Top court urges penalties with education in cases involving small companies

China's top court has reaffirmed the importance of fostering the healthy development of the private sector, calling on judges nationwide to rectify improper and illegal government actions in this regard by rule of law.

With disclosure of five notable cases on Monday, the Supreme People's Court emphasized that when imposing administrative penalties on small and medium-sized enterprises, it is more crucial to combine punishment with education, so that these businesses can continue their operation and development normally.

For example, one disclosed case involved a lubricant technology company established in Hekou district of Dongying, Shandong province, in October 2022. From December 2022 to May 2023, this small and micro enterprise claimed on its website that it was a high-tech company specializing in the research, development, production, sales and services of lubricant materials.

After receiving reports alleging that the company was engaged in false advertising, the district's market supervision administration began investigation and determined that the company was not a high-tech enterprise. Subsequently, the firm removed the online inaccurate description.

In June 2023, the administration decided to fine the company 20,000 yuan ($2,784) for violating the law. However, the enterprise neither questioned the decision nor paid the fine. Consequently, the administration turned to the local court for compulsory enforcement of the penalty.

Considering the company had promptly removed the untrue information, the court suggested the administration refrain from imposing the fine, but guide the firm to enhance legal awareness and offer stronger law education, so as to guarantee the development of small and micro enterprises. The suggestion was accepted by the administration.

"The company had been opened for less than six months and had not official commenced production from the time it was reported for false advertising to when it was fined. Additionally, its website had very few visitors," the court explained.

It said that its decision to withdraw the administrative penalty also took into account that imposing such a fine before the company had generated any actual revenue could have a significant negative impact on its future development.

It was not the first time that the country's top court has highlighted judicial support for private enterprises. Early this month, it had issued a guideline, emphasizing equal protection for various economic entities participating in market competition.