06 December 2017

Anti-bribery Management System: Exploring the Legal Application of Operator's Exemption from Commercial Bribery Liability

This article was written by Liu Ting(Partner) and Zhang Yuanhao.

After 24 years, the Law of the People's Republic of China against Unfair Competition (hereinafter referred to as “Anti-Unfair Competition Law”) was finally ushered into a new chapter. On November 4, 2017, the new Anti-Unfair Competition Law was passed by the NPC Standing Committee and released on the same day. It will be effective on January 1, 2018. Among all the highlights in the latest law, the new regulation on operators’ commercial bribery is one of the most eye-catching changes. Apart from paragraph 1 of Article 7, which limits the scope of bribery, paragraph 3 of Article 7 also includes the condition that an operator is defined as not constituting commercial bribery, that is, “The bribery committed by an employee of a business operator shall be deemed as conducted by the business operator, unless otherwise evidence given by the operator shows that such bribery is not related to seeking a business opportunity or gaining competitive advantage for the business operator.” This provides one possibility for operators to reasonably be exempted from the administrative or even criminal legal liability for commercial bribery.

Bribery acts of employees will be deemed as the acts of the business operator—causes for risks

When the operator is not a natural person, commercial bribery is actually carried out by the operator's employees. Therefore, Article 3 of the Interim Provisions of the State Administration for Industry and Commerce on Prohibition of Commercial Bribery stipulates that, “the acts of employees of a business operator conducting commercial bribery for the purpose of selling or purchasing commodities for the business operator shall be regarded as the acts of the business operator.” Given that employees’ bribery acts are linked to the bribery acts of business operators, the facts of employees’ bribery also become the legal basis for the administrative law enforcement departments to impose administrative punishment on the operators. Also, the bribery conducted by employees will bring uncertain legal risks to the operators.

Employees' bribery behavior is not related to operators' seeking of competitive advantage—establishing an anti-bribery management system is essential

This trend of law enforcement will be reversed after the release of the latest law. How should the provision that "employees’ behavior is not related to operators’ seeking of business opportunities or competitive advantage" be interpreted? Director Yang Hongcan from the Anti-Monopoly and Anti-Unfair Competition Enforcement Bureau of the SAIC said in an interview about the revised Anti-Unfair Competition Law[1] that, “Enacting special provisions on employees’ commercial bribery behavior are beneficial to regulate operators’ behavior and the law enforcement of administrative departments. ‘Providing evidence to show employees’ behavior is not related to operators’ seeking of business opportunities or competitive advantage’ means operators have established reasonable legal and compliance measures and have effectively supervised employees’ acts, and do not allow or virtually allow employee to offer a bribe”. From this, we can see the key to exempting operators’ liability from employees’ bribery is that enterprise should establish highly efficient compliance management system. If an operator can prove that it has built a well-established internal control system as well as compliance system to prevent and combat commercial bribery, it is possible for the operator to be exempted from the liability for its employees’ bribery behavior.

Establishing an effective anti-bribery management system—the elements of an effective anti-bribery management system

In fact, the introduction of operators’ exemption from commercial bribery liability also shows the consistency of our domestic legislation with relevant international legislation on anti-bribery. For example, in the case of Garth Peterson related to the US “Foreign Corrupt Practices Act (‘FCPA’)”, the reasons why Morgan Stanley is not prosecuted include that Morgan Stanley has adopted a series of internal control measures, such as its implementation of an effective compliance management system, establishment of professional compliance system and process, setting up a compliance department that independently reports to the board of directors, carrying out effective compliance training for employees, monitoring and inspecting trade behavior, and establishment of effective report channels. 

Until now, the effective compliance management system has not been explicitly defined in domestic judicial practice, and domestic enterprises are still exploring how to establish a compliance management. The international anti-bribery management system standard ISO37001:2016 may serve as a fine example and be introduced into these enterprises. As the pilot city of China's anti-bribery management system standard, Shenzhen took the lead in launching the first anti-bribery management system standard in China. Enterprises can establish an effective anti-bribery management system with reference to this standard based on their situations. 

To build a sound anti-bribery management system not only requires enterprises to be responsible for their own anti-corruption and anti-bribery system and build proper anti-bribery regulations, but also demands them to bear the responsibilities and obligations for compliance management of related parties, which include suppliers, clients and business partners. For anti-commercial bribery, the third parties, the high-risk areas, are most likely to be ignored by enterprises. Establishment of effective third party management mechanism is an indispensable part to the anti-bribery management system. Enterprises shall review the qualification of suppliers or partners, and conduct dynamic management and supervision in the process of providing products and services during the cooperation, in order to avoid the negative effects caused by the third party violations.


[1]For detailed information, please refer to http://www.saic.gov.cn/zw/zcfg/jd/201711/t20171109_270236.html.

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