing. In the absence of a reply within 30 days, or in the event of a reply that no further examination will be conducted, the concentration may be implemented.469
The Anti-monopoly Enforcement Authority must decide to approve or prohibit the concentration within 90 working days from the date of its decision in favour of further examination.470 The Authority’s decisions are notified in writing and reasons must be provided for the prohibition of a concentration.471 Concentrations are approved unless they may eliminate or restrict competition. However, the Anti-monopoly Enforcement Authority may in any case decide that the undertakings have proved either that the advantages of the concentration exceed its disadvantages or that the concentration is in the public interest.472
Pending the Authority’s decision, the undertakings may not implement the concentration.473
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The examination of proposed concentrations is based on the following factors:
The Anti-Monopoly Enforcement Authority may impose conditions on its approvals.475
The Anti-Monopoly Enforcement Authority with respect to concentrations is made public.476
In foreign take-overs of domestic undertakings, or concentrations of foreign undertakings in China that involve national security, the competent organs of the State must be consulted.477
9.8.5. Abuses of administrative powers to restrict competition
Administrative agencies and organizations vested with powers to administer public affairs by laws and regulations may not abuse their powers by requirements to deal, purchase or use commodities from designated undertakings.478 They may not block regional trade by:
Administrative agencies and organizations may not abuse their powers to exclude undertakings from other regions from local bidding activities through discriminatory qualification requirements or standards, or by omitting to give public notices as required by the law.480 They may not restrict investment in their region or the establishment of local branches by undertakings from other regions discriminatorily.481 They may not abuse their powers to compel undertakings to engage in monopolistic activities prohibited under the Anti-Monopoly Law.482 They must not adopt regulations that eliminate or restrict competition.483
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9.8.6. Investigations
The responsibility for conducting investigations of suspected violations of the Anti-Monopoly Law is vested in the Anti-Monopoly Enforcement Authority.484 The Law permits anonymous denunciations to the Anti- Monopoly Enforcement Authority of violations of its provisions.485
In conducting its investigations, the personnel of the Anti-Monopoly Authority, subject to approval by the Authority’s senior officials, may adopt any of the following measures:
The Authority and its personnel must keep confidential commercial secrets that come to their attention during investigations.487
Third parties concerned by proceedings before the Anti-Monopoly Enforcement Authority enjoy a right of intervention.488
Upon completion of an investigation, the Anti-Monopoly Enforcement Authority must make its determination public.489
If the concerned parties agree to implement remedial measures, the Anti- Monopoly Enforcement Authority may suspend its investigations, subject to the parties’ performance of their commitments.490
9.8.7. Liabilities
In the event of violations of the provisions of the Anti-Monopoly Law, the Enforcement Authority may issue injunctions, confiscate illegal gains and impose fines ranging from 1% to 10% of the previous year’s sales in the relevant market. Sanctions may be mitigated or waived for parties that take the initiative to bring a situation to the Authority’s attention.491 The Authority may order undertakings involved in a concentration to adopt remedial measures, impose fines of up to RMB 500,000 and order disposals of all or part of an undertaking’s stock, transfers of parts of its business or other measures necessary to restore the original market situation.492
Violators of the Anti-Monopoly Law are also accountable in civil law to repair the consequent damages.493
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Refusals to submit relevant information, submission of fraudulent information, the concealment, destruction or removal of evidence and other obstructions of investigations, may, in serious situations, give rise to fines of up to RMB 100,000 for individuals and RMB 200,000 to RMB 1 million for enterprises. If the criminal law has been violated, pursuits may be initiated by the procuratorate.494
Parties that are dissatisfied with a decision of the Anti-Monopoly Enforcement Authority with respect to a concentration must first apply for administrative reconsideration. If they remain dissatisfied after the reconsideration, they may bring an administrative suit before the people’s courts in accordance with the law. On the other hand, if the decision concerns other matters, dissatisfied parties may apply for an administrative reconsideration or directly bring an administrative suit.495
Officials of the Anti-Monopoly Enforcement Authority are subject to administrative sanctions if they abuse their powers, neglect their duties, accept bribes, commit fraud or disclose business secrets obtained in connection with their enforcement activities, and, in appropriate cases, they may be pursued under the criminal law.496
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Since its rigid planned distribution system of the Mao era, China has, in the course of the reform movement since 1978, spawned a modern, complex market. Its entry into the WTO has compelled the country to adopt international standards imported by the multinational distributors that have rushed onto the promising Chinese market. The trend toward exacerbated competition is likely to continue in the future and the next major novelty in Chinese distribution is likely to be the successful launching of Chinese brands onto the global market.
1 According to World Bank figures, the tertiary sector corresponded to some 61% of world GDP, but in China it amounted to only 32.7%, approximately one quarter of which was contributed by commercial enterprises. During the Cultural Revolution, self-reliance in services was encouraged. For instance, of the some 15,000 restaurants in Beijing in 1949, only about 600 remained by the mid 1970s, Li Jingwen, The Chinese Economy into the 21st Century, Foreign Languages Press, Beijing, 1995, p. 108, p. 146–150.
2 Deng Xiao Ping explained the compatibility of socialism and markets as follows: “A planned economy is not equivalent to socialism, because there is planning under capitalism too; a market economy is not capitalism, because there are markets under socialism too. Planning and market forces are both means of controlling economic activity. The essence of socialism is liberation and development of the productive forces, elimination of exploitation and polarization, and the ultimate achievement of prosperity for ail.”, Excerpts from Talks Given in Wuchang, Shenzhen, Zhuhai and Shanghai, January — February, 1992, in Selected Works of Deng Xiao Ping, volume II, Foreign Languages Press, Beijing, 1994, p 360.
