Why Ctrip’s Opponent Failed in Charging Its Advertisement’s Unfair Competition?

u=615186427,68769916&fm=21&gp=0 (1)Abstract

(By Albert Chen) For the company operation in China, whether its slogan would constitute the unfair competition, it shall first judge whether the parties involved are conducting the same or similar industries. After that, it shall verify whether the defendant has conducted the accused propaganda. The last and also is the most important, it shall confirm whether the prohibitive words or phrases have been adopted in the slogan, or whether its description has appeared to be exaggerated or not the truth, and the fit with the fact shall also be judged.

Case Summary

Beijing Golden Holiday Co., Ltd. (the “BGH”) is the company focusing on the online travelling consultation. During the business running, the company found that Ctrip Computer Technology (Shanghai) Co., Ltd., Ctrip Computer Technology (Shanghai) Co., Ltd Beijing Branch and Shanghai Ctrip Business Co., Ltd (herein after all called as “Ctrip”, NASDAQ: CTRP) have used the words like “biggest”, “best” and “leading” to describe themselves, and that has damaged the lawful interests of BGH as well as the order in the market, which could be taken as the unfair competition. Therefore, BGH filed a lawsuit against Ctrip in the court.

As provided in the Unfair Competition Law of China, no operators in China shall be against the voluntariness, equality, fairness, honesty and credibility, and the regulation in the law, to damage the interests of other operators. Considering this, the hearing court ruled as the follows:

After the first instance, the hearing court first confirmed both BGH and Ctrip have involved in the same business, and Ctrip has conducted the propaganda as accused by the plaintiff. But as to the “false” of the propaganda, the court judged that:

1) The slogan of the defendant “Ctrip travelling website is the leading one in China hotel reservation…”, does not appear to be “absolute”, and on the other hand has not violated the law.;

2) The slogan of the defendant “Ctrip…has been one of the most reputed travelling brands in China” does on contain any offence or exclusion against the opponent.;

3) The accused slogan “Ctrip has won the best special service award in China” is the description of the fact, and is not the evaluation by the defendant for itself.

Basing on the above judgment, the first instance court decided Ctrip shall not take the liability of the unfair competition. BGH appealed to the higher court with the dissatisfaction with the judgment. The second instance court confirmed the facts investigated in the first instance, at the same time, the court also confirmed Ctrip has accumulated certain social reputation after years of operation. Basing on these, the second instance court sustained the original decision, and refused all the appeal claim of BGH.

Lawyer Comment

The opinions of the court in the case is actually the process to decide the unfair competition resulted by the false propaganda. The author would like to conclude it as the follows:

1) To decide whether the parties involved are acting the same or similar business

For the judgment over the unfair competition coming from the false propaganda, it shall first judge whether the parties involved are acting the same or similar business, and that is also what has been defined on the unfair competition in Article 2 of the Anti Unfair Competition Law. On the other hand, we could also find the judicial practice that the operator involved in the unfair competition shall be seen acting the same or similar business. For this reason, both courts in the case first confirmed BGH and Ctrip has involved in the same industry.

2) To decide whether the defendant has conducted the accused propaganda.

3) To decide whether the defendant has adopted the absolute, exclusive or false description in its propaganda, and whether that description is conforming to the facts

In what situation would the company slogan for its product be deemed the unfair competition? The answer from the Unfair Competition Law is:

“An operator may not use advertisements or other means to give false, misleading publicity as to the quality, composition, performance, use, manufacturer, useful life, origin, etc. , of the goods.”

With that regulation, the false propaganda shall first violate the truth, and that false propaganda shall also lead to the misunderstanding of the public. According to the Interpretation on Several Issues concerning the Law Application of in Hearing the Unfair Competition Civil Cases by the Supreme People’s Court (the “Interpretation”)’s Article 8:

“For the propaganda over the product in apparently exaggerated way, but which is not adequate to mislead the public, shall not be regarded as the misleading false propaganda.”

For what is the misleading, the law has not given us any specific regulation. But currently we could find the principle regulation in the Interpretation:

“The people’s court shall judge the misleading false propaganda basing on the daily life experience, the general attention of the public, the misleading facts and the actual situation of the publicized the facts”.

In the case, Ctrip’s slogan does no appear to be absolute, exclusive or any description against the facts. On the other hand, Ctrip has accumulated much social reputation and influence through years of operation. So the author agrees with the court’s decision that Ctrip shall not take any liability.

But it is noted that, in the Advertisement Law, we could see the article that no “such words as the ‘state-level’ the ‘highest-level’ or the ‘best’” shall be used in the ads. Considering this, despite Ctrip could be exempted from the unfair competition liability, as regulated by the Advertisement Law, its highest level slogan could also face the administrative punishment from the authority.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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