Chongqing court's application of AUCL's internet provision on falsifying data prompts debate – analysis

• Court rules without supporting evidence on 'technical means’

• Falsifying data can also be regulated by AUCL's Article 8 –lawyers

A Chongqing court recently ruled that falsifying online data violated the internet provision (Article 12) of China's amended Anti-Unfair Competition Law (AUCL), prompting debate among practitioners on the lack of supporting evidence of "technical means," two lawyers told PaRR.

The Chongqing No.5 Intermediate People's Court ruling, which was handed down on 26 April and made public on 31 July, found in favor of Tencent in its unfair competition lawsuit against Shutui (Chongqing) Network Technology (Shutui) and its legal person, an individual surnamed Tan.

Tencent alleged that the defendants used technical means to boost view-through rates, click-through rates and number of followers on network products operated by Tencent, such as Weixin, Tencent Video, etc. Tencent alleged that the fake online traffic created by defendants misled consumers and harmed consumer’s interests, as well as misdirected Tencent’s business judgement, which is based on the statistics of online traffic. It also harmed Tencent’s business interests and therefore constituted unfair competition.

The court established that the defendants’ behavior violated Article 12 (4) of the amended AUCL and ordered the defendants to pay Tencent CNY 1.2m (USD 173,370) in compensation.

Article 12 (4) prohibits a business operator from using “technical means” to influence users’ choices or in other ways to impede or disrupt the normal operation of network products or services legally provided by other business operators.

Tencent was represented by Chongqing K&H Law Firm. Shutui and Tan were represented by Chongqing Yi’an Law Firm.

Technical means

Notably, both the plaintiff and defendants failed to provide supporting evidence on what “technical means” were used to conduct the alleged unfair competitive conduct, according to the rst-instance ruling.

The court reasoned that despite the absence of evidence on “technical means”, it was obvious that the defendants must have adopted existing technologies, such as link insertion or traffic There are no files associated with this

Intelligence interception, to achieve data falsification and circumvent the monitoring of network operators.

Such an “arbitrary” reasoning does not sound convincing, Yang Chunbao (Chambers), senior partner at Dentons who specializes in the TMT sector, told PaRR.

To apply the internet provision of the amended AUCL, the court should ask the plaintiff to provide evidence on how defendants used “technical means” and how it resulted in the “impediment”or “disruption” of the normal operation of plaintiff’s network products or services, Yang said.

In this case, the defendants’ behavior did not “impede or disrupt”the normal operation of Tencent’s products and the products still operated normally; instead the defendant's behavior distorted the consumers’ truthful browsing history and resulted in the misleading of consumers, Yang added.

The application of Article 12 of the amended AUCL in this case seemed a bit "far-fetched", Yang said.

In a similar lawsuit at Changzhou Intermediate People’s Court in Jiangsu province, the plaintiff iQIYI alleged that the defendant Suizhou Feiliu Network Technology (Feiliu) falsied click views on the plaintiff’s video website and the defendant Shanghai Qiniu Information Technology (Qiniu) sold cloud service and domain name to Feiliu and offered technical support to Feiliu, according to copy of the ruling seen by PaRR. The ruling was handed down on 26 March 2019.

To prove how Feiliu used “technical means” to conduct the alleged unfair business behavior, counsel for iQIYI submitted documents of the hook software Feiliu used to mimic browser activity and boost click views and submitted backend statistics and visitor data with device ngerprint (DFP) or user agent (UA) related to Feiliu.

The Changzhou court ruled in favor of iQIYI, determining that Feiliu’s conduct violated Article 12 (4) of the amended AUCL, and ordered Feiliu to pay iQIYI CNY900,000 (USD 130,000) in compensation.

iQIYI was represented by Zhong Lun Law Firm. Feiliu was represented by Yingke Law Firm. Qiniu was represented by Kin Ding Law Firm.

In practice, technical means used by defendants are often “covert” and “hard to detect” and it is very difficult for the plaintiff to provide evidence on technical means, Yao Xiaojuan, lawyer at T&C Law Firm who specializes in internet-related unfair competition lawsuits, told PaRR.

In civil cases the burden of proof is a preponderance of the evidence, so it makes sense for the Chongqing court to apply

Article 12 of the amended AUCL in the Tencent vs. Shutui case, Yao added.

False promotion

Yang noted that Article 8 of the amended AUCL is more suitable in the Tencent vs. Shutui case.

Article 8 of the amended AUCL prohibits business operators from promoting its products in a false or misleading manner, attempting to cheat or mislead consumers.

Yao pointed out Article 8 and Article 12 of the amended AUCL are overlapping in some respects but their conditions are different.

Article 12 focuses on unfair business conducts via technical means in the internet sector, while Article 8 emphasizes fake promotion regardless of whether technologies are used or whether the conduct occurs in the internet sector, Yao added.

by Kimberly Jin in Shanghai