3 According to Deng Xiaoping, “Actually they are both means of developing the productive forces. So long as they serve that purpose, we should make use of them. If they serve socialism, they are socialist; if they serve capitalism they are capitalist”, quoted in Wang Mengkui (chief editor), China’s Economic Transformation over 20 Years, Foreign Languages Press, Beijing, 2000, p. 39–40. See also Gao Shanquan and Chi Fulin (chief editors), Theory and Reality of Transition to a Market Economy, Foreign Languages Press, Beijing, 1995, p. 17–18.
4 The Constitution was adopted at the Fifth Session of the Fifth NPC, promulgated on December 4, 1982 and amended at the First Session of the Eighth NPC on April 12, 1988, and again at the Second Session of the Ninth NPC on March 29, 1993.
5 Article 15 of the Constitution.
6 Article 11 of the Constitution.
7 Other parts of the global reform have touched upon the markets for capital, real estate, and labour. The retreats of State ownership and State planning have necessitated reforms of the enterprise framework, of the social security regime and of the taxation system. The advent of markets has given rise to a need for rules to impose fair competition.
8 Li Jingwen, The Chinese Economy into the 21st Century, Foreign Language Press, Beijing, 1995, p. 108.
9 Gao Shanquan and Chi Fulin (chief editors), Theory and Reality of Transition to a Market Economy, Foreign Languages Press, Beijing, 1995, p. 2–3.
10 MOFTEC circular of October 28, 1990.
11 As of this date, books, newspapers, magazines, pharmaceutical products, pesticides and mulching films were opened up.
12 Foreign chain store operators were to have the freedom to choose partners among enterprises legally established in China.
13 At http://en.ce.cn/subject/RetailinginChina/Regulation&Policy/200410/18/t20041018_2018070.shtml
14 Article 22 of the Commercial Sector Foreign Investment Measures.
15 Article 3of the Commercial Sector Foreign Investment Measures.
16 Article 6 of the Commercial Sector Foreign Investment Measures.
17 Article 6 of the Commercial Sector Foreign Investment Measures.
18 Article 8 of the Commercial Sector Foreign Investment Measures.
19 Article 9 of the Commercial Sector Foreign Investment Measures.
20 Article 5 of the Commercial Sector Foreign Investment Measures.
21 Article 11 of the Commercial Sector Foreign Investment Measures. Where an activity is subject to special provisions or the import and export of goods involves quota or licences, the required formalities must be completed, article 16 of the Commercial Sector Foreign Investment Measures.
22 Article 17 of the Commercial Sector Foreign Investment Measures.
23 Article 18 of the Commercial Sector Foreign Investment Measures.
24 Article 18 of the Product Quality Law.
25 Article 19 of the Product Quality Law.
26 Article 21 of the Product Quality Law.
27 Article 8 of the Product Quality Law.
28 Construction projects are excluded from the scope of the Law, though construction materials, structural components and fittings and equipment are covered by the Law.
29 Article 4 of the Product Quality Law.
30 Article 5 of the Product Quality Law.
31 Article 9 of the Product Quality Law.
32 Article 10 of the Product Quality Law.
33 Article 11 of the Product Quality Law.
34 Article 13 of the Product Quality Law.
35 According to article 18 of the Standards Implementation Rules, compulsory standards include the following: pharmaceutical standards, food hygiene and veterinary drug standards; product safety and hygiene standards and safety and hygiene standards applicable during the course of product manufacturing, storage and usage, work safety and hygiene standards, transport safety standards; quality, safety and hygiene standards for construction projects and other project standards subject to State control; important commonly used technical terms, symbols, code names and drafting methods; common testing and inspection method standards; interchangeable coordinated standards; and quality standards for important products under State control. The list of important product standards subject to State control is set down jointly by the State Council department in charge of standardization and other competent State Council departments.
36 Articles 33 and 34 of the Standards Law. If a product fails to comply with compulsory standards, its production may be ordered to be suspended, the products confiscated and/or destroyed or appropriate technical rectification may be ordered. Fines between 20% and 50% of the value of the defective products may be imposed. An enterprise selling a product that fails to comply with compulsory standards will be ordered to suspend sales, and to recall products already sold. A fine of between 10% and 20% of the value of the defective products may be imposed. Responsible individuals may be fined up to RMB 5,000. If a product failing to comply with compulsory standards is imported, such product must be sealed and confiscated and its destruction or necessary technical rectification must be carried out. A fine of 20% to 50% of the value of the product imported may be imposed. If the non-conformity with compulsory standards results in serious consequences constituting a crime, the people directly responsible may incur criminal liability.
37 Article 25 of the Standards Law.
38 Article 14 of the Product Quality Law.
39 Article 15 of the Product Quality Law. Article 24 requires that the authorities regularly make public the condition of the products that they have randomly tested.
40 Article 16 of the Product Quality Law.
41 Corruption declining, graft-buster says (SCMP), September 21, 2007.
42 Corruption declining, graft-buster says (SCMP), September 21, 2007.
43 Article 4 of the Food Hygiene Law.
44 Article 2 of the Food Hygiene Law.
45 Article 3 of the Food Hygiene Law.
46 Article 14 of the Food Hygiene Law.
47 Article 15 of the Food Hygiene Law.
48 Article 15 of the Food Hygiene Law.
49 Article 17 of the Food Hygiene Law.
50 Article 32 of the Food Hygiene Law.
51 Article 5 of the Food Hygiene Law.
52 Article 8 of the Food Hygiene Law.
53 Article 27 of the Food Hygiene Law.
54 Article 6 of the Food Hygiene Law.
55 Article 10 of the Food Hygiene Law.
56 Article 11 of the Food Hygiene Law.
57 Article 13 of the Food Hygiene Law.
58 Article 16 of the Food Hygiene Law.
59 Article 19 of the Food Hygiene Law.
60 Article 20 of the Food Hygiene Law.
61 Article 21 of the Food Hygiene Law.
62 Article 23 of the Food Hygiene Law.
63 Article 24 of the Food Hygiene Law.
64 Article 25 of the Food Hygiene Law.
65 Article 25 of the Food Hygiene Law.
66 Article 31 of the Food Hygiene Law.
67 Article 28 of the Food Hygiene Law.
68 Article 5 of the Food Hygiene Law.
69 A certificate shall be issued to railway and communications food safety inspector by the competent department at the next higher level, article 34 of the Food Hygiene Law.
