China’s Anti-Unfair Competition Law 2025: Extraterritorial Reach andExecutive Liability Transform Global Compliance Landscape

Introduction: A Watershed Moment in China’s
Regulatory Evolution

On October 15, 2025, China’s revised Anti-Unfair Competition Law (AUCL) took effect, marking the most significant overhaul of China’s market regulation framework in nearly a decade. Passed by the National People’s Congress Standing Committee on June 27, 2025, this legislative transformation represents far more than a routine update to existing commercial law. It constitutes a fundamental recalibration of how China regulates competition, enforces digital economy standards, and holds corporate executives personally accountable for misconduct. For international law firms advising clients on China market operations, the implications are profound and immediate.

The revised AUCL introduces three groundbreaking elements that collectively reshape
the compliance landscape for foreign businesses operating in or connected to China’s
market. First, it establishes explicit extraterritorial jurisdiction, enabling Chinese
regulators to pursue enforcement actions against foreign companies for conduct
occurring entirely outside China’s borders. Second, it imposes direct personal liability
on corporate executives, moving beyond traditional entity-level penalties to hold
individual decision-makers accountable. Third, it codifies comprehensive rules
governing the digital economy, addressing emerging challenges in e-commerce, data
aggregation, and platform-based business models that were inadequately covered
under the previous legal framework.

These changes arrive at a critical juncture in global economic relations, as nations
worldwide grapple with the challenges of regulating cross-border digital commerce,
protecting domestic markets from unfair practices, and asserting regulatory
sovereignty in an increasingly interconnected world. China’s approach, as embodied
in the revised AUCL, signals a decisive shift toward more assertive extraterritorial
enforcement and heightened personal accountability standards that will require
foreign businesses and their legal advisors to fundamentally reassess their compliance
strategies and risk management frameworks.

The Extraterritorial Jurisdiction Provision: China’s Long Arm Reaches Global

The most consequential development for international business lies in Article 40 of the
revised AUCL, which establishes China’s explicit claim to extraterritorial jurisdiction
over unfair competition matters. The provision states unambiguously that “an act of
unfair competition committed outside the territory of the People’s Republic of China
which disrupts the order of market competition within the territory of the People’s
Republic of China or damages the legitimate rights and interests of domestic business
operators or consumers shall be dealt with in accordance with this Law.”
This language represents a paradigm shift in China’s regulatory approach. Unlike the
previous version of the AUCL, which focused primarily on conduct occurring within

China’s territorial boundaries, the 2025 revision adopts an effects-based jurisdictional
test. Under this standard, the physical location where the alleged unfair competition
occurs becomes secondary to the question of whether the conduct produces harmful
effects within China’s market. This mirrors jurisdictional approaches adopted by other
major economies, including the European Union’s application of competition law and
the United States’ effects doctrine in antitrust enforcement, but applies them within
China’s unique legal and regulatory context.

The practical implications for foreign businesses are far-reaching and multifaceted.
Consider a multinational technology company headquartered in the United States that
operates data aggregation services using servers located in California. If this company
scrapes data from Chinese e-commerce platforms without authorization, and this data
misappropriation harms Chinese competitors or consumers, Chinese regulators can
now initiate enforcement proceedings under the AUCL despite the fact that all relevant
conduct occurred outside China. The company’s lack of physical presence in China no
longer shields it from Chinese regulatory authority, provided the effects of its actions
are felt within China’s market.

This extraterritorial reach aligns with China’s broader legal direction under several
recent legislative initiatives. The Data Security Law, which came into force in 2021,
already established extraterritorial application for data-related violations affecting
China’s national security or public interest. Similarly, the Export Control Law and the
Anti-Foreign Sanctions Law have asserted China’s authority to regulate conduct
beyond its borders when Chinese interests are implicated. The revised AUCL extends
this extraterritorial framework into the commercial competition sphere, creating a
comprehensive regulatory architecture that can reach global business activities with
China market connections.

