Following the high profile and public dispute between Tencent and Qihu over the use of their software products last year, the Ministry of Industry and Information Technology (“MIIT”) issued the draft measures (“Draft Measures”) regulating unfair competition activities among Internet information service providers (“Providers”) for public comment.

Under the draft Measures, MIIT has proposed that Providers are prohibited from engaging in unfair competition activities, such as offering products that are incompatible with competitors' products without reasonable grounds or authority, or disturbing the operation, or blocking the information, of competitors' products or services. If a Provider queries the security or the quality of the competitor’s service, it must test such quality through a reputable third-party organization.

Providers are also prohibited from infringing on user rights in certain ways, such as restricting users' ability to choose other Providers' products or services, arbitrarily installing, operating, upgrading, or uninstalling software on users’ terminals without users’ consent and etc. Further, Providers are prohibited from collecting or storing users' personal data without explicit legal basis or users’ consent. If personal data is required for identification or needed for the service to operate, users must be clearly informed on the purposes for which the data will be used. Any unauthorized disclosure of user personal data is prohibited.

Providers who violate the Draft Measures will be subject to penalties of up to RMB1 million and, in serious cases, its business operations may be suspended.

The Draft Measures reiterate the mechanisms currently available for settling disputes in the Internet information service sector. The Draft Measures reemphasized the role of MIIT in its supervision and guidance over the dispute settlement.

The Draft Measures attempt to provide guidance on settling disputes among competing Providers but raise certain other uncertainties. For example, under the existing legal framework, the State Administration of Industry and Commerce (“SAIC”) is the competent authority governing anti-unfair competition sector. The Draft Measures will lead to an overlapped authority by both MIIT and SAIC in the Internet information service sector. Further, the Draft Measures use many technical terms which are not specifically defined. These terms such as “commonly-used uninstall method” and “incompatibility” are open to debate.