70 Article 36 of the Food Hygiene Law.
71 Article 38 of the Food Hygiene Law.
72 Article 39 of the Food Hygiene Law.
73 Article 41 of the Food Hygiene Law.
74 Article 42 of the Food Hygiene Law.
75 Articles 43-47 of the Food Hygiene Law.
76 Article 48 of the Food Hygiene Law.
77 Article 50 of the Food Hygiene Law.
78 Article 51 of the Food Hygiene Law.
79 Article 52 of the Food Hygiene Law.
80 The Law was adopted at the 29th Meeting of the Standing Committee of the Eighth NPC and it entered into effect on May 1, 1998.
81 The Law was adopted at the 29th Meeting of the Standing Committee of the Eighth NPC and it entered into effect on May 1, 1998.
82 Article 2 of the Price Law.
83 Article 4 of the Price Law.
84 Article 5 of the Price Law.
85 Article 18 of the Price Law.
86 Articles 19 and 24 of the Price Law.
87 Business operators must respect the provisions of the Price Law in selling imported merchandise or purchasing goods for export, article 16 of the Price Law.
88 Article 5 of the Price Law.
89 Article 7 of the Price Law.
90 Article 8 of the Price Law.
91 Article 9 of the Price Law.
92 Article 10 of the Price Law.
93 Article 11 of the Price Law. Refusals to comply with investigating authorities may entail the imposition of fines, article 44 of the Price Law.
94 Article 21 of the Price Law.
95 Article 25 of the Price Law.
96 Articles 22 and 34 of the Price Law.
97 Article 33 of the Price Law.
98 Article 23 of the Price Law.
99 Article 25 of the Price Law.
100 Articles 30 and 31 of the Price Law.
101 Article 40 of the Price Law.
102 Article 41 of the Price Law.
103 Article 45 of the Price Law.
104 Article 46 of the Price Law.
105 The Regulations mainly provide for specific sanctions against activities in violation of the Price Law, including violations under article 14 of the Price Law, failures to implement government-guided or -fixed pricing, failures to implement statutory government pricing intervention measures and emergency pricing measures, obtaining huge profits in violation of laws and regulations, failure to expressly mark prices and non-cooperation in government supervision.
106 The sanctions include warnings, remedial orders, and confiscation of unlawful incomes, fines, suspensions and revocations of business licences.
107 The minutes of hearings must be sent to the participants within ten days, article 24.
108 International agency agreements are treated in the chapter on International Trade.
109 The Law was adopted at the Fourth Session of the Sixth NPC, promulgated by Order No. 37 of the President on April 12, 1986, and it entered into effect as of January 1, 1987.
110 Article 66 of the GPCL.
111 Article 68 of the GPCL.
112 Article 424 of the Contract Law.
113 Article 425 of the Contract Law.
114 Article 426 of the Contract Law.
115 Article 426 of the Contract Law.
116 Article 427 of the Contract Law.
117 The industry’s revenue in China reached RMB 35 billion in 2003, which would represent about 5% of worldwide direct sales. Amway is reported to have sold in 2003 through some 141 stores and 180,000 agents about $ 1 billion, up by more than 400% from 1997.
118 In 1998, the central government prohibited door-to-door sales to put a stop to pyramid schemes, which had caused large consumer losses, and even riots, in several cities. After the prohibitions were issued, Amway’s annual sales fell from RMB 1.5 billion to RMB 320 million.
119 Many observers consider that the approved direct sellers actually continued widespread use of team commissioning while many local authorities turned a blind eye.
120 The new rules came into effect on December 1, 2005.
121 Article 3 of the Direct Selling Regulations.
122 Article 6 of the Direct Selling Regulations.
123 Article 4 of the Direct Selling Regulations.
124 Article 7 of the Direct Selling Regulations.
125 Interest on the bond belongs to the direct seller, article 29 of the Direct Selling Regulations.
126 Article 9 of the Direct Selling Regulations.
127 Article 9 of the Direct Selling Regulations.
128 Article 12 of the Direct Selling Regulations.
129 Article 13 of the Direct Selling Regulations.
130 Article 14 of the Direct Selling Regulations.
131 Article 16 of the Direct Selling Regulations.
132 Article 15 of the Direct Selling Regulations.
133 Article 18 of the Direct Selling Regulations.
134 Article 18 of the Direct Selling Regulations.
135 Article 22 of the Direct Selling Regulations.
136 Some foreign direct sellers are reported to have built sales forces whose commissions are based on team performance.
137 Article 22 of the Direct Selling Regulations.
138 Article 23 of the Direct Selling Regulations.
139 Article 24 of the Direct Selling Regulations.
140 Article 24 of the Direct Selling Regulations.
141 Article 26 of the Direct Selling Regulations.
142 Article 27 of the Direct Selling Regulations.
143 Article 30 of the Direct Selling Regulations.
144 Article 33 of the Direct Selling Regulations.
145 When a SAIC office conducts an onsite inspection, at least two inspectors must be present. The approval of the main person in charge of the SAIC at the county level or above is required if materials or illegal property are to be placed under seal or seized, article 35 of the Direct Selling Regulations.
