SAIC: Business whose conducts amount to serious violation of law will be blacklisted

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On December 30, 2015, the State Administration for Industry & Commerce (SAIC) released the “Interim Measures for the Administration of the List of Businesses Seriously Violating the Law and Becoming Discredited” (hereinafter the “Interim Measures”). The Interim Measures have come into effect as of April 1, 2016.

The Interim Measures enumerate 10 circumstances where a business can be deemed to have seriously violated the law, 3 of which pertain to trademark and unfair competition:

  • Where a business has been imposed administrative punishments more than 3 times within 2 years due to unfair competition acts;
  • Where a business has been imposed administrative punishments more than twice within 5 years due to trademark infringement acts;
  • Where a trademark agency has been ordered to cease its activities.

The SAIC is in charge of supervising and orchestrating the management of this “list of businesses seriously violating the Law and becoming discredited”, i.e., this “blacklist”, across the entire country. The local AIC or Market Supervision Departments exercising the AIC authority, above the county level will manage the blacklist within their area of jurisdiction.

What are the consequences for an enterprise, to be recorded in the blacklist? Article 13 of the Interim Measures provides that the enterprise shall become a “target for supervision and administration”, that its legal representative or principal may not serve in such capacity for a period of three years, and that the enterprise may not receive a “good standing” certificate nor any other quality award.

In general, businesses that are blacklisted by the SAIC, will be subject to the AIC’s credit constraint and joint sanction of the AIC and other governmental authorities through inter-departmental information sharing mechanism, as well as public disclosure through the business credit disclosure system.

The aforementioned disciplinary measures are very much welcome.

The Interim Measures also prescribe that a business that have not committed any serious violation of the law for a period of five years after it has been blacklisted, may be removed from the blacklist.

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