Top court emphasizes balancing education, penalties for businesses

China's top court has reiterated the importance of addressing improper or illegal actions taken by governments against businesses through litigation or mediation as part of a wider judicial strategy to promote the healthy development of small and medium-sized enterprises.

The Supreme People's Court on Monday released five cases highlighting the approach, underscoring the need to balance punishment with education when imposing administrative penalties on SMEs. The aim, the court said, is to allow such businesses to continue operations and growth without undue hindrance.

One case involved a lubricant technology company established in October 2022 in Hekou district of Dongying, Shandong province. Between December 2022 and May 2023, the company described itself on its website as a "high-tech company specializing in the research, development, production, sales and services of lubricant materials".

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After reports of false advertising, the district's market supervision administration investigated and found the company was not a high-tech enterprise. The company later removed the misleading information from its site.

In June 2023, the administration fined the firm 20,000 yuan ($2,786) for violating the Anti-Unfair Competition Law. The company did not contest the penalty or pay the fine, prompting the administration to seek enforcement through the local court.

Acknowledging the company's swift correction, the court advised the administration to forgo the fine and instead focus on educating the business about legal compliance. The administration accepted the recommendation, which the court said was aimed at supporting the growth of SMEs.

"The company had been operational for less than six months and had not commenced formal production during the period in question. Moreover, its website had minimal traffic," the court said.

"Withdrawing the administrative penalty was also influenced by the potential negative impact of a fine on a company that had yet to generate revenue," it added.

It was not the first time the top court highlighted protections for private enterprises. Earlier this month, it disclosed 12 cases involving the private sector and called on courts nationwide to optimize the rule-of-law environment to advance the high-quality growth of relevant companies.

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The court urged judges to focus more on protecting innovators in science and technology, while also providing stronger judicial support for companies expanding globally.

In a 25-article guideline issued in August, the top court directed courts at all levels to give equal protection to all economic entities engaged in market competition, emphasizing the judiciary's commitment to rigorously enforcing the Private Sector Promotion Law.

Effective since May 20, it is the country's first fundamental law in this area. It marks a milestone in supporting the development of the private economy and boosting entrepreneurs' confidence.

Contact the writer at caoyin@chinadaily.com.cn