146 Article 37 of the Direct Selling Regulations.
147 Article 36 of the Direct Selling Regulations.
148 Article 38 of the Direct Selling Regulations.
149 Article 39 of the Direct Selling Regulations.
150 Article 5 of the MOFCOM Franchising Measures.
151 Article 4 of the State Council Franchising Measures, and article 5 of the MOFCOM Franchising Measures.
152 Article 5 of the MOFCOM Franchising Measures.
153 Article 4 of the State Council Franchising Measures, and article 5 of the MOFCOM Franchising Measures.
154 Article 5 of the MOFCOM Franchising Measures. This point is nto expressly covered in the State Council Measures.
155 Article 25 of the MOFCOM Franchising Measures. No such prohibition appears in the State Council Franchising Measures.
156 Article 5 of the State Council Franchising Measures,
157 Article 6 of the State Council Franchising Measures.
158 Article 33 of the State Council Franchising Measures.
159 A franchisor’s trademarks must be registered under the Trademark Law.
160 Article 8 of the MOFCOM Franchising Measures.
161 Article 6 of the MOFCOM Franchising Disclosure Measures.
162 Article 7 of the MOFCOM Franchising Disclosure Measures.
163 Article 9 of the MOFCOM Franchising Disclosure Measures.
164 Article 19 of the MOFCOM Franchise Measures.
165 Article 12 of the State Council Franchising Measures.
166 Article 3 of the MOFCOM Franchising Filing Measures.
167 Article 5 of the MOFCOM Franchising Filing Measures.
168 Article 6 of the MOFCOM Franchising Filing Measures.
169 Article 7 of the MOFCOM Franchising Filing Measures.
170 Article 8 of the MOFCOM Franchising Filing Measures.
171 Article 9 of the MOFCOM Franchising Filing Measures.
172 Where the materials provided by a franchiser are not complete, the filing agency may within 7 days require that the nonconformity be remedied, article 10 of the MOFCOM Franchising Filing Measures.
173 Article 14 of the MOFCOM Franchising Filing Measures.
174 Article 17 of the MOFCOM Franchising Filing Measures.
175 Article 18 of the MOFCOM Franchising Filing Measures.
176 Article 9 of the MOFCOM Franchising Measures.
177 Article 14 of the State Council Franchising Measures.
178 Article 10 of the MOFCOM Franchising Measures.
179 Article 17 of the State Council Franchising Measures and article 23 of the MOFCOM Franchising Measures.
180 Article 19 of the MOFCOM Franchising Measures.
181 Article 15 of the State Council Franchising Measures.
182 Article 16 of the State Council Franchising Measures.
183 Article 18 of the State Council Franchising Measures.
184 Article 12 of the MOFCOM Franchising Measures.
185 Article 16 of the MOFCOM Franchising Measures.
186 Article 21 of the MOFCOM Franchising Measures.
187 Article 18 of the State Council Franchising Measures and article 22 of the MOFCOM Franchising Measures.
188 Article 15 of the MOFCOM Franchising Measures.
189 Article 12 of the State Council Franchising Measures.
190 Article 13 of the State Council Franchising Measures. This rule is not obligatory in the context of renewals.
191 Article 32 of the MOFCOM Franchising Measures.
192 Article 33 of the MOFCOM Franchising Measures.
193 Articles 38 and 39 of the MOFCOM Franchising Measures.
194 Article 24 of the State Council Franchising Measures.
195 Article 27 of the State Council Franchising Measures.
196 Article 28 of the State Council Franchising Measures.
197 Article 29 of the State Council Franchising Measures.
198 Article 30 of the State Council Franchising Measures.
199 Article 11 of the MOFCOM Franchising Filing Measures.
200 Articles 15 and 16 of the MOFCOM Franchising Filing Measures.
201 Article 288 of the Contract Law.
202 Article 289 of the Contract Law.
203 Article 290 of the Contract Law.
204 Article 291 of the Contract Law.
205 Article 292 of the Contract Law.
206 Article 304 of the Contract Law.
207 Article 305 of the Contract Law.
208 Article 306 of the Contract Law.
209 In particular, the stipulations of the State governing the carriage of hazardous materials would be applicable.
210 Article 307 of the Contract Law.
211 Article 308 of the Contract Law.
212 Article 309 of the Contract Law.
213 Article 310 of the Contract Law.
214 Article 311 of the Contract Law.
215 Article 312 of the Contract Law.
216 Article 313 of the Contract Law.
217 Article 314 of the Contract Law.
218 Article 315 of the Contract Law.
219 Article 317 of the Contract Law.
220 Article 318 of the Contract Law.
221 Article 319 of the Contract Law.
222 Article 320 of the Contract Law.
223 Article 381 of the Contract Law.
224 Article 382 of the Contract Law.
225 Article 383 of the Contract Law.
226 Article 384 of the Contract Law.
227 Article 386 of the Contract Law.
228 Article 387 of the Contract Law.
229 Article 388 of the Contract Law.
230 Article 389 of the Contract Law.
231 The warehouseman must promptly notify the depositor or holder of the warehouse receipt, article 390 of the Contract Law.
232 Article 391 of the Contract Law.
233 Article 393 of the Contract Law.
234 Article 394 of the Contract Law.
235 It was adopted at the Tenth Session of the Standing Committee of the Eighth NPC on October 27, 1994 with effect on February 1, 1995.
