Say no to “Commercial Defamation”

The “Commercial Defamation” normally refers to an operator discredits its competitor’s business reputation, damages its competitor’s competitive advantages, seizes competitive opportunities, and disrupts the fair competition market environment, by fabricating false information or other means. However, it is very difficult to determine whether an operator constitutes commercial defamation.

Therefore, it is necessary for us to have a thorough understanding of the constituent elements and common types of commercial defamation.

Article 11 of the “Anti-Unfair Competition Law” stipulates that, “Operators shall not fabricate or disseminate false or misleading information that damages the business reputation and product reputation of competitors”. Article 20 of the judicial interpretation of the “Anti-Unfair Competition Law” further clarifies that, “If an operator disseminates false or misleading information fabricated by others, which damages the business reputation and/or product reputation of competitors, the court shall determine it as commercial defamation in accordance with Article 11 of the ‘Anti-Unfair Competition Law’.”

According to the above provisions, the constituent elements of commercial defamation include: ① The subject and object are fixed: the subject is the operator, and the object is the competitor; ② Specific behaviors: fabricating or disseminating false or misleading information; and ③ Consequence: the business reputation and/or product reputation of competitors have been damaged. In addition, in judicial practice, the court may also review whether the subject has subjective malice.

In order to help enterprises to get to know common commercial defamation practices, we have sorted out several commercial defamation cases in recent years, and summarized the following typical types:

• Posting false or misleading comparative advertisements, making inappropriate comparisons, and providing critical evaluations. In case (2024) Zui Gao Fa Min Shen No. 518, the supreme people’s court held that the defendant’s comparison of the performance of the product was not based on comprehensive, objective, and accurate scientific data, nor based on authoritative experiments or opinions, so its conclusion lacked factual basis. And the supreme people’s court supported the second instance court’s determination of commercial defamation.
• Sending false or misleading warning letters, declaration letters, or risk notification letters to relevant customers. In case (2022) Zui Gao Fa Zhi Min Zhong No. 2586, the supreme people’s court held that the defendant had sent a reminder letter to the relevant customers, stating that it had filed a patent infringement lawsuit against the plaintiff and requested the relevant customers not to purchase infringing products. During the hearing, the court found that the evidence presented by the defendant in the patent infringement lawsuit was clearly inappropriate and insufficient to prove the fact of infringement. And the supreme people’s court supported the first instance court’s determination of commercial defamation.
• Maliciously complaining to the platform. In case (2019) Chuan Zhi Min Zhong No. 134, the court held that the defendant filed a complaint by forging a trademark registration certificate, which led Alibaba’s platform to punish the plaintiff for infringing on trademark rights, causing damage to the plaintiff’s business reputation and product reputation, so the defendant’s subjective malice was obvious. And the court supported the first instance court’s determination of commercial defamation.
• Misleading reporting of litigation facts or publication of information on unresolved cases. In case (2023) Zui Gao Fa Min Shen No. 2538, the supreme people’s court held that the defendant concealed the fact that the relevant case had been withdrawn, provided misleading reports on the facts of the relevant litigation, and led relevant parties to mistakenly believe that the plaintiff may have been found to have infringed the defendant’s rights in the relevant case. And the supreme people’s court supported the second instance court’s determination of commercial defamation.
• Other circumstances by publishing false or misleading one-sided, critical, derogatory, and defamatory remarks about other operators or products. In case (2021) Jin Min Zhong No. 565, the court held that the defendant’s statement about the plaintiff’s falsification of the “Physician Qualification Certificate” had certain factual basis, but the rest statements were inconsistent with the facts. And the court supported the first instance court’s determination of commercial defamation.

If a company encounters similar circumstances, it can protect its legitimate rights by reporting and complaining to the supervisory and inspection authorities, or it can pursue civil and criminal responsibilities against its competitor in accordance with the law.

The “Anti-unfair Competition Law” has made clear provisions on the legal liabilities of commercial defamers. Article 23 stipulates that, “Where a business operator violates the provisions of Article 11 of this Law in harming the business goodwill or product reputation of its competitors, the regulatory authorities shall order the business operator to stop the illegal act, eliminate the impact, and pay a fine ranging from RMB100,000 to RMB500,000; in serious cases, a fine ranging from RMB500,000 to RMB3 million shall be imposed.” In addition, Article 27 stipulates that, “A business operator who violates the provisions of this Law shall bear civil liability, administrative liability and criminal liability; where its assets are insufficient to pay, it shall first bear the civil liability.”