China: China’s first e-commerce law will take effect on January 1, 2019
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In recent years, e-commerce has exploded in China. And with the upcoming Singles Day, promoted annually by Chinese e-commerce giant Alibaba and taking place on November 11, we’re once again witnessing the power of e-commerce spending. The event, dubbed “anti-Valentine’s Day,” in which Chinese singles go on a global online shopping spree, generated more than US$25 billion last year (168.2 billion yuan) of online sales worldwide.
In response to the rapid growth of e-commerce, the People’s First Standing Order enacted the Electronic Commerce Law of the People’s Republic of China (hereinafter referred to as “the Law”) on August 31, 2018. The law, effective from January 1, 2019, is the first to regulate e-commerce businesses, ensure consumer protection and foster the development of the e-commerce industry in a sustainable and healthy way.
Electronic commerce is defined by law as all commercial activities carried out on an information network to sell goods or provide services within the territory of the People’s Republic of China. However, items such as financial products or services, or services relating to news reports, audio or video programs, publications and cultural products provided through information networks, are not subject to the law.
Scope of e-commerce
The law classifies three types of commercial operators falling within the scope of electronic commerce. They include:
- E-commerce operators E-commerce operators are either natural persons, incorporated entities or incorporated associations carrying out commercial activities through information networks such as the Internet to sell goods or offer services on a website developed by the e-commerce operator or through other networks, such as sellers supplying goods through the Wechat platform, a versatile messaging, social media and mobile payment application.
- Platform operators Platform operators are either legal persons or unincorporated associations providing online platforms for digital commerce, business matchmaking, information dissemination and other services between two or parties for facilitate transactions. An example is a shopping platform with third-party companies providing goods or services.
- E-commerce operators on platforms Sellers are third-party companies that sell goods or services on e-commerce platforms
Company registration and obligations
E-commerce operators must operate as a legal business entity and comply with relevant laws and administrative regulations required to conduct business in China. In practice, all e-commerce operators providing goods or services must be registered as a business in accordance with applicable laws, obtain a business license – except where no registration is required under applicable laws and administrative regulations – and obtain the relevant administrative licenses and fulfill tax obligations.
Increased responsibilities for e-commerce platforms
E-commerce platforms are responsible for providing open, fair and just services to third-party businesses on the platform. Platforms must provide transparent Service Agreements and Trading Rules and solicit comments in material positions on any proposed changes to the Service Agreement and Trading Rules, at least seven days prior to the implementation of the change.
In addition, the verification and identification of third-party companies operating on the platform are the responsibility of the e-commerce platform. The commercial and tax identification of third-party companies is subject to the market regulation department. Any unregistered business operating on the platform will be notified by e-commerce operators to register accordingly in accordance with applicable provisions, laws and regulations. Business and tax registration violations should be reported to the relevant government department through the platform.
Consumer rights and protection
Consumers are entitled to a The right to know and right to choose. Product or service information must be disclosed in a complete, accurate and timely manner. And false or misleading posts, such as fictitious offers and fabricated user reviews, are prohibited. Similarly, comments on services or goods provided by an e-commerce operator on e-commerce platforms cannot be deleted.
Increased protection of intellectual property
Intellectual property infringement on an e-commerce platform is handled by the platform operator. A notice of intellectual property infringement must be sent to the platform and it is the responsibility of the platform to forward it to the e-commerce operator. If the platform does not transmit this notification, the platform is jointly and severally liable for the damages.
In the event of a violation, the e-commerce platform is required to take necessary action, such as removing or blocking relevant information, disabling relevant links, and terminating transactions or services. If the platform does not implement these measures, it will be held jointly and severally liable with the infringer.
The development of the e-commerce industry entering the next era will be promoted in a safer and healthier way; the law paves the way for increased consumer protection in e-commerce sales. With the introduction of business registration for all e-commerce sellers and stricter responsibilities for e-commerce platforms, the law is tackling intellectual property infringement and illegal business operations. E-commerce businesses and platform operators must be prepared and fully compliant with the law from January 1, 2019. In particular, business registration and tax obligations must be concluded before the effective date of the January 1, 2019.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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