For international law firms, this development necessitates a fundamental
reassessment of how they counsel clients on China-related compliance risks. The
traditional approach of analyzing whether a client has sufficient contacts with China to
trigger regulatory jurisdiction must now be supplemented with a careful evaluation of
whether the client’s global business activities could produce effects within China’s
market that might be characterized as unfair competition. This effects-based analysis
requires deep understanding of both China’s substantive competition law standards
and the evidentiary frameworks Chinese regulators employ to establish the requisite
market impact.

Executive Personal Liability: Accountability Reaches the C-Suite

The revised AUCL’s introduction of direct personal liability for corporate executives
represents a second major transformation with significant implications for foreign
businesses and their leadership teams. While the previous legal framework focused
primarily on imposing penalties at the entity level, the 2025 revision explicitly
authorizes regulators to pursue individual executives for their role in unfair
competition violations.

This shift toward personal accountability reflects a global trend in corporate
governance and regulatory enforcement. Jurisdictions worldwide have increasingly
recognized that entity-level penalties alone may prove insufficient to deter
misconduct, particularly when corporate structures can diffuse responsibility and
shield individual decision-makers from consequences. By imposing personal liability
on executives, China joins other major economies in holding corporate leaders directly
accountable for compliance failures within their organizations.

The personal liability provisions apply across multiple dimensions of executive
responsibility. First, executives who directly participate in or authorize unfair
competition conduct face individual penalties, including fines and potential criminal
liability in severe cases. Second, executives who fail to implement adequate
compliance systems or who negligently oversee operations that engage in unfair
competition may face liability for supervisory failures. Third, executives who attempt
to conceal or obstruct investigations into unfair competition violations face enhanced
penalties for their interference with regulatory processes.

For multinational corporations operating in or connected to China’s market, these
personal liability provisions create new imperatives for executive-level compliance
oversight. Chief Executive Officers, Chief Operating Officers, and other senior leaders
must now ensure that their organizations maintain robust compliance programs
specifically tailored to China’s unfair competition standards. This includes
implementing comprehensive due diligence processes for China market activities,
establishing clear reporting channels for potential violations, and maintaining detailed
documentation of compliance efforts that can demonstrate good faith attempts to
prevent misconduct.

The personal liability framework also has significant implications for corporate
governance structures. Boards of directors must now consider China-specific
compliance risks when evaluating executive performance and compensation.
Executives themselves must demand adequate resources and authority to implement
effective compliance programs, as personal liability exposure creates direct incentives
for proactive risk management. Legal advisors must counsel both entities and
individual executives on their respective obligations and potential exposures under
the revised AUCL.

Digital Economy Regulation: Codifying Rules for
Platform-Based Business Models

The third major innovation in the revised AUCL involves comprehensive codification of
rules governing digital economy activities. As China’s digital commerce sector has
expanded dramatically over the past decade, regulatory frameworks have struggled to
keep pace with emerging business models and competitive dynamics. The 2025
revision addresses this gap by establishing clear standards for platform operators,
data aggregators, e-commerce businesses, and other digital economy participants.

The digital economy provisions address several key areas of concern that have
emerged in China’s rapidly evolving online marketplace. First, they establish standards
for platform neutrality, requiring operators of e-commerce platforms and other digital
marketplaces to treat competing merchants fairly and avoid using their platform
control to favor affiliated businesses. Second, they regulate data-driven competitive
advantages, prohibiting companies from using improperly obtained data to gain unfair
market positions. Third, they address algorithmic discrimination, requiring platforms
to ensure that their recommendation systems and pricing algorithms do not engage in
unfair differentiation among users or merchants.

These digital economy rules reflect China’s recognition that traditional competition
law frameworks, developed primarily for brick-and-mortar commerce, require
adaptation for platform-based business models. Digital platforms often exhibit
network effects, multi-sided market dynamics, and data-driven competitive
advantages that differ fundamentally from traditional market structures. The revised
AUCL’s digital economy provisions attempt to address these unique characteristics
while maintaining competitive market conditions.

For foreign technology companies and digital service providers, these provisions
create both compliance obligations and strategic considerations. Companies must
audit their platform operations, data practices, and algorithmic systems to ensure
compliance with the new standards. They must implement technical and
organizational measures to prevent prohibited conduct, such as discriminatory
treatment of platform users or improper data utilization. They must also consider how
these requirements interact with their global compliance frameworks, as different
jurisdictions may impose varying or conflicting obligations on digital economy
activities.