236 Article 3 of the Advertising Law.
237 Article 4 of the Advertising Law.
238 Article 3 of the Advertising Law.
239 Article 5 of the Advertising Law.
240 Article 7 of the Advertising Law.
241 Article 9 of the Advertising Law.
242 Article 10 of the Advertising Law.
243 Article 11 of the Advertising Law.
244 Article 12 of the Advertising Law.
245 Article 13 of the Advertising Law.
246 Articles 14-16 of the Advertising Law.
247 Article 17 of the Advertising Law.
248 Article 18 of the Advertising Law. Advertisements for tobacco must carry the legend “Smoking is harmful to your health”.
249 Article 19 of the Advertising Law.
250 Article 22 of the Advertising Law.
251 Article 20 of the Advertising Law.
252 Article 21 of the Advertising Law.
253 Article 23 of the Advertising Law.
254 Article 25 of the Advertising Law.
255 Article 26 of the Advertising Law.
256 Article 28 of the Advertising Law.
257 Article 29 of the Advertising Law.
258 Article 30 of the Advertising Law.
259 Article 31 of the Advertising Law.
260 Article 32 of the Advertising Law.
261 Article 34 of the Advertising Law.
262 Article 35 of the Advertising Law.
263 Article 36 of the Advertising Law.
264 Article 37 of the Advertising Law.
265 Article 38 of the Advertising Law.
266 Articles 39–43 of the Advertising Law.
267 Article 46 of the Advertising Law.
268 Article 47 of the Advertising Law.
269 Article 48 of the Advertising Law.
270 For instance, the rules of contracts and other forms of protection of consumers as well as those prohibiting unfair competition apply to activities on the web. On March 22, 2000, the Ministry of Culture prohibited all unauthorized online sales of music and audiovisual products by sites under foreign control.
271 Article 26 of the Electronic Signature Law adopted by the Tenth Standing Committee of the Tenth NPC on August 28, 2004, which entered into effect on April 1, 2005.
272 Provisional Measures for Regulating Internet Banking Transactions, promulgated by the PBC on July 9, 2001.
273 The MII must approve any fund-raising on the domestic or foreign markets by internet content providers, Measures for Managing Internet Content Provisions, State Council, October 6, 2000.
274 For instance, the Government of Beijing led the central government with its Interim Measures for the Administration of Online Advertising of April 10, 2001. The Guangdong provincial government led in the adoption of rules with respect to electronic signatures before adoption of the national law in 2004, Guangdong to Legitimize Electronic Signature, china.org.cn. The Shanghai office of SAIC adopted rules governing electronic commerce before any such measures had been adopted at the national level, Shanghai Trial Measures of Counterpart Internet Version Business Certificate.
275 Article 2, promulgated by the State Council on September 25, 2000, http://www.chinaeclaw.com/english/readArticle.asp?id=2387.
276 The Appendix to the Telecommunications Regulations mentions: the supply of network infrastructure, data transmission over networks, and basic telephone services.
277 The Appendix to the Telecommunications Regulations mentions the following services: e-mails, voice messaging, data storage, electronic data interchange, online processing of data or transactions, value added telecopying, internet access, online information services, web conferencing.
278 Article 4 of the Telecommunications Regulations.
279 The prohibition applies to “intelligence” as defined in article 111 of the Criminal Law, that is items which involve the security and interests of the nation, but which are not public or which, according to relevant regulations, should not be made public, The Explanation of Certain Issues Regarding the Specific Laws to be Used in Adjudicating Cases of Stealing or Spying to Obtain, or Illegally Supplying, State Secrets or Intelligence for Foreigners of November 20, 2000, cited by U.S. Congressional Executive Commission at http://www.cecc.gov/pages/virtualAcad/exp/explaws.php.
280 Provisions on the Administration of the Protection of Secrets on Internationally Networked Computer Information Systems, January 1, 2000, cited by U.S. Congressional Executive Commission at http://www.cecc.gov/pages/virtualAcad/exp/explaws.php.
281 State Council Decree No. 195 promulgated on February 1, 1996, and amended on May 20, 1967.
282 The principal backbone networks are ChinaNet (affiliated with China Telecom), CERNET (administered by the Ministry of Education), CSTNET (a scientific network), China GBNet (commercial network affiliated with Jitong Corporation), UniNet (commercial network affiliated with China UniCom) and CNCNET (commercial network affiliated with China Netcom Corporation).
283 Article 17 of the Telecommunications Regulations.
284 http://www.bobsonwong.com/research/china/netreg-0010txt/
285 Article 18 of the Measures for Managing Internet Content Provision.
286 Internet Filtering in China 2004-5, http://66.249.93.104/search?q=cache:Wq9UgrnahosJ:www.opennetinitiative.net/studies/chinaONI_China_Country_Study.pdf+china+state+council+interim+procedures+on+registration+and+filing+of+online+business+opportunities&hl=en.
287 Article 5 of the Measures on the Administration of Safeguarding the Safety of Internationally Networked Computer Information Networks, 1997.
