IV.Trial of Competition Cases

23.Relationship between an Operator's Illegal Business Operation and Unfair Competition Acts for which Civil Liabilities Should be Assumed

Any operating act violating the relevant provisions of administrative laws and regulations on administrative approval shall constitute illegal business operation.Illegal business operation and infringement，including unfair competition provided by the Anti-unfair Competition Law overlap to some extent.However，not all illegal business operations constitute infringement or unfair competition for which civil liabilities should be assumed.

In the appeal against the judgment of dispute over false advertising，Beijing Golden Holiday Travel Service Ltd.（hereinafter referred to as Golden Holiday Company）v.Ctrip Computer Technology（Shanghai）Co.，Ltd.（hereinafter referred to as Ctrip Computer Company），Shanghai Ctrip Commerce Co.，Ltd.（hereinafter referred to as Ctrip Commerce Company），Hebei Comfort International Airline Services Co.，Ltd.（hereinafter referred to as Comfort Services Company）and Beijing Ctrip International Travel Agency Co.，Ltd.（hereinafter referred to as Beijing Ctrip Company）［（2007）MSZZ No.2，hereinafter referred to as Ctrip Case］，the SPC clarified the relationship between illegal business operations，infringement，and unfair competition provided by the Anti-unfair Competition Law.In addition，through the verdict of this case，the SPC conceded the legality of the new operating mode in which Ctrip Computer Company and Ctrip Commerce Company offer air ticket booking services through‘www.ctrip.com’，which not only protects innovation in business modes，but also inspires market competition.

The basic facts of the case are as follows：from July to September 2006，by filinga lawsuit，adding defendants，and adding claimant，Golden Holiday Company claimed that，Ctrip Computer Company and Ctrip Commerce Company had actually conducted agency sales of air tickets through‘www.ctrip.com’without a business approval certificate for the agency sales of air tickets to civil aviation passengers，which should be considered as an illegal business operation，as well as false advertising.Although the Comfort Services Company had obtained the Business Approval Certificate for Civil Aviation Passenger Transport Agent Services，but it provided Ctrip Computer Company with air ticket issuance and delivery services within Shijiazhuang City in Hebei Province，which constituted the illegal transfer of administrative approval，assisting in illegal business operation and false advertising.Beijing Ctrip Company collected the ticket fees for domestic air tickets sold by Ctrip Computer Company and Ctrip Commerce Company，so Beijing Ctrip Company also participated in the illegal business operation.Therefore，Golden Holiday Company asked the court to order Ctrip Computer Company and Ctrip Commerce Company to cease their false advertising，and order Ctrip Computer Company to stop all business activities operated through‘www.ctrip.com’and compensate the plaintiff for damages arising from unfair competition.In the first instance，the High People's Court of Hebei Province held that the alleged acts did not constitute false advertising and ruled［（2006）JMSCZ No.3-2］to dismiss the claims thereof.After Golden Holiday Company appealed，the SPC rejected the appeal and reaffirmed the original ruling on October 22,2009.The other alleged acts claimed by Golden Holiday Company in this case are dismissed through a separate ruling［（2006）JMSCZ No.3-1］made by the High Court of Hebei Province，holding that the allegation constituted a repeated suit.When Golden Holiday Company filed another appeal against this ruling，the SPC dismissed its appeal and upheld the original ruling（see the‘Ctrip Case’mentioned hereinafter）.

