The efforts made to mitigate risks of commercial bribery in China have been ever increasing during years for multinational companies, especially in lieu of the long-arm jurisdiction of the U.S. Foreign Corrupt Practice Act and the U.K. Bribery Act. Nowadays, those who operate business activities in China should be also finding themselves in a similar position when facing Chinese regulations, and perhaps something more.
In China, following the legislative initiatives amending the Anti-Unfair Competition Act of the People’s Republic of China (the “AUCA”), which is the other half piece of the anti-bribery regime in China, the enforcement against commercial bribery once again becomes a hot-button issue. With the restructure of the anti-bribery provision in the AUCA, as well as dovetailing the national movement of anti-corruption, it is also believed that Chinese government is multiplying the resource to crack down such unlawful activities in the commercial world, both by domestic and foreign companies.
This article aims to provide an intuitive roadmap to the Chinese anti-bribery regulatory scheme and lay out how the laws and the liabilities are structured, with the hope to enable readers a quick grasp thereof for guiding their daily business conducts to some extent. It is believed nowadays, and more so in the future, compliance of Chinese anti-bribery laws by foreign companies will become similarly important as of foreign laws by domestic companies.
II. What is Commercial Bribery under the AUCA
As the starter, the AUCA defines commercial bribery as “using money, things of value, or other means to bribe with the purpose of obtaining transactional opportunity or competitive advantage”. The recipients of unlawful commercial bribery under the AUCA are limited to: (1) staff of a counterparty in transaction; (2) organizations or individuals entrusted by a counterparty in transaction to handle relevant matters; and (3) organizations or individuals who use their power or impact to influence a transaction. In this sense, the AUCA does not only include counterparties themselves to be a recipient for the purpose of commercial bribery, but also explicitly allows to provide discount to counterparties or commission to intermediates, provided that the discount and/or commission is offered and accepted in accordance with the agreement and booked truthfully. In addition, in the case that commercial bribery by employee is demonstrated, the AUCA obliges the employer to prove its irrelevance, otherwise the company should take the liabilities.
III. Criminal, Civil and Administrative Liabilities
After that, the common journey to understand the Chinese anti-bribery regulatory scheme begins with the types of liabilities. An unlawful commercial bribery action in China likely entails all (1) criminal, (2) civil, and (3) administrative liabilities:
(1) - For criminal liabilities, the Criminal Law of the People’s Republic of China (the “Criminal Law”) comprises of eight different charges that are possibly involved, which has also been a position long recognized by the legal memorandum jointly issued by China’s supreme court and supreme governmental body of prosecutors. Pursuant to the Criminal Law, for the purpose of unlawfully seeking benefits, with anything of value, including money, goods, and gains that can be calculated monetarily, both offerors and recipients are criminally liable. Under the Chinese law, the offeror and recipient can be either natural person or legal person – in the case of legal person, the liabilities can be of the form of fines or imprisonment for the directly responsible personnel and/or fine for the company. The establishment of criminal charges under the Criminal Law does not necessarily take a governmental officials or employee to be involved: commercial bribery purely conducted within private sector are also criminally liable in China. However, to initiate criminal procedure against commercial bribery, thresholds are set based on the amount of the unlawful benefit involved. For example, for commercial bribery between private persons/companies, the bribe is required to be larger than RMB 60,000 yuan for prosecution, which is twice of the amount for initiating the prosecution against commercial bribery involving governmental officials or employees.
(2) & (3) - For civil and administrative liabilities, the AUCA, on one hand, confirms the right to litigate if one suffers from loss due to commercial bribery, and, on the other hand, compels the competent agency to investigate and impose administrative liabilities on the offenders. For civil litigation, common scenarios include that a company sues its competitor who bribes a vendor not to sell its product, or that sues its employee who takes kickbacks and allows its supplier to provide inferior or second-hand goods in replacement of the agreed-upon goods. The AUCA also provides the right to litigate for recovering reasonable cost, and pursuing after punitive damage not exceeding five times in the case of gross violation. For administrative punishment, the AUCA sets a fine between RMB 100,000 to 3,000,000 yuan for the offenders, and additionally the discretion of the competent authority to revoke the business license of the company in the case of gross violation. The AUCA also requires keeping a record of the companies violating the AUCA, including commercial bribery, and to disclose to the public.
In conclusion, China has been increasingly focusing on anti-corruption, and the jurisprudence is becoming even more robust. While certain important legal issues remain uncertain, such as the standard to identify and determine who is the “counterparty” in a transaction, there should be no doubt that the Chinese regulators will not be dragged down. As other major jurisdictions including the U.S. are scaling up its enforcement, with or without the involvement of Chinese enterprises, it is also believed China is starting to enhance its investigation into commercial briery in China by foreign companies.