288 The Regulation was issued by the State Council in October 1999 as Directive No. 273.
289 Article 2 of the Regulation of Commercial Encryption Code.
290 Article 9 of the Contract Law.
291 Article 2 of the Electronic Signature Law.
292 Article 2 of the Electronic Signature Law.
293 Article 3 of the Electronic Signature Law.
294 Article 3 of the Electronic Signature Law.
295 Articles 5 and 6 of the Electronic Signature Law.
296 Article 17 of the Electronic Signature Law.
297 Article 19 of the Electronic Signature Law.
298 Article 9 of the Electronic Signature Law.
299 Article 11 of the Electronic Signature Law.
300 Article 12 of the Electronic Signature Law.
301 Article 7 of the Electronic Signature Law.
302 Article 8 of the Electronic Signature Law.
303 Article 13 of the Electronic Signature Law.
304 Article 27 of the Electronic Signature Law.
305 Article 28 of the Electronic Signature Law.
306 Article 29 of the Electronic Signature Law.
307 Article 30 of the Electronic Signature Law.
308 Article 31 of the Electronic Signature Law.
309 Article 32 of the Electronic Signature Law.
310 United States Congress, Virtual Academy, http://www.cecc.gov/pages/virtualAcad/exp/explaws.php
311 Article 5 of the Online News Provisions.
312 Article 7 of the Online News Provisions.
313 Article 11 of the Online News Provisions.
314 Article 13 of the Online News Provisions.
315 Notice on Further Administration on Transmitting Radio, TV and Movies through the Internet to the Public.
316 Article 2 of the Online Cultural Products Provisions.
317 Article 3 of the Online Cultural Products Provisions.
318 Article 3 of the Online Cultural Products Provisions.
319 Article 4 of the Online Cultural Products Provisions.
320 Article 6 of the Online Cultural Products Provisions.
321 Under article 9 of the Online Cultural Products Provisions, the first authority has 30 days in which to reply, as does the Ministry of Culture.
322 Under article 10 of the Online Cultural Products Provisions, the first authority has 30 days in which to reply.
323 Article 12 of the Online Cultural Products Provisions.
324 Article 15 of the Online Cultural Products Provisions.
325 Article 16 of the Online Cultural Products Provisions.
326 Article 17 of the Online Cultural Products Provisions. See also article 15 of the Internet Content Provisions.
327 Article 18 of the Online Cultural Products Provisions.
328 Article 19 of the Online Cultural Products Provisions.
329 Article 20 of the Online Cultural Products Provisions.
330 Article 21 of the Online Cultural Products Provisions.
331 Article 22 of the Online Cultural Products Provisions. Not-for-profit operators are subject to fines of a maximum of RMB 1,000.
332 Article 24 of the Online Cultural Products Provisions. However fines for not-for-profit sites are limited to RMB 1,000.
333 Article 25 of the Online Cultural Products Provisions.
334 Article 4 of the Internet Publishing Regulations.
335 Article 4 of the Internet Publishing Regulations.
336 Notice Regarding Further Strengthening the Administration of Periodicals Relating to Current Affairs and Politics, General Lifestyle, Information Tabloids and Scientific Theory, 2000, cited by U.S. Congressional Executive Commission at http://www.cecc.gov/pages/virtualAcad/exp/explaws.php.
337 Notice Regarding the Work of Bringing the Periodical Industry Under Control, 1997, cited by U.S. Congressional Executive Commission at http://www.cecc.gov/pages/virtualAcad/exp/explaws.php.
338 Notice Regarding the Further Strengthening the Administration of Selection of Articles for Newspapers and Periodicals, February 25, 2002, cited by U.S. Congressional Executive Commission at http://www.cecc.gov/pages/virtualAcad/exp/explaws.php.
339 As of April, 2005, the total number of titles published as electronic books amounted to 148,000, the most in the world. In 2004, there were more than 8 million copies of e-books in wide circulation including among some 1,000 libraries. There were 26 e-publishers netting RMB 300,000 in profits, of which 15 earned RMB 500,000 and five RMB 1,000,000, Li Zi, A New Chapter for E-Books, Beijing Review, http://www.bjreview.com.cn/En-2005/05-26-e/china-3.htm.
340 Article 5 of the Internet Publishing Regulations. According to the Regulations on the Administration of Publishing of December 25, 2001, publishing units include newspaper publishing houses, periodical publishing houses, reference book publishing houses, audio/visual publishing houses and electronic publication publishing houses. To establish a publishing unit, candidates must have concluded articles of incorporation, they must have a sponsoring unit and managing unit that have been recognized by the State Council’s publishing administration agency, have a registered capital of at least RMB 300,000 and a fixed place of business. Examination and approval of the establishment of publishing units must conform to the nation’s plans for the quantity, organization and distribution of publishing units, cited by U.S. Congressional Executive Commission at http://www.cecc.gov/pages/virtualAcad/exp/explaws.php..
341 Article 6 of the Internet Publishing Regulations.
342 Article 6 of the Internet Publishing Regulations.
343 Article 7 of the Internet Publishing Regulations.
344 Article 8 of the Internet Publishing Regulations.
345 Article 10 of the Internet Publishing Regulations.
346 Article 11 of the Internet Publishing Regulations.
347 Article 12 of the Internet Publishing Regulations.
348 Articles 13 and 14 of the Internet Publishing Regulations.
349 Article 21 of the Internet Publishing Regulations.
350 Article 22 of the Internet Publishing Regulations.
351 Article 24 of the Internet Publishing Regulations.
352 Article 19 of the Internet Publishing Regulations.
353 Article 25 of the Internet Publishing Regulations.
354 Article 26 of the Internet Publishing Regulations.
355 Article 18 of the Internet Publishing Regulations.
356 Article 20 of the Internet Publishing Regulations.
357 Article 27 of the Internet Publishing Regulations.
358 Article 28 of the Internet Publishing Regulations.
359 According to the PBOC, around 400,000 Chinese do some of their banking online.
360 Article 4 of the Provisional Measures for Regulating Internet Banking Transactions.
361 Article 6 of the Provisional Measures for Regulating Internet Banking Transactions.
362 Article 5 of the Online Brokerage Regulations.
363 Articles 11 and 12 of the Online Brokerage Regulations.
364 CSRC, Procedure for the Examination and Approval of Securities Companies for Engaging in Online Brokerage Activities, April 29, 2000.
