Wei Huang, managing partner, and Kexin Chen, associate, at Beijing Tian Yuan Law Firm provide a comprehensive interpretation of a core provision of China’s revised Anti-Unfair Competition Law and its impact on enterprises of all sizes.

 

• A new statutory clause has been adopted which prohibits abuse of advantageous position
• The clause is broadly drafted and emphasizes the dependence of one party on the other
• The drafting of the clause leads to two potential interpretations, each with a very different impact on large enterprises and contractual liability
• Further guidance from the authorities and practical application of the new clause will be essential in order to establish the new position

 

On June 27, 2025, China’s revised Anti-Unfair Competition Law (the “AUCL”) was formally promulgated. Following extensive deliberation and substantive revisions, Article 15, the abuse of advantageous position clause, has been adopted, attracting widespread attention.

Article 15 provides: “Large-scale enterprises and other business operators shall not abuse their advantageous position based on their capital, technology, distributing channels, industry influence, etc., forcing small and medium-sized enterprises to accept unreasonable terms on periods, methods, conditions of payments, or liability for breach of contracts, to delay payments on goods, projects and services.”

How the abuse of advantageous position clause (the “Anti-Abuse Clause”) will be applied in administrative enforcement and civil litigation/arbitration has been attracted wide discussion. In the following section, we will provide an interpretation of this core provision and offer our professional insights.

 

I． Legislative evolution of the “Anti-Abuse Clause”

The drafting history of Article 15 of the AUCL reveals a deliberate three-stage refinement:

• Initial framework: Modeled on the regulatory framework of abuse of dominance regime in the Anti-Monopoly Law (the “AML”), adopting the terminology “abuse of relatively advantageous position”;
• Scope narrowing: Subsequently focused on regulating large enterprises imposing unreasonable terms or exclusive agreements on small and medium-sized enterprises (the “SMEs”);
• Final focus: concentrated the prohibition on core abusive conduct: imposing unreasonable terms and delaying payments.

This progression aligns with the stated legislative purpose articulated by Luo Wen, head of the State Administration for Market Regulation (the “SAMR”): “to safeguard the development space for SMEs” in China’s evolving market ecosystem.

 

II． Analysis of the Anti-Abuse Clause

1. The determination of “advantageous position”

The Anti-Abuse Clause establishes a broad definition of “advantageous position”, expressly enumerating sources of leverage including capital, technology, transaction channels, and industry influence, similar to the elements of “abuse of dominant position” under the AML.

However, unlike the determination of dominant position, which basically involves on clear market share thresholds, the assessment of advantageous position emphasizes the dependence of one party on the other. In a scenario where such dependence exists, the stronger party may exploit this dynamic to impose a variety of unreasonable terms, which curtail the weaker party's freedom in negotiation and the fairness of the transaction.

Frequently, the stronger party may not meet the stringent criteria of “dominant market position”, which results in the AML’s failure to provide effective regulation. Given this regulatory gap, the AUCL steps in and offers protection in these relationships with asymmetrical bargaining power.

Based on the analysis above, we project that the determination of an advantageous position will hinge critically on one party’s dependence on the other. Unequal power dynamics, as evidenced by non-negotiable “take it or leave it” offers, may serve as evidence of one party's “advantageous position”.

 

2. The standards of large, small and medium-sized enterprises

Notably, the Anti-Abuse Clause further narrows its applicable scope to “large enterprises” and “SMEs”, while retaining flexibility in defining the specific thresholds for classifying enterprise sizes.

To further clarify the threshold, the Provisions on the Classification Standards for Small and Medium-Sized Enterprises (the “Standards”), issued by the Ministry of Industry and Information Technology in 2011, can serve as a reference. Tailored to different industries, the Standards identified SMEs based on multiple benchmarks including the number of employees, earnings, and total assets.

However, given the early promulgation of the Standards, their provisions may not fully align with current market realities. In practice, the benchmarks and indicators may serve as reference for substantial assessments. Authorities are likely to conduct case-specific determination given the distinct industry dynamics. Official interpretations or guidance providing further clarification and explanation on this issue will be welcomed.

 

3. The legal requirements to constitute “abuse of advantageous position”

The Anti-Abuse Clause delineates two behavioral conditions for abusing advantageous position: forcing SMEs to accept unreasonable trading conditions and delaying payment.

The structure leads to two divergent interpretations, with significant implications for regulatory scope and enforcement.

 

• The first interpretation: parallel standalone conduct

Under this view, “forcing unreasonable conditions” and “delaying payment” are treated as two independent, parallel forms of abusive conduct. Either condition, on its own, is sufficient to constitute an abuse of advantageous conduct.

The interpretation expands the regulatory scope to cover more standalone claims based on “unreasonable terms” (even in the absence of delayed payments), thereby broadening the protections for SMEs. However, a potential drawback is the risk of duplicative liability for delayed payments. Such conduct has already been subject to the parties' agreement and contract law—typically, for breaching payment obligations. Now, the delinquent party may incur additional liability under the AUCL, placing a heavier burden on large enterprises.

