Platforms should also consider experimenting with new ways of resolving disputes that they regard as too difficult, for example, through accelerated arbitration and the use of China’s new internet courts. E-commerce operators shall not deceive or mislead consumers through false or misleading commercial promotion by means of fictitious sale, making up Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn. Most major platforms in China are yet to implement Article 28. And while it may be argued that the most deeply affected are small and medium-sized enterprises, larger brand names also lack the resources to pursue IP violations on a scale that can keep pace with the challenges that they face. One important aspect of the E-commerce Law is obviously to better regulate the mar­ket and protect consumers. ​China's new e-commerce law: A step in the right direction. ​China's new and wide-reaching e-commerce law has come into effect. The provision in the E-commerce Law that provides the clearest clues regarding coverage of social media is Article 9 which defines ‘e-commerce platform operator’ to cover entities that “provide a virtual place of business, transaction matching, information release and other services to parties of e-commerce transactions to enable them to carry out independent transaction activities”. This includes more foreign participation which will both expand choice to Chinese consumers and work to address complaints that China has been too soft on IP protection. He is also a Uniform Domain-Name Dispute-Resolution Policy arbitrator. The report concludes that infringements will increase by 70% in the next five years, perhaps taking the current global level to in excess of US$1.5 billion. Article 2 This Law applies to the e-commerce activities within the mainland territory of the People's Republic of China. Articles 74 to 88 of the E-commerce Law set out the penalties – monetary and otherwise – that may be imposed in case of non-compliance. Instead, Article 10 simply requires that platforms forward any identifying information that they receive to the local market supervision bureaux and to remind vendors of their obligations to undergo company registration locally. Mr Simone speaks Mandarin Chinese and Italian. Legitimate product manufacturers and designers will also be encouraged to join China's online environment, knowing that they will be protected against the counterfeiting of their designs and theft of intellectual property. The Legislature passed the E-Commerce Law, which is due to come into effect from Sept 1st next year. In order for all the new law's goals to be achieved, all stakeholders will have to lift their game. E.g. The ban of fake reviews includes not only those reviews written by hired agents, but also positive reviews written by customers in exchange for monetary rewards. One important feature of the new law is the requirement that online businesses must register their business and acquire all necessary licenses regulating particular activities, such as sale of therapeutic drugs. During the consultation phase for the new law, industry groups raised a number of concerns over Article 43, including – but not limited to – the following: Concerns have also been expressed over potential real-world consequences of Article 43, including the likelihood that counterfeiters and sellers of clones will exploit the new provisions by flooding platforms with flimsy counter notices. Consumer interest groups, standards bodies, industry organizations, citizen action groups and others will have to be prepared to play their part in using the new legislation to better protect consumers, challenge bad actors and redress consumer grievances. the lack of clarity over whether the platform is obliged to conduct a reasonable review of the legal merits; the lack of a right by the IP owner to file a rebuttal to the vendor’s, the short 15-day window for the filing of formal infringement complaints to relevant authorities; and. It also puts the onus on platform operators to remove listings, disable web pages and terminate transactions if IP rights infringement is detected. It remains unclear for now just how thoroughly these provisions will be enforced. While these efforts have had a definite effect, they have taken place largely behind closed doors and their impact on the total level of infringements is clearly limited. Therefore, it is important that China takes steps to protect this market, and ensure it has a regulatory framework in place that will promote its continued development. Questions have also been raised as to whether the law applies to social media platforms, including messaging services and video and photo sharing services. http://www.sips.asia. Also, Article 42 imposes joint and several liability on online trade platforms that knowingly allow the sale of goods that pose a risk to consumer health and safety – thereby offering a potentially powerful tool for addressing items that are not deemed by platforms to infringe IP rights. The implementation of these new regulations commenced on January 1, 20… The law has for centuries struggled with and always limped behind advances in technology. As a result, the timeline for issuance of the implementing regulations remains unclear. In this regard, trade associations representing mainly US and EU companies argued for the establishment of a higher duty of care for trade