365 Such sources include in particular the Drug Administration Law and the Regulations for Implementation of the Drug Administration Law. The Drug Administration Law was adopted at the Seventh Meeting of the Standing Committee of the Sixth NPC on September 20, 1984, and it was revised at the 20th Meeting of the Standing Committee of the Ninth NPC on February 28, 2001, promulgated with effect as of December 1, 2001. The Regulations were promulgated by the State Council and entered into effect on September 15, 2002.
366 Article 46 of the Technology Import and Export Regulations, which were adopted at the 46th Executive Meeting of the State Council on October 31, 2001 and which entered into effect on January 1, 2002.
367 The law came into effect on May 1, 1989, http://66.249.93.104/search?q=cache:tQIR_Bo4M2IJ:www.article23.org.hk/english/research/securitylaw.doc+china+Law+concerning+the+Maintenance+of+State+Secrets+&hl=en.
368 In the case of Defendant Zhu’s Theft of Important State Secrets, the Supreme Court confirmed the lower court judgment condemning a university professor for having disclosed academic exams as “State secrets”, see http://www.cecc.gov/pages/newLaws/protectSecretsENG.php.
369 Article 7 raises the prospect of pursuits in China for reiteration on foreign networks of State secrets as defined by the Chinese authorities. Article 8 obliges all those who store information to obtain the approval of the security authorities. Under certain interpretations of article 7, the reiteration abroad of State secrets disclosed in foreign media would be punishable in China. Secrecy-related regulations with respect to the internet date from at least 1997, Ministry of Public Security, http://www.usembassy-china.org.cn/sandt/netsecret.htm.
370 Several hundred foreign companies are reported to have subscribed to the declaration, International freedom of Expression Exchange, at http://www.ifex.org/fr/content/view/full/16923?PHPSESSID=. In November 2007, Yahoo! Inc. pledged to provide an undisclosed amount of “financial, humanitarian and legal support” to the families of Shi Tao and Wang Xiaoning, the former now serving ten years in prison for “revealing State secrets”, the latter jailed in 2003 for ten years with the help of e-mail data supplied by Yahoo. In the meantime, Yahoo cofounder and chief executive officer, Jerry Yang, had pubicly apologized and set up a “Yahoo! Human Rights Fund” to “provide humanitarian and legal assistance to persons in the People’s Republic of China who have been imprisoned or persecuted for expressing their views using the internet.” Two other dissidents, Li Zhi and Jiang Lijun, were also convicted with Yahoo’s help in 2003. At the time of his arrest, Mr. Shi worked for Dangdai Shangbao (Contemporary Business News), based in Changsha, Hunan province. In April 2004, he attended an editorial meeting to discuss a classified document containing a series of instructions about how the media should work to prevent social unrest in the run-up to the anniversary of the June 4, 1989 crackdown. Later that night he sent a summary from his office computer via his Yahoo China e-mail account to a New York-based, pro-democracy publication and Web site, Minzhu Luntan (Democracy Forum), which published his article under a pseudonym. Two days later, the Beijing State Security Bureau issued a “Notice of Evidence Collection” to Yahoo’s Beijing office, requesting account information linked to Mr. Shi’s email address (which did not contain his narre), plus contents of his emails. Beijing-based Yahoo China complied with the request. In 2006, Mr. Yang was quoted as having said, “we have no way of preventing that beforehand ... If you want to do business there you have to comply.” Rebecca MacKinnon, Asia’s Fight For Web Rights (WSJ), April 18, 2008.
371 Law for the Protection of the Security of Information Systems, adopted at the 19th Session of the Ninth NPC on December 28, 2000.
372 Article 4, adopted at the 1144th Session of the Judicial Committee of the Supreme People’s Court on November 22, 2000.
373 Article 7, Supreme People’s Court Interpretation concerning Internet Copyright Disputes.
374 Article 22 of the Product Quality Law.
375 Article 23 of the Product Quality Law.
376 Articles 23 and 25 of the Price Law.
377 Articles 14 and 15 of the Price Law.
378 Articles 10 and 30 of the Direct Selling Regulations.
379 Article 13 of the Franchising Regulations.
380 Articles 3 and 4 of the Advertising Law.
381 Article 13 of the Advertising Law.
382 Article 5 of the Advertising Law.
383 Article 7 of the Consumer Protection Law.
384 Article 8 of the Consumer Protection Law.
385 Articles 7–13 of the Consumer Protection Law.
386 Article 16 of the Consumer Protection Law.
387 Articles 17–25 of the Consumer Protection Law.
388 Article 50 of the Consumer Protection Law.
389 The Law was adopted at the Third Session of the Standing Committee of the Eighth NPC and was promulgated on September 2, 1993.
390 Article 2 of the Competition Law.
391 Article 2 of the Competition Law.
392 Article 4 of the Price Law.
393 Article 14 of the Price Law.
394 Article 8 of the Price Law.
395 Article 14 of the Price Law.
396 Article 5 of the Franchising Regulations.
397 Article 21 of the Advertising Law.
398 The Interim Provisions on Prohibiting Bid-Rigging, SAIC Decree No. 82 were promulgated and entered into effect on January 6, 1998.
399 The Interim Provisions on Prohibiting Commercial Bribery, SAIC Decree No. 60 were promulgated and entered into effect on November 15, 1996
400 Certain Regulations on Prohibiting Infringement of Commercial Secrets, SAIC Decree No. 41 were promulgated and entered into effect on November 23, 1995.
401 Certain Regulations on Prohibiting Unfair Competition Activity Concerning Imitating Specific Names, Packaging or Decoration of Well-known Commodities, SAIC Decree No. 33 were promulgated and entered into effect on July 6, 1995.
402 Regulations Prohibiting Anti-Competitive Practices of Public Enterprises, SAIC Decree No. 20 were promulgated and entered into effect on December 24, 1993.
