The proposed legislation remains staying at high level rules, without imposing real enforcement effects on the platforms such as Alibaba. Nonetheless, there are some encouraging articles entities may leverage on, such as those concerning IPR protection, which, though, are not strong enough in our opinion. Running on-line stores, entities may also need to pay attention to the articles providing personal information protection obligations for Platforms.
The draft E-Commerce Law (the “Draft”) is open for public comments till January 26, 2017. The law aims to regulate the e-commerce market, and protect the legitimate rights and benefits of various parties in the e-commerce transactions.
The Draft is not changed much from the version submitted to the NPC for review. One notable difference is that financial products and services as well as audio-video programs and internet publishing are excluded from the law.
The key highlights of the Draft are summarized as follows:
The Scope and Definition
E-commerce is widely defined as “business activities involving products or services transactions through information networks such as the Internet”, which means e-commerce transactions taking place through mobile Internet are included as well. Additionally, products refer to both tangible and intangible products. The law applies to e-commerce activities within the territory of China and cross-border as well.
E-Commerce Operators and Third-Party Platform
The Draft expressly states the distinction between E-Commerce Vendor (“Vendor”) and E-Commerce Third-Party Platform (“Platform”) and stipulates their respective obligations.
For vendors, the Draft Law clearly provides obligations they should undertake. For example they must show their business licenses in visible places on their homepages. They are not allowed to charge consumers an express logistics service fee higher than what is offered by the professional express logistics service providers, or to restrict consumers from choosing their preferred express logistics service providers.
For Platforms, the Draft expressly mandates that Platforms should be obliged to review the Vendors on their platforms, and provide them with stable and safe services. Platforms are also required to formulate open and transparent transaction rules, make public important information, and record transaction logs.
E-commerce Transaction Safeguard
- Intellectual property rights protection: Not only Vendors but also Platforms are obliged to protect intellectual property rights. Platforms must take necessary measures in accordance with laws and regulations upon intellectual property rights holder’s notice. These positive elements are then weakened by such provisions that rights holder must shoulder civil liabilities of wrongful accusations IP infringement. And once the accused Vendor submits a statement to the platform guaranteeing that no infringement has taken place, the platform should terminate the measures in a timely manner and inform the rights holder so it can seek remedies through administrative or judicial ways. Although the most severe penalty for Platforms fail to fulfill their IPR protection obligations could be the suspension of business license, the penalty is generally not sufficiently biting as there are no corresponding enforcement measures provided in the Draft.
- Personal information protection: The Draft provides that e-commerce business entities can collect personal information of the consumers only against lawful, justifiable and necessary need, and with the consent of the consumers. Platforms must set up a mechanism to guard against leakage, loss, damage or destruction of consumers’ personal information.
- Protection of fair competition: Acts of unfair competition are expressly prohibited by the Draft, including domain name abuse, fake and misleading links, attacks or invasions to other company’s network, unauthorized use of electronic signs to mislead people, and inappropriate restricting transactions.
- Prohibition of illegal credit rating: the Draft clearly prohibits acts disrupting e-commerce credit rating including enhancing one’s reputations through fictitious transaction, deleting adverse evaluations, making compensations or other conditions in exchange for favorable evaluations, forcing the other party to the transaction to make, modify, and delete evaluations against its wills, and publishing untruthful credit rating information.
- Consumer protection: the Draft emphasizes the protection of consumer rights by such requirements as authenticity of product information, product and service quality guarantee, transaction rules, standard rules, consumer rights protection deposits, as well as online dispute settlement mechanism.
The Draft encourages cross-border e-commerce by claiming to set up a supervising and regulatory mechanism adaptable to e-commerce with electronic customs clearance, duty collection, commodity inspection and quarantine.