After trial，the SPC held that the issuer of air tickets should be regarded as the party that actually engages in the air ticket sales agency business；the operator who engages in the booking，delivery and payment collection relating to air ticket sales cannot be taken as the sales agent as stipulated in the Provisions for Administration of Civil Air Transport Sales Agencies（MH Decree No.37）.Where the‘booking’in dispute was a step of‘sales’，whether‘booking’and‘delivery’also constituted‘air ticket sales’and whether the direct collection of passengers’ticket payments could be‘sales of air tickets’had no substantial significance in determining whether those acts violated the relevant provisions of Decree No.37.The existing evidences could not directly prove that Ctrip Computer Company and Ctrip Commerce Company had committed the illegal sales agency of civil aviation passenger transport.Even though their relevant acts did constitute illegal business operations in violation of administrative laws and regulations，it should be an issue of administrative or criminal liabilities，and should be investigated and ascertained by the corresponding administrative department or criminal judiciary.Only when an illegal business operation violating the relevant administrative license laws and regulations constitutes an infringement，should civil liabilities be considered.That is to say，illegal business operation is not definitely an infringement，and the plaintiff of civil action cannot replace the burden of proof of an infringement with evidence of illegal business operation.In addition，a business operator should assume the civil liabilities arising from unfair competition only when the operator acts against the relevant provisions of the Anti-unfair Competition Law and infringes the legitimate rights and interests of other operators，regardless of whether its illegal business operations violate the relevant administrative laws and regulations.

24.Whether the Abbreviation ofan EnterpriseNameCan be Protected by the Anti-unfair Competition Law

According to Article 5（3）of the Anti-unfair Competition Law，using other enterprises’names or the personal names of others as their own enterprise's name without authorization，and as a result，making consumers confuse their goods as the goods of others，shall constitute unfair competition.Article 6 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Civil Unfair Competition Cases provides that enterprise names that have a certain reputation in the market or are known to the relevant section of the public may be determined as the‘enterprise's name’provided in Article 5（3）of the Antiunfair Competition Law.But the provisions above fail to clearly indicate whether an enterprise's abbreviated name could also be protected by Article 5（3）of the Antiunfair Competition Law.

In the retrial case concerning a dispute over the infringement of an enterprise's rights to its name Shandong Shanqi Heavy Industry Co.，Ltd.（hereinafter referred to as Shanqi Heavy Industry）v.Shandong Crane Factory Co.，Ltd.（hereinafter referred to as Shandong Crane Factory）［（2008）MSZ No.758］，the SPC held that the abbreviation of an enterprise name which has a certain market reputation，is well known to the relevant public and actually serves as a trade name，may be deemed as an enterprise name，and can be protected by Article 5（3）of the Anti-unfair Competition Law.

The basic facts of the case are as follows：both Shandong Crane Factory and Shanqi Heavy Company are enterprises focusing on hoisting machinery in Qingzhou City，Shandong Province.Shandong Crane Factory was founded in 1968，renamed Yidu Crane Factory in 1976.And then，it was renamed Shandong Crane Factory on October 31,1991.On January 8,2002，it was renamed Shandong Crane Factory Co.，Ltd.For a long time，Shandong Crane Factory used the abbreviation‘Shanqi’many times on its own initiative in its enterprise promos，on its factory buildings，on the work clothes of its employees，in its contracts and in its other external publicity and business activities.Its customers also called it‘Shanqi’.The current enterprise name of Shanqi Heavy Industry was pre-approved on January 13,2004，and the company was formally established on February 13,2004.Shandong Crane Factory brought a lawsuit on July 11,2005，requesting the court to order Shanqi Heavy Industry to immediately stop using the trade name‘Shanqi’and compensate for its damages.In the first instance，Weifang Intermediate People's Court of Shandong Province held that‘Shanqi’was the specific abbreviation of Shandong Crane Factory.It determined that Shanqi Heavy Industry had infringed upon Shandong Crane Factory's right to its name and upheld the claims of Shandong Crane Factory.The High People's Court of Shandong Province reaffirmed that‘Shanqi’was the specific abbreviation of Shandong Crane Factory，and also held that the use of‘Shanqi’by Shanqi Heavy Industry in its enterprise name could easily cause confusion and constitute unfair competition，thus sustaining the judgment of the first instance.Against the judgment of the second instance，Shanqi Heavy Industry filed an appeal to the SPC for a retrial.The SPC delivered a retrial judgment on April 27,2009，dismissing the appeal for retrial.