403 Certain Regulations on Prohibiting Unfair Competition in Prize-Attached Sales, SAIC Decree No. 19 were promulgated and entered into effect on December 24, 1993
404 The Law was adopted at the 29th Session of the Standing Committee of the Tenth NPC were promulgated on August 30, 2007 and entered into effect on August 1, 2008.
405 Article 6 of the Competition Law.
406 Article 5 of the Competition Law.
407 Article 10 of the Competition Law.
408 Article 9 of the Competition Law.
409 Article 11 of the Competition Law.
410 Article 12 of the Competition Law.
411 Article 8 of the Competition Law.
412 Article 17 of the Competition Law.
413 Article 14 of the Competition Law.
414 Article 15 of the Competition Law.
415 Article 20 of the Competition Law.
416 Article 20 of the Competition Law.
417 Article 21 of the Competition Law.
418 Article 30 of the Competition Law.
419 Article 31 of the Competition Law.
420 Articles 22–27 of the Competition Law.
421 Article 29 of the Competition Law.
422 Article 2 of the Bid-rigging Regulations.
423 Article 3 of the Bid-rigging Regulations.
424 Article 4 of the Bid-rigging Regulations.
425 Article 4 of the Bid-rigging Regulations.
426 Article 2 of the Commercial Bribery Regulations.
427 Article 5 of the Commercial Bribery Regulations.
428 Article 2 of the Trade Secrets Regulations.
429 Article 3 of the Trade Secrets Regulations.
430 Article 25 of the Unfair Competition Law.
431 Article 5 of the Trade Secret Regulations.
432 Article 219 of the Criminal Law.
433 Where the name, packaging or decoration of a product is used in the same or a similar way without the owner’s authorization, thus causing misidentification among buyers, the product may be deemed to be well known.
434 Article 2 of the Regulations Prohibiting Anti-Competitive Practices of Public Enterprises.
435 Article 4 of the Regulations Prohibiting Anti-Competitive Practices of Public Enterprises.
436 Article 5 of the Regulations Prohibiting Anti-Competitive Practices of Public Enterprises.
437 Article 6 of the Regulations Prohibiting Anti-Competitive Practices of Public Enterprises.
438 Article 6 of the Sales Promotions Regulations.
439 Article 2 of the Anti-Monoply Law.
440 Article 16 of the Anti-Monoply Law.
441 Article 56 of the Anti-Monoply Law.
442 Chapter 2 of the Anti-Monopoly Law, Monopoly Agreements.
443 Chapter 3 of the Anti-Monopoly Law, Of the Abuse of Market Dominance.
444 Chapter 4 of the Anti-Monopoly Law, On Concentrations
445 Article 28 of the Anti-Monopoly Law.
446 Chapter 5 of the Anti-Monopoly Law, Prohibiting Abuse of Administrative Power to Restrict Competition.
447 Article 31 of the Anti-Monopoly Law.
448 The decision-making authority of the Anti-Monopoly Enforcement Agency is in Article 44.
449 Article 48 of the Anti-Monopoly Law.
450 Article 53 of the Anti-Monopoly Law.
451 Article 13(4) of the Anti-Monopoly Law.
452 Article 27(3) of the Anti-Monopoly Law.
453 Article 4 of the Anti-Monopoly Law.
454 Article 12 of the Anti-Monopoly Law.
455 Articles 3, 5 and 6 of the Anti-Monopoly Law.
456 Article 7 of the Anti-Monopoly Law.
457 Article 8 of the Anti-Monopoly Law.
458 Article 9 of the Anti-Monopoly Law.
459 Article 10 of the Anti-Monopoly Law.
460 Article 13 of the Anti-Monopoly Law.
461 Article 14 of the Anti-Monopoly Law.
462 Article 15 of the Anti-Monopoly Law.
463 Article 16 of the Anti-Monopoly Law.
464 Article 17 of the Anti-Monopoly Law.
465 Article 18 of the Anti-Monopoly Law.
466 Article 19 of the Anti-Monopoly Law.
467 Article 20 of the Anti-Monopoly Law.
468 Article 22 of the Anti-Monopoly Law.
469 Article 24 of the Anti-Monopoly Law.
470 Article 24 of the Anti-Monopoly Law. The period may be extended for up to 60 days.
471 Article 25 of the Anti-Monopoly Law.
472 Article 27 of the Anti-Monopoly Law.
473 Articles 24 and 25 of the Anti-Monopoly Law.
474 Article 26 of the Anti-Monopoly Law.
475 Article 28 of the Anti-Monopoly Law.
476 Article 29 of the Anti-Monopoly Law.
477 Article 30 of the Anti-Monopoly Law.
478 Article 31 of the Anti-Monopoly Law.
479 Article 32 of the Anti-Monopoly Law.
480 Article 33 of the Anti-Monopoly Law.
481 Article 34 of the Anti-Monopoly Law.
482 Article 35 of the Anti-Monopoly Law.
483 Article 36 of the Anti-Monopoly Law.
484 Article 37 of the Anti-Monopoly Law.
485 Article 37 of the Anti-Monopoly Law.
486 Article 38 of the Anti-Monopoly Law.
487 Article 40 of the Anti-Monopoly Law.
488 Article 42 of the Anti-Monopoly Law.
489 Article 43 of the Anti-Monopoly Law.
490 Article 44 of the Anti-Monopoly Law.
491 Articles 45 and 46 of the Anti-Monopoly Law.
492 Article 47 of the Anti-Monopoly Law.
493 Article 49 of the Anti-Monopoly Law.
494 Article 51 of the Anti-Monopoly Law.
495 Article 52 of the Anti-Monopoly Law.
496 Article 53 of the Anti-Monopoly Law.