 

• The second interpretation: Cumulative conditions

The alternative interpretation treats “delaying payment” as a specific manifestation of the harmful effects resulting from “unreasonable conditions.” Under this framework, both conditions must be satisfied to constitute the abuse of advantageous position.

This approach addresses a gap under contract law, where SMEs often struggle to obtain effective relief for unreasonable conditions that indirectly lead to delayed payments. By linking the two, the provision would provide a targeted remedy for such scenarios. Conduct involving unreasonable trading conditions but without delayed payments, would fall outside the scope of regulation.

Given the possible ambiguity in the provision, we anticipate further interpretation and enforcement practices to clarify its scope and application criteria. 

 

III． The application of the Anti-Abuse Clause

1. Administration

Unlike other provisions of the AUCL, which may be enforced by competent authorities at or above the county level, Article 31 of the AUCL explicitly designates authorities "at or above the provincial level" as the competent bodies for enforcing the Anti-Abuse Clause.

By confining the enforcing authority to provincial-level and higher bodies, this reduces the risk of inconsistent interpretations and discretionary practices that might arise if enforcement were decentralized to lower-level authorities. This, in turn, enhances the uniformity of discretionary standards and upholds the principle of restrained law enforcement, preventing over-enforcement or arbitrary application.

Additionally, the provision incorporates a rectification mechanism, allowing enterprises that abuse the advantageous position to correct their actions. Fines are imposed only when enterprises “fail to rectify the violation within a prescribed time limit”. The opportunity to rectify would minimize, to the greatest extent feasible, unnecessary disruptions to business operations.

 

2. Civil litigation

With the Anti-Abuse Clause coming into force, SMEs gain the right to initiate civil litigation against the alleged abuse of advantageous position. Given the similarities between this clause and the “abuse of dominant market position” provisions under the AML, several critical considerations arise in the context of such litigation:

• Arbitration jurisdiction

A key preliminary issue is whether arbitration clauses in existing agreements between the parties can govern disputes arising from alleged abuse of advantageous position. In antitrust litigation involving abuse of dominant market position, the courts have excluded arbitration jurisdiction, emphasizing the public interest nature of antitrust laws, which aim to protect market competition as a whole (see cases including (2023) Zui Gao Fa Zhi Min Xia Zhong No.497, (2023) Zui Gao Fa Zhi Min Xia Zhong No.133, and Zui Gao Fa Zhi Min Zhong No.748).

However, in one trade secret dispute, another type of unfair competition case, the court held that when the alleged unfair competition behavior is intricately intertwined with contract performance, the dispute falls within the scope of the agreement’s arbitration clause ((2021) Zui Gao Fa Zhi Min Zhong No. 1934). Applying this logic to abuse of advantageous position cases, the focus on the dependence relationship between the parties suggests that such disputes primarily involve individual rights and obligations. As a result, the courts are likely to uphold arbitration clauses in relevant agreements, requiring parties to resolve such disputes through arbitration rather than litigation.

Given the similarities between abuse of advantageous position and abuse of dominant position, SMEs may invoke the rationale underpinning antitrust cases by highlighting the detrimental impact of such abusive conduct on consumer welfare and public interests, so as to support the court’s jurisdiction.

 

• Hierarchical jurisdiction

In terms of hierarchical jurisdiction, Article 3 of the Several Provisions of the Supreme People's Court on Jurisdiction over Intellectual Property-related Civil and Administrative Cases of First Instance, clarifies that non-technical intellectual property cases—including those involving abuse of advantageous position—fall under the jurisdiction of lower people’s courts designated by the Supreme People’s Court.

Therefore, in contrast to the administrative framework, which is confined to provincial-level and higher authorities, SMEs can initiate proceedings regarding the abuse of advantageous position directly in the first-instance courts.

 

• Substantive issues: Validity of agreements with unreasonable conditions

In addressing the substantive issues of the case, the central question revolves around the validity of an agreement containing unreasonable conditions. Article 153 of the Civil Code stipulates that contracts contravening mandatory provisions of laws and administrative regulations are void. Its corresponding interpretation clarifies that, if the legislative intent behind these mandatory provisions can be fulfilled solely through administrative or criminal sanctions, the contract's validity may be upheld (see Article 16 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Principles of Contract Part of the Civil Code of the People's Republic of China, Fa Shi [2023] No. 13).

Contracts with unreasonable conditions that amount to an abuse of advantageous position, may potentially be deemed to be invalid, due to their violation of the AUCL. Additionally, the Anti-Abuse Clause may be unlikely to fall within the exceptions stipulated in the corresponding interpretation above. This is because the purpose of the Anti-Abuse Clause, namely protecting SMEs’ developing space, can only be realized through substantially terminating the unreasonable conditions and making payments, rather than through administrative liability (fining alone).

Based on the foregoing analysis, it seems to be the position that contracts in violation of the abuse of advantageous position may possibly be regarded as invalid pursuant to Article 153 of the Civil Code.