The digital economy provisions also strengthen intellectual property protection within
the unfair competition framework. The revised AUCL explicitly prohibits various forms
of IP-related unfair competition, including unauthorized use of trade secrets, improper
appropriation of commercial information, and exploitation of others’ innovative
efforts. These provisions complement China’s standalone IP protection laws and
provide additional enforcement mechanisms for rights holders seeking to combat
unfair competitive practices in digital markets.

Strategic Implications for International Law Firms and Their Clients

The revised AUCL’s transformative provisions create multiple strategic imperatives for
international law firms advising clients on China market operations. These
implications span compliance program design, risk assessment methodologies,
transaction structuring, and dispute resolution strategies.

Compliance Program Enhancement
Law firms must guide clients in developing or enhancing compliance programs that
address the revised AUCL’s expanded scope and heightened accountability standards.
This begins with comprehensive risk assessments that evaluate not only China-based
operations but also global activities that could produce effects within China’s market.
Firms should help clients map their business processes, identify potential unfair
competition risks, and implement controls designed to prevent violations.
Effective compliance programs under the revised AUCL must incorporate several key
elements. First, they require clear policies and procedures that define prohibited conduct and establish standards for competitive activities. Second, they demand robust training programs that educate employees and executives about their obligations under China’s unfair competition standards. Third, they necessitate monitoring and auditing mechanisms that can detect potential violations before they
escalate into enforcement actions. Fourth, they require incident response protocols
that enable swift and appropriate reactions to compliance concerns.

Executive Risk Management
The personal liability provisions create new dimensions of risk that require specialized
attention. Law firms should counsel executives on their individual exposure and help
them implement protective measures. This includes ensuring that executives receive
adequate compliance training, that they have access to legal counsel when making
decisions with potential AUCL implications, and that they maintain appropriate
documentation of their compliance efforts.
Firms should also advise clients on insurance and indemnification arrangements that
can help manage executive liability risks. Directors and officers liability insurance
policies may require review and potential enhancement to ensure adequate coverage
for China-specific exposures. Corporate indemnification provisions should be
evaluated to confirm they provide appropriate protection for executives facing
personal liability under the revised AUCL.

Cross-Border Transaction Considerations
The extraterritorial jurisdiction provisions have significant implications for cross-
border transactions involving China market connections. Law firms conducting due diligence for mergers, acquisitions, joint ventures, or other transactions must now
evaluate target companies’ global activities for potential AUCL exposure. This includes
assessing whether the target’s business practices could be characterized as unfair
competition affecting China’s market, even if those practices occur entirely outside
China. Transaction documentation should address AUCL compliance through appropriate
representations, warranties, and indemnification provisions. Buyers should seek
protection against undisclosed AUCL violations, while sellers should carefully scope
their compliance representations to reflect the law’s expanded extraterritorial reach. Post-closing integration plans should incorporate AUCL compliance harmonization to
ensure that combined entities maintain adequate controls.

Dispute Resolution and Enforcement Defense
When clients face AUCL enforcement actions or private litigation, law firms must
deploy defense strategies that account for the law’s new provisions. This includes
challenging jurisdictional assertions when appropriate, particularly in cases where the
alleged effects within China’s market are attenuated or speculative. It requires
developing evidentiary records that demonstrate compliance efforts and good faith
business practices. It demands strategic engagement with Chinese regulators to seek
favorable resolution of enforcement matters.

Firms should also counsel clients on the interplay between AUCL proceedings and
parallel matters in other jurisdictions. When conduct triggers regulatory scrutiny in
multiple countries, coordinated defense strategies become essential. Firms must
navigate potential conflicts between different jurisdictions’ legal requirements while
maintaining consistent positions across enforcement proceedings.

