Online Private Chat, Commercial Disparagement?

Mr. Zheng, the legal representative of Company A sent some negative information related to its competitor, Company B, in a industry QQ group. After the mediation organized by the public security authority, Zheng sent an apology statement in that QQ group. Several months later, Zheng used Wechat to chat with Chen, the client of Company B. Zheng told Chen that Company B stole the technology, the quality of its product and service were very poor. Company B brought a lawsuit against Company A and Zheng for commercial disparagement. The first instance court determined that Company A and Zheng had constituted commercial disparagement. In Jan. 2017, the second instance court, Zhejiang High People’s Court upheld the original judgment.

In this case, the 2 defendants defended with the excuse that the private chat had not been released to the public, which should not be deemed as a commercial disparagement. However, the first instance court decided, “……both parties belong to the ceramic machinery equipment industry,……. which is not known to the public, and the clients’ scope is limited as well. Zheng disseminated false facts to the competitor’s specific client, which could substantially damage the commercial reputation of Company B and its products.” The second instance court further pointed out, “The ‘Anti-Unfair Competition Law’…… dose not set restrictions on the receiver of the false facts……. ’Freedom of Speech’ shall also follow the public order and good customs of the society, and shall not infringe others’ legitimate rights and interests.”

The legal basis of this judgment is Article 14 of the “Anti-Unfair Competition Law”(1993), which prescribes that a business operator shall not fabricate, spread false facts to damage the business reputation or commodity fame of the other competitor. In terms of literal interpretation, “spread” refers to release something (especially information) to the unspecified majority. However, in the judicial practice, in some cases, the judges would extend the interpretation of “spread”, that is, refers to release something (especially information) to the unspecified majority, or specified common clients, or other competitors in the same industry. For example, in (2008) Er Zhong Min Zhong ZI No.4517, the defendant sent letters to the specified clients and potential clients; in (2016) Zhe Min Zhong No.719, the defendant sent false information via QQ and Wechat to specified clients.

In this case, Zheng’s private chat is considered to be a repetitive infringement behavior, which is coherent with the prior behaviors and finally constitutes commercial disparagement. This consideration shows that the court would comprehensively review all the relevant details and make the final decision. In other words, if the defendant did not conduct a serials of similar behaviors, or the receivers did not belong to a specified industry ,or the receiver was not a specified client, then a simple one to one chat would be extremely unlikely to be determined as a commercial disparagement.

Then, how would those similar cases be judged in accordance with the “Anti-Unfair Competition Law”(2018)? Article 11 of the 2018 version prescribes that a business operator shall not fabricate or disseminate any false or misleading information to injure the credit standing of its competitor or the reputation of its competitor’s commodities. In terms of literal interpretation, “disseminate” is different from “spread”, which means the business operator could release the information to the public or to specified receivers. That is, as long as the behavior violates business ethics, or break the legitimate competition order, such behavior shall be regulated.

Till now, we have not find a new commercial disparagement case which is related to a one to one private chat. However, in consideration of the previous judgments and the amendments of the “Anti-Unfair Competition Law”, to send false or misleading information to specified or potential clients might be more possible to be deemed as a commercial disparagement.

For the business operator, if the competitors have similar behaviors, it could consider to claim for commercial disparagement, or claim in accordance with Article 2 of the “Anti-Unfair Competition Law”(2018). The business operator shall also pay attention to the collection of evidence, which is difficult and uncertain.