The punitive damages system serves three primary functions: providing relief, imposing punishment, and acting as a deterrent. It is a crucial mechanism for promoting fair market competition and plays a significant role in maintaining competitive order. Currently, in the realm of regulating unfair competition, there are issues such as the unreasonable scope of application, unclear conditions for application, and inappropriate determination of punitive damages amounts. To address these issues, the application of the punitive damages system should be further refined. This includes rationalizing the scope of application, clarifying the conditions for application, and reasonably setting the amounts of punitive damages. These improvements could help promote fair competition and advance the economic development of our country.