After review and retrial，the SPC held that enterprises’abbreviations were made to facilitate verbal communication.The formation of an abbreviation was associated with two processes：first，an enterprise substitutes the abbreviation for its official name，and second，the public acknowledges the relationship between the objects to which the abbreviation and the formal name refer.Because certain modificatory elements in an official name are omitted in an abbreviation，the scope of objects referred to by the official name may be unduly extended.Therefore，whether an enterprise's abbreviation may serve as a particular reference to the enterprise depends on whether the abbreviation is recognized by the relevant public and whether a stable association between it and the enterprise has been established among the relevant public.The abbreviation of an enterprise or an enterprise name which has a certain market reputation，is well known to the relevant public and actually serves as a trade name，may be deemed as an enterprise name.If，by use and public recognition，the particular abbreviation of an enterprise has gained the acknowledgement to the relevant public in a specific geographical area，the corresponding market reputation and a steady bond with the enterprise，and has been playing the role of a commercial sign in the identification of the operating entity，any other subsequent unauthorized use of such a well-known abbreviation which suffices to make the relevant public in a specific area confuse the subsequent user with the prior enterprise and causes the relevant public confusing in market between the subsequent user and the prior user，the subsequent user may infringe on the legal rights and interests of the prior user by inappropriately taking advantage of the prior user's reputation.Under such circumstances，the specific abbreviation of such a prior enterprise name should be regarded as an enterprise name，and Article 5（3）of the Anti-unfair Competition Law on the protection of enterprise names may apply to the protection of such a specific abbreviation.

25.Basic Conditions for Civil Liabilities that the False Advertising Act Should Assume

In the aforementioned‘Ctrip’case，the SPC also defined the basic conditions for the bearing of civil liabilities for false advertising：namely，only when the operators have a competitive relation，and the relevant advertising contents suffice to confuse the relevant public and cause direct damage to the operators，should the operators bearthecivilliabilitiesarisingtherefrom.Astotheresultof misunderstanding and direct damage，the plaintiff's burden of proof of its damage from the infringement cannot simply be replaced by the possible misleading aftermath of the relevant public.

After trial，the SPC held that false advertising resulting in the misleading of the public as provided in Article 9.1 of the Anti-unfair Competition Law was not accessible to all the operators who claim civil rights.The concerned party can bring a lawsuit of false advertisement under civil rights，but it should meet three basic conditions：the operators are in a competitive relation，the relevant advertising contents suffice to confuse the relevant public，and the advertising cause direct damage to the operators.As to the aftermath of misunderstanding and direct damage in this case，Golden Holiday Company claimed that the publicity of Ctrip Computer Company and Ctrip Commerce Company caused market confusion，i.e.，consumers confused or misunderstood the identity and business qualification of the relevant services of Ctrip Computer Company and Ctrip Commerce Company.To this regard，Ctrip Computer Company and Ctrip Commerce Company indeed improperly defined their identities during business operation and committed such acts as confusing or conflating their titles and operating identities.Specifically，they frequently used the abbreviations‘Ctrip’and‘www.ctrip.com’，and such publicity could easily make people wonder who‘Ctrip’was，whether those‘Ctrips’were the same，who operated‘www.ctrip.com’，etc.，and cause much doubt and confusion.Thus，these actions could indeed make the relevant public confuse or misunderstand them.During the trial of this case，the litigation documents submitted by the appellees also used the abbreviation‘Ctrip’，and it was difficult to distinguish whether it meant Ctrip Computer Company or Ctrip Commerce Company.Nevertheless，regardless of whether therelevantpublicconfusedorconflatedthetitlesandoperating qualification of the two appellees，Golden Holiday Company failed to prove that the relevant acts of Ctrip Computer Company and Ctrip Commerce Company，including the aforesaid misleading result，had caused it direct damage，and the burden of proof of Golden Holiday Company could not simply be replaced by the possible misleading result of the relevant public.

26.Constituent Conditions of Commercial Defamation Behavior

Article 14of the Anti-unfair Competition Law provides for commercial defamation：a business operator shall not fabricate or spread false information to injure his competitors'commercial credit or the reputation of his competitors'commodities.