platforms, one that goes beyond the mere notice-and-takedown model and instead requires platforms to implement proactive measures to address violations (ie, actions that would prevent future infringements, such as insertion of filters relying on Big Data software, strengthened intake procedures and more systematic auditing). In most cases, the enforcing authority is the local market supervision bureau. Under the new e-commerce law, the overseas seller must designate a Chinese “responsible party”, which will be held directly accountable by the Chinese authorities for consumer complaints, product recall and other product quality or safety obligations. Often, advertising and transactional behaviour takes place behind the veil of members-only chat rooms that cannot be monitored by IP owners or even Chinese enforcement authorities using normal software tools. It is noteworthy the 38th clause of the law stipulates the e-commerce platform operators assume joint liabilities if the commodities and services retailers provide through them encroaches on consumers' legal rights and interests. For example: prohibiting misleading promotions, fake reviews and other attempts to manipulate the market. Under the new law, online shoppers will be further protected from fake products and … While establishing a set of laws and regulations, aiming to regulate the vast online retailing business and to protect the rights of consumers and intellectual property is a step in the right direction, there is clearly room for improvements. Chapter 5 of the E-Commerce Law, Promotion of E-Commerce, provides that China shall promote cross-border e-commerce development, establish and improve the management systems of customs, taxation, entry-exit inspection, payments and other systems relating to cross-border e-commerce, and support cross-border e-commerce platforms in warehousing, logistics, customs … The world of e-commerce and the underling technological advancements, especially in areas such as artificial intelligence (AI), will require that laws, regulations, standards and other administrative machinery be continually revised and adapted to new realities. The new law further fosters consumer protection and competition by requiring the e-commerce operator to disclose accurate product/service information and to avoid engaging in misleading and deceptive practices. Chinese platforms will meanwhile need to continue investing greater resources to build their IP protection teams and technical capabilities in order to achieve more cost-effective results and keep the level of complaints by consumers, IP owners and governments in check. The E-Commerce Law of the People's Republic of China (E-commerce Law) was enacted on August 31, 2018. The article of most relevance for IP protection provides that in case a platform fails to take necessary measures against IP violations, the market supervision bureau must first provide a warning and opportunity for the platform to rectify the violation within a prescribed period, failing which a fine of between Rmb50,000 and Rmb2 million (approximately between $7,300 and $295,000) will be imposed. The new legislation will also protect consumers against fake reviews. And while in China administrative enforcement is viewed as an inexpensive and fast way of resolving most trademark infringement cases, the market supervision bureaux have generally proved unwilling to take enforcement action in routine online cases, arguing difficulty in asserting jurisdiction where location of the infringer and its stocks are unknown. The E-commerce Law aims to protect the rights and interests of the parties, regulate e-commerce behaviour, maintain market order and promote the development of e-commerce in China. Many Chinese platforms have been lauded for their willingness to thoughtfully consider more complex infringement cases, but there is now palpable fear that those platforms will feel compelled to side with infringers due to the seemingly mandatory language in Article 43. Eugene Clark is a columnist with China.org.cn. Over the past few years, e-commerce in Chinahas developed at a rapi… The framework of the new law is comprehensive. On the positive side, Article 15 of the law seems to target long-standing concerns over vendor anonymity by requiring sellers to display their business licence (or links thereto) on their home page. In June 2018, China’s internet userbase surpassed the 800 million mark,[1] making it the world’s biggest internet userbase holder and e-commerce market potential in the world. Mr Simone has been active since 1990 with International Trademark Association (INTA) committee work focused on legislative reforms and anti-counterfeiting in China. E-commerce in China has grown to about 19% of the total USD 5.8 trillion retail sales. The new law also creates a higher cost of entry which may dissuade some small players from entering the e-commerce market. The E-commerce Law of the People’s Republic of China passed by the Fifth Session of the Standing Committee of the 13th National People’s Congress on 31 August 2018 is hereby promulgated and shall be implemented with effect from 1 January 2019. China will implement a new e-commerce law from 1 January 2019 with the intent to further enhance legal protection for consumers and brands, especially in relation to curbing the counterfeit goods market, for which China has gained an