Global Context: China’s Position in the International Regulatory Landscape

The revised AUCL’s extraterritorial provisions and enhanced enforcement mechanisms
must be understood within the broader context of global regulatory competition and
jurisdictional assertions. Major economies worldwide have increasingly adopted
expansive views of their regulatory authority, particularly in areas involving digital
commerce, data flows, and cross-border business activities. China’s approach, as
embodied in the revised AUCL, represents both convergence with and divergence from
international regulatory trends.

The extraterritorial jurisdiction provision aligns China with other major economies that
have adopted effects-based jurisdictional tests. The European Union’s application of
competition law to conduct outside Europe that produces effects within the EU market
provides a notable parallel. Similarly, the United States has long applied its antitrust
laws extraterritorially when foreign conduct has direct, substantial, and reasonably
foreseeable effects on US commerce. China’s adoption of similar principles reflects a
global trend toward assertive regulatory jurisdiction in an interconnected economy.

However, China’s approach also exhibits distinctive characteristics that reflect its
unique legal system and policy priorities. The integration of unfair competition
enforcement with broader data security, export control, and anti-sanctions
frameworks creates a comprehensive regulatory architecture that differs from
approaches in other jurisdictions. The emphasis on personal executive liability, while
not unique to China, receives particular emphasis in the revised AUCL’s enforcement
framework. The specific attention to digital economy regulation reflects China’s position as home to some of the world’s largest technology platforms and e-commerce ecosystems.

For multinational businesses and their legal advisors, these dynamics create complex
compliance challenges. Companies must navigate potentially conflicting requirements
across multiple jurisdictions, each asserting authority over aspects of global business
operations. Law firms must develop sophisticated strategies that enable clients to
comply with China’s requirements while maintaining compliance with obligations in
other markets. This often requires careful analysis of where conflicts exist, how they
can be managed, and when difficult choices between competing legal requirements
become necessary.

Conclusion: Preparing for a New Era of China Market Compliance

The revised Anti-Unfair Competition Law represents a watershed moment in China’s
regulatory evolution and a critical inflection point for foreign businesses operating in
or connected to China’s market. The law’s extraterritorial reach, executive liability
provisions, and digital economy regulations collectively establish a new compliance
paradigm that demands immediate attention and strategic response from
international law firms and their clients.

Success in this new environment requires more than reactive compliance. It demands
proactive engagement with China’s regulatory framework, sophisticated risk
assessment capabilities, and integrated compliance strategies that span global
operations. Law firms must evolve their advisory services to address these expanded
requirements, helping clients navigate the complexities of extraterritorial jurisdiction,
manage executive liability risks, and maintain competitive operations within China’s
digital economy regulations.

The revised AUCL also underscores the importance of ongoing regulatory monitoring
and adaptive compliance programs. As Chinese regulators implement the new
provisions and develop enforcement precedents, best practices will continue to
evolve. Law firms and their clients must maintain vigilance, tracking regulatory
developments and adjusting compliance strategies accordingly.

Ultimately, the revised AUCL reflects China’s determination to assert regulatory
authority over market conduct affecting its economy, regardless of where that conduct
occurs. For international businesses and their legal advisors, this reality creates both
challenges and opportunities. Those who successfully navigate the new compliance
landscape will be well-positioned to participate in China’s dynamic market while
managing regulatory risks effectively. Those who fail to adapt may find themselves
facing enforcement actions that could have been prevented through proactive
compliance efforts.

The message is clear: China’s regulatory reach has expanded, accountability standards
have intensified, and the compliance imperative has never been more urgent.
International law firms must rise to meet this challenge, providing the sophisticated
guidance their clients need to succeed in this transformed regulatory environment.

References

[1] Harris Sliwoski LLP. (2025, October 6). China’s 2025 Competition Law Creates

Executive Liability and Extraterritorial Reach. China Law Blog. https://harrissliwoski.com/chinalawblog/chinas-2025-competition-law-creates-executive-liability-
and-extraterritorial-reach/

[2] Hogan Lovells. (2025, October 15). China’s revised AUCL takes effect: Advancing IP
protection and fair competition in the digital economy. https://www.hoganlovells.com/en/publications/chinas-revised-aucl-takes-effect-advancing-ip-protection-and-fair-competition-in-the-digital-economy