China’s amended Anti-Unfair Competition Law (amended AUCL) comes into force on 1 January 2018. Much has been written about the various iterative drafts released over the 18-month consultation period. But the final amended AUCL omits some of the more radical amendments proposed and in some ways represents a reduced risk to companies provided they transact on commercial and well-documented terms. We set out our analysis below of the anti-bribery provisions.


China’s anti-bribery regime is comprehensive and prohibits a wide range of activities. The Criminal Law proscribes supply and demand side bribery offences in respect of corporates and individuals in the public and private sectors. Where alleged bribery involves commercial entities and does not meet the criminal liability threshold, it may nevertheless violate the civil bribery provisions under the current AUCL.

The AUCL aims to maintain fair market competition in China. The State Administration for Industry and Commerce (SAIC) is responsible for the investigation and enforcement of offences under the AUCL.


Scope of bribery offence

By reviewing the current and amended provisions, we assess the scope of the newly cast offence and to whom it applies.

Current AUCL

Article 8 of the current AUCL, read alongside the SAIC’s Interim Provisions on Commercial Bribery 1996, prohibits a “business operator”, meaning “legal person, other economic organisations and individuals who engage in commodity business operation or profitable service” from:

  • giving a bribe in the form of money, property or other means for the purpose of selling or purchasing goods or for-profit services;
  • soliciting/accepting bribes when selling or purchasing goods or for-profit services; or
  • secretly giving/accepting “off-the-book” kickbacks.

Both demand and supply side bribery are prohibited and the undefined term “bribe” has been widely interpreted to include promotion fees, advertising expenses, sponsorship fees, service remuneration, commission, and expense reimbursements between business operators. The current AUCL expressly exempts from liability properly accounted for qualifying discounts and commissions. In addition, in practice accurately accounted for promotional gifts of small value (excluding cash or equivalents) based on common commercial practice have not been the subject of enforcement activity by the SAIC.

Amended AUCL

The amended AUCL defines “business operator” in similar terms as the current AUCL. Likewise, the amended AUCL does not define “bribery”. Although previous draft amendments attempted to do so, these were eventually discarded. However, those who may be bribed has expanded. Article 7 states that business operators must not “bribe in order to seek transaction opportunities or a competitive edge with property or by other means” the following three types of bribe recipient:

  • employees of the transaction counterparty;
  • entities or individuals entrusted by the transaction counterparty to handle relevant affairs; or
  • entities or individuals that use authority or influence to influence a transaction.

In terms of exemptions, a business operator “may expressly pay a discount to the counterparty, or pay a commission to the middleman.” The discount or commission must be accurately recorded in the books of both those who give and receive such discounts/commissions. These exemptions have not changed materially from the current AUCL.

Our observations

  1. Giving bribes is no longer limited to selling/purchasing goods or services. We will have to see how this is enforced in due course but it may represent a subtle widening of the scope of activities falling within the AUCL’s jurisdiction.
  2. The categories of bribe recipient now include state or public as well as private entities and individuals. This represents a widening of the AUCL, which to date has focused on dealings between business operators. However, transaction counterparties are now excluded from the categories of bribe recipients (only employees of an entity counterparty can be bribed). This in turn represents a narrowing of the AUCL, as the SAIC has historically enforced the AUCL in respect of many entity-to-entity transactions. Removing this seems to offer corporates greater freedom to transact commercially with one another on mutually beneficial terms.
  3. However, an anomaly appears to arise as a result since transaction counterparty is no longer a potential bribe recipient yet discounts between transaction counterparties must be recorded appropriately by them. If they are not, the transaction (and therefore the activity of the transaction counterparty) may fall back within the scope of the amended AUCL. It should therefore not be assumed that a transaction counterparty is entirely excluded from the category of potential bribe recipients. Until guidance is published, the most cautious approach would be to assume that the position under the current AUCL applies, whilst taking comfort that the direction of travel seems to be toward a more lenient approach between transaction counterparties.
  4. Only supply side bribery appears to be prohibited now. Demand side bribery (eg those who solicit or accept bribes) is not addressed in the amended AUCL, other than the point in (3) above requiring transaction counterparties accurately to record discounts / commissions in order to fall within the stated exemptions. It remains to be seen whether in practice the SAIC will seek to enforce demand side bribery. Clarification from SAIC on this point would be welcomed.
  5. In practice, the most prudent approach is to limit incentives to properly recorded discounts or commissions. Other non-cash benefits may be provided in certain circumstances but they entail more risk. Any benefits provided must be accurately recorded in the company’s books in compliance with applicable Chinese law. Arrangements should be agreed with entities not employees.

Vicarious liability

The current AUCL does not expressly provide for vicarious liability, although interpretative regulations have effectively made employers strictly liable for their employees’ wrongful conduct. The amended AUCL makes express this long-standing practice and creates a rebuttable presumption of vicarious liability unless the company has evidence to prove that the employee’s actions were “unrelated to seeking opportunities for transactions or gaining a competitive advantage” (article 7). Unless and until formal guidance is published, companies may have a difficult time rebutting the presumption of vicarious liability. The head of SAIC’s Anti-monopoly and Anti-Unfair Competition Enforcement Bureau has recently provided an interpretation which seems to suggest that vicarious liability can be rebutted if companies have evidence to prove that they have:

  • had reasonable measures in place in compliance with laws and regulations;
  • adopted effective supervisory and monitoring measures; and
  • not in some way connived in the employees’ commission of bribery.

This appears to echo wording of the UK Bribery Act’s express defence to the section 7 corporate bribery offence. Despite the unofficial nature of the interpretation, this provides another justification for corporates building strong compliance programmes to counter allegations of bribery.

Increased penalties

The amended AUCL provides for confiscation of illegal gains and administrative fines between RMB 100,000 to RMB 3 million per violation, as well as revocation of business licences in serious cases. Penalties only apply to companies that give bribes; language in an earlier draft penalising companies for accepting bribes has been omitted (in line with the removal of demand side offences). The amended AUCL also includes specific monetary penalties for obstructing an investigation (up to RMB 5,000 for individuals and up to RMB 50,000 for entities).