unhealthy reputation. On January 1, 2019, China's new e-commerce law took effect. Government agencies will have to implement the rules and administrative procedures that provide the details for implementation. the apparent obligation of platforms to release enforcement measures, rather than merely the discretion to do so. E-commerce operators must also meet their tax obligations and are now required to issue a tax invoice (fapiao). China’s new E-commerce Law (which entered into effect on 1 January 2019) regulates a wide array of matters, including antitrust, data protection, consumer protection, payment and delivery services, among others. Finally, e-commerce will account for an ever increasing share of China's foreign trade. The provision in the new law which has stimulated the most controversy to date is set out in Article 43, which appears to require online trade platforms to release IP protection measures for given listings if the vendor files a counter-notice containing “prima facie evidence of non-infringement” and the IP owner does not submit evidence within 15 days of its having filed a civil or administrative complaint. Where a special licence is required (e.g. The new Chinese e-commerce law, which was passed after four rounds of debates, is believed to have consulted different stakeholders in the legislative process. With the new policy, the list of duty-free cross-border e-commerce products c… In fact, various opinions issued a few years prior to the E-commerce Law by the Beijing Higher People’s Court suggested that a proactive-measures standard was justified in China under general tort principles. SIPS has offices in Beijing, Shanghai and Hong Kong. Efforts by industry to lobby over the contents of the implementing regulations and influence how the law is otherwise applied in practice are meanwhile likely to be hamstrung by a continuing lack of transparency with rule makers and the strong support that the government continues to give to the e-commerce players as a whole. Almost all of the provisions in the E-commerce Law relating to IP protection leave critical questions unanswered, and there are no guarantees that the future implementing regulations will be issued soon or, if they are, that they will resolve these questions in a manner friendly to IP owners. The reasons for this are unclear, but it may be due to the lack of implementing regulations clarifying their precise obligations. Free Practical Law trial To access this resource, sign up for a free trial of Practical Law. The new law encourages self-regulation, the establishment and strengthening of industry and network codes of conduct. Article 28 of the E-commerce Law requires platforms to publish the identifying information of vendors. Mr Simone has been advising clients on China IP matters since 1988. Administrative fines by the market supervision bureaux are likely to be rare, as the threat of action will probably be sufficient to change behaviour. The law came into force on 1 January The new legislation aims to protect the legal rights of all parties in online business activities; maintain 'order' in online markets, and facilitate a healthy development of online business. But the new law does not explicitly state either proposition. The new e-commerce law raises the standard of commercial conduct in cyberspace and thus constitutes an important step along the road to the continued growth of China's e-commerce market. In light of that language, social media service providers will likely argue that Article 9 should not be applied to their businesses, as they are not created with the main purpose of facilitating trade in goods and services. In recent years, there has been growing concern over the need to provide better and more efficient regulation of e-commerce. While the end result seems predictable in hindsight, it was hoped that Chinese drafters of the E-commerce Law would be swayed by the views of their own judiciary. Regrettably, the new E-commerce Law does not specifically mention social media, but it is hoped that this gap will be addressed in the upcoming implementing regulations. But IP owners may well enjoy faster and more satisfying results if they can present platforms with evidence that an infringer either does not have the required certifications (eg, the China Compulsory Certificate) or that test results issued by government-approved labs (financed by the IP rights holders, of course) confirm that the goods fail to meet relevant standards. Individual chapters cover: e-contracts and e-payments; guarantees for e-commerce transactions; data protection and promotion of consumer protection, fair competition and mechanisms for dispute resolution; cross-border commerce; and the provision of substantial civil and criminal penalties. Merchants must clearly disclose any clauses or bundles they have placed on sales and cannot assume consent from the consumer. A new Chinese e-commerce law that went into effect January 1 may provide some relief, though some of its provisions are murky and its enforcement has yet to be tested. E-commerce platform providers will have to be more diligent in regulating the information, content and conduct on their platforms. The new e-commerce law compliments this by also placing restrictions on abuses of consumer profiling, such as forcing consumers to "opt-out" of particular services. On January 1, 2019, China's new