(By You Yunting) Abstract: Although the Advertising Law stipulates that advertisements may not make excessive use of superlatives in advertising products and services, a business operator using absolutist phrasing and imagery alone is insufficient to find one guilty of unfair competition. Although it is true that many methods of advertising on the Internet are not yet clearly defined in the laws, if a company’s methods would be considered to go beyond those of a normal business practice, it can be assured that those operators may face the possibility of lawsuits and possible criminal actions.

 Recently, Tencent acquired Sohu’s Sogou Company. However, Tencent was once engaged in two lawsuits against Sohu over the pinyinspoils of the pinyin input software market (pinyin is the official Romanization of standard Chinese, and is one of the most commonly used electronic input methods for Chinese characters in the Mainland China market). Both companies won as plaintiffs and lost as defendants. This week, we plan on introducing the content of these two lawsuits, and their significance in terms of the unfair competition law. In today’s post, we will introduce the first case.

Introduction to the case:

Tencent is the developer and publisher of the “QQ Pinyin Input” software, while Sogou Technology and Sogou Information (hereinafter, “Sogou”) are respectively the developer and sole operator of the “Sogou Pinyin Input” software. In making its claims, Tencent held that Sogou had advertised Sogou Pinyin Input as the most popular, the highest rated, and the most powerful input software on both the Internet and within the display interface included as part of the Sogou Pinyin installment procedure. Furthermore, Sogou allegedly advertised that its Pinyin input software would be always free, and would never make use of plug-ins. This, according to Tencent, constituted unfair competition. At the same time, according to Tencent, Sogou utilized technological methods to prevent users from using QQ Pinyin Input software, thus Pinyin preventing QQ Pinyin Input from entering the market, thereby violating the rules of “top ranking after first installment”. Due to the aforesaid reasons, Tencent subsequently filed a lawsuit against Sogou with the court.

The Beijing No. 1 Intermediate People’s Court, upon hearing the information presented at trial, finally decided that Sogou had utilized a large number of “absolute” expressions to describe its input software as being the best one in its field, constituting false advertising to the extent that it would mislead customers, and therefore in violation of the Anti-Unfair Competition Law. In addition, the court also held that because Sogou guided its users Pinyinin deleting QQ Pinyin Input’s language bars with the purpose of preventing Pinyinusers from making use of alternative Pinyin Input Software, QQ’s concluded, that Sogou was clearly in violation of the relevant laws, and its actions constituted unfair competition. Therefore, the court ruled that Sogou should assume liability in tort for unfair competition in the market.

Lawyers’ Comments:

I. Why was Sogou found guilty for false advertising?

 Although the Advertising Law stipulates that advertisements may not use excessive superlatives, including language indicating a product in absolute terms or terms indicating a product or service are “the best”, in my opinion, the use of “absolute” terms in advertising propaganda by business operators must not, as a general rule, be considered “unfair competition”. This is primarily because the Anti-Unfair Competition Law stipulates that a business operator shall not use advertisements or other means to give false and misleading promotion on the quality of goods. From the above provision, when differentiated from the Advertising Law, the Anti-Unfair Competition Law places more focus and attention on this particular aspect of “false advertising”. Therefore, if a business operator could prove that its “absolute” expressions are in accordance with actual facts, i.e., that its products are in fact the “best” in some objectively measurable category, then its acts may not be considered to be unfair competition.

With regard to this case, the court ruled Sogou was guilty of practicing unfair competition upon Sogou’s failure to prove its absolute expressions were in accordance with the actual facts.

II. Why was Sogou found guilty of practicing unfair competition when the end-user chose the “repairing” function available in the Sogou Pinyin Input installation procedure, thus blocking QQ Pinyin Input?

 First, to be clear, as for acts related to the admittedly complicated Internet industry, in regard to unfair competition, most courts apply to the Article 2 of the Anti Unfair Competition Law, which reads, “In carrying out transactions on the market, business operators shall follow the principle of voluntariness, equality, fairness, honesty and credibility, and observe generally recognized business ethics.” Therefore, in effect, whether Sogou was guilty of unfair competition by providing the option of “repairing” Pinyin an end-users computer, thereby blocking QQ Pinyin Input from being used, shall be determined in relation to this particular principle of fairness and justifiableness.

 In this case, although the users essentially initiated Sogou’s “repairing” function, Sogou constantly implied the use of this function throughout the installation process in the hopes of inducing the end-user to make use of it. The court believed this inducement was sufficient to find Sogou liable for unfair competition. From the court’s judgment, despite no explicit laws or rules detailing Internet competition, if such methods of competition are generally considered to be beyond those used in normal practice, the business owners and operators will likely be brought to justice.

Lawyer Contacts

You Yunting：86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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