In the commercial defamation dispute case of Shanghai Bailanwang Trade Development Co.，Ltd.（Bailanwang Company）v.Shanghai Dahe Eggs Co.，Ltd.（Dahe Eggs Company）［（2009）MSZ No.508］，the SPC further clarified the constituent conditions of commercial defamation behavior，holding that commercial defamation behavior stated in the Anti-unfair Competition Law does not stipulate that the concerned party must directly indicate the name of the concrete defamation object，but such an object should be identifiable.Furthermore，the Anti-unfair Competition Law makes no restrictions on the language of commercial defamation，which may not be emotional.

The basic facts of the case are as follows：‘Lanwang’（‘蘭王’in Chinese characters）eggs in Shanghai are sold by Dahe Eggs Company and Bailanwang Company.Bailanwang Company applied for the registration of‘蘭王’，but had not yet obtained authorization.Before March 2007，Dahe Eggs Company and Bailanwang Company maintained cooperation in the production and sales of‘蘭王’eggs.After both parties ended their cooperation，Bailanwang Company entrusted an outsider to produce‘蘭王’eggs.On May 11,2007，Bailanwang Company published an Announcement in Japanese in a Japanese newspaper including Notice on Similar Goods and False Goods of‘蘭王’，About the‘蘭王’Trademark and Identification of‘蘭王’Eggs，claiming that the other company sold goods similar to or with the same name as the goods of Bailanwang Company in Shanghai，that such goods had nothing to do with Bailanwang Company，and that it was unable to guarantee the use period and quality of such goods.To prevent possible problems，Bailanwang Company stated that it would regard the sales of any goods with the mark of Bailanwang Company or similar such marks as an infringement upon its trademark rights.On June 1,2007，Bailanwang Company published a Relevant Statement in its boxes of eggs which read，‘The Company has entrusted the Shanghai Egg Board Trade Association，theeggsupervisioninstitutionofShanghai，tomakean investigation to determine that Dahe Eggs Company has no breeding farm to produce eggs at all’；‘In the past，the Company entrusted Dahe Eggs Company to conduct GP，but it has many problems in terms of the management，cleaning，selection and packaging of eggs’；The Company confirms that the sales of goods similar to those of the Company constitute an act of unfair competition and an act aiming for unfair benefits.Dahe Eggs Company sued Bailanwang Company.In the first instance，Shanghai No.2 Intermediate People's Court held that Bailanwang Company had committed commercial defamation，and ordered them to immediately cease their unfair competition，eliminate their relevant influence and compensate for the losses thus incurred.However，Bailanwang Company refused to accept this judgment and filed an appeal.In the second instance，Shanghai High People's Court upheld the first instance judgment.Against the judgment of the second instance，Bailanwang Company filed an appeal to the SPC for a retrial on the grounds that the Announcement it published never indicated a concrete name，and the contents of the Announcement and Relevant Statement described the facts and never calumniated or descended to the use of unfounded accusations.The SPC delivered a retrial judgment on August 4,2009，dismissing the appeal.

Upon review and retrial，the SPC held that Article 14 of the Anti-unfair Competition Law did not stipulate that the concerned party must directly indicate the name of the concrete defamation object，but such an object should be identifiable.In this case，the Announcement published by the retrial petitioner did not indicate that the concerned party was the respondent，but only that the retrial petitioner and the respondent sold‘蘭王’eggs in Shanghai.Bailanwang Company clearly knew this fact，and consumers，according to the Announcement，could draw the conclusion that the other operator of‘蘭王’eggs was infringing upon the trademark right of Bailanwang Company.As the producer of‘蘭王’eggs，Dahe Eggs Company suffered damage in both commercial credit and the reputation of its goods.Therefore，the Announcement published by Bailanwang Company constituted the commercial defamation of Dahe Eggs Company.Furthermore，the Anti-unfair Competition Law places no restrictions on the language of commercial defamation，which may not be emotional.Any statement containing false or fabricated matters that has injured another's commercial credit or the reputation of another's commodities can constitute commercial defamation，regardless of whether such a statement contains hateful，humiliating or defiant words or calumniating terms，or whether such a statement is emotional.