e-commerce law took effect. food or drug-re­lated), such … Again China takes a very pragmatic approach to roof all these topics under the E-commerce Law, which however could trigger quite some practical implications which international operation shall pay special attention to. The Law clarifies e-commerce operators into e-commerce platform operators such as Taobao (淘宝), merchants on e-commerce platforms, e.g., Walmart having its own e-commerce platform, as well as those doing business on their own websites or via other web services, such as individuals who might be selling goods via social networks such as the popular chatting app WeChat. China's Cyber Security Law came into effect on June 1, 2017 and dealt with personal data protection, privacy and personal data protection. In fact, The Diplomat claims the e-commerce law is a mere codification of an already existing law established by China’s courts. It notes the need for major e-commerce entities to promote business guides and encourage fair competition and greater trust among all stakeholders. Michael Tan and Lynn Zhao, Partner and Associate respectively at Taylor Wessing LLP, told DataGuidance, “The E-commerce Law had been on the Chinese legislator’s schedule for several … For those seeking maximised results, there are several best practices to consider, including: Cooperation among brand owners operating in the same industry in investigations, reporting to authorities and policy work is also advisable where feasible, including collective engagement with platforms on salient problems. For example, the new law holds liable both the counterfeiters, as well as e-commerce operators who fail to "take necessary measures" to prevent and stop sellers in violation of intellectual property rights . Milk, milk powder and other foods, diapers, health care products and cosmetics are the goods involved in the most complaints. Article 10 of the new law requires vendors that have not obtained business licences to do so, and in parallel register with local tax authorities. On the positive side, Article 15 of the law seems to … In response to more predictable IP enforcement on trade platforms, infringers are increasingly moving to social media to advertise and sell their goods. Due to the huge potentials provided by cross border e-commerce. For example: Business registration: except for very few types of rare and small person­al businesses, Article 10 of this law requires all e-commerce operators to handle businesses’ registration (市场主体登记 in Chinese). While the reasons for this are unclear, it is reasonable to assume that they simply followed prevailing practices overseas and were encouraged by the arguable success of Alibaba and other platforms in controlling IP violations through proactive measures adopted on a voluntary basis. Second, e-commerce in China shall be conducted by Chinese companies. China’s new E-commerce Law (which entered into effect on 1 January 2019) regulates a wide array of matters, including antitrust, data protection, consumer protection, payment and delivery services, among others. Article 80 meanwhile grants market supervision bureaux the power to impose fines on platforms that fail to verify vendor information. E-commerce platforms will also have to establish a system to post consumer comments and introduce other measures to ensure accurate information. pushing for more favourable interpretations of the law through test cases. These proposals were clearly rejected by drafters of the E-commerce Law. E-Commerce Law of the People’s Republic of China 中华人民共和国电子商务法 [CURRENT TEXT: Chinese, English] (adopted Aug. 31, 2018, effective Jan. 1, 2019) Status: Passed; Legislative Body (Vote): NPCSC (167–3–1) Drafter & Submitter: NPC Financial and Economic Affairs Committee; Legislative Plans For example, many questions remain about how all of this will be implemented, especially in regard to foreign entities that seek to enter the Chinese e-commerce market. Of course, the ills of Article 43 may well be cured in part by the future implementing regulations to the E-commerce Law. The new law further enhances China's regime of privacy protection. The ‘whac-a-mole’ syndrome is now regarded as the inevitable outcome for most online takedown programmes. The legislation also strengthens intellectual property protection and addresses the problem of manufacturing and sale of counterfeit goods. China is one of the countries that has embraced e-commerce. It seems reasonable to assume that platforms would be required or have the discretion to terminate service to any vendor that fails to comply with these requirements. The new law requires all online businesses to register with the government, and those that … But with the growth of online trade and the country’s production capabilities, it is no surprise that China is regarded as the single largest source of infringing goods worldwide. The new e-commerce law of China is a step forward toward a more regulated and stable environment for China’s e-commerce development. One of the hottest topics is e-commerce platform operators (EPOs) liability for … Consumers will now have stronger legal protections under the new e-commerce law. The new law builds upon earlier reforms of China's legal system. Joseph Simone is a partner with SIPS, a firm focused mainly on IP protection in greater China. 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