10 Typical Cases of IPR Protection —— Case Example 6

Punishing Unfair Competitions according to Law
To Promote the Establishment of an Integrity System for the FTA
——Shenzhen P Company v. Beijing Z Company for False Promotion

[Case Summary]
Shenzhen P Company and Beijing Z Company are both partners of M Winery in China, and there is a certain competitive relationship between the two parties. In August 2016, M Winery revoked the authorization of Z Company's online sales channel, and in September of the same year, P Company was authorized as the exclusive distributor of the online channel. In May 2018, P Company found that Z Company published multiple articles via its official website, WeChat public account and other public media to promote Z Company as the sole agent of M Winery China and the only exclusive partner in China. The executives of Z Company released the related news through WeChat Moments. The behavior of Z Company and its executives caused the cooperation partners, consumers and media of P Company to question whether P Company had the legal authorization of M Winery. P Company believed that the remarks of Z Company were seriously inconsistent with the facts, which constituted false propaganda, causing a negative impact to P Company's business reputation and sales, and infringement of its legal rights and interests, therefore sued to the court.
[Ruling Results]
The court held that although Z Company was exclusively authorized by M Winery in September 2014, the authorized party may terminate the authorization contract at any time as stipulated by the letter of authorization. Z Company is aware that P Company was authorized by M Winery in September 2016 to become an importer for online channel and exclusive agent for a series of products. In this case, Company Z was still using on promotional remarks on its official website and WeChat official account, such as the exclusive distributor of M Winery in China, causing damage to the reputation of Company P; the actions constitute unfair competition.The court ruled that Company P should delete the false promotion and made a statement on its official website and WeChat official account for its unfair competition for ten consecutive working days to eliminate the impact and compensate Company P for 70,000 yuan of economic losses, including reasonable expenses for defending its rights.
[Significance]
With the increase in economic and trade activities, foreign products in the Chinese market often take the form of exclusive distribution agents or multiple distributor agents. Once there are multiple distributors, competition will inevitably occur. When there is competitive relationship, how to avoid unfair competition disputes requires all parties to deal with their agency rights and boundaries in accordance with the principles of integrity and mutual assistance. If either party violates the principle of good faith and conceals the truth, exaggerating or falsely promoting during the distribution, damage could be done to the interests of the other party and constitute unfair competition. This case is a typical dispute over unfair competition. After the court found out that the defendant ’s behavior was indeed unfair competition, the ruling required it to eliminate the impact and provide explanations, which effectively protected the plaintiff ’s legitimate rights and interests while supporting the part of the losses caused by protecting the rights, safeguarding the legitimate rights and interests of the right holders and effectively improving the business environment of the FTA.