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New law express: China’s e-commerce law promulgated

Written by Richard Zhang, PhD in Law and Head of International Legal Affairs Division at Z&T Law Firm

The E-commerce Law of the People’s Republic of China (hereinafter referred to as the “E-commerce Law”) was adopted through voting at the fifth session of the Standing Committee of the 13th National People’s Congress recently and will come into effect on January 1, 2019. As the first comprehensive law of China in the e-commerce field, the E-commerce Law is a significant milestone.

The E-commerce Law has seven chapters, covering e-commerce operators, e-commerce contract execution and performance, e-commerce dispute settlement, e-commerce promotion, and legal liabilities. The main impacts on China’s e-commerce industry are as follows:

First, Article 9 of the E-commerce Law stipulates that e-commerce operators referred to herein shall mean natural persons, legal persons and unincorporated organizations selling products or rendering services via the Internet and other information networks, including e-commerce platform operators, in-platform operators, and e-commerce operators selling products or rendering services via self-established websites and other network services. Thus, the scope of e-commerce operators is further defined, where WeChat businesses are included, and individual transferors are excluded.

Second, according to Articles 10 and 11 of the E-commerce Law, except that individuals selling self-produced farm and sideline products, scattered small-amount transactions and other cases of exemption, all e-commerce operators (including without limitation operators entering e-commerce platforms, operators carrying out e-commerce activities via self-established network platforms, and operators dealing with e-commerce in the form of WeChat businesses) shall be registered as market players. In addition, the E-commerce Law specifies the tax obligation of e-commerce operators, where even e-commerce operators not required to be registered as market players shall also go through tax registration after the first tax obligation is incurred.

Third, Article 35 of the E-commerce Law stipulates that e-commerce platform operators shall not impose any unreasonable restriction or condition on transactions of in-platform operators, transaction prices and transactions with other operators within platforms, or collect any unreasonable charge from any in-platform operator by any service agreement, transaction role or other technical means. In reality, some major e-commerce platforms impose an “alternative” requirement on businesses entering the platform for the purpose of business competition, namely entering into a so-called “exclusive cooperation agreement”, accepting any unreasonable admission condition, etc. Such restriction by e-commerce platform operators on business activities of in-platform operators on other platforms goes against the principles of voluntariness and fairness. In order to avoid such acts, the E-commerce Law sets strict legal liabilities to protect the management autonomy and transaction freedom of in-platform operators, maintain fair market competition, and protect consumer rights and interests, and public interests.

Fourth, for intellectual property infringements in the e-commerce environment, the E-commerce Law further improves the intellectual property protection system in e-commerce by establishing the “notification—counter-notification” rule. Article 42 of the E-commerce Law stipulates that if the holder of any intellectual property right thinks that its intellectual property right is infringed on, it shall have the right to notify the e-commerce platform operator to take any necessary measure, such as deletion, shielding, link disconnection, and transaction or service termination. Such notice shall include prima facie evidence on the infringement. After receiving such notice, the e-commerce platform operator shall take any necessary measure timely and forward such notice to the in-platform operator; if the e-commerce platform operator fails to take any necessary measure timely, it shall assume a joint and several liabilities for the additional damages with the in-platform operator. If the in-platform operator suffers from losses due to a wrong notice, the e-commerce platform operator shall assume a civil liability according to law; if the e-commerce platform operator sends a wrong notice intentionally, causing losses to the in-platform operator, the liability for damages shall be doubled.

The E-commerce Law will certainly raise higher compliance requirements for e-commerce enterprises in China and ensure the rapid development of the e-commerce industry in a normative and orderly regulatory environment.