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. AmCham Shanghai recently published an article I wrote on China’s new E-Commerce Law, titled,Implications of China’s E-Commerce Law, and I urge you to read it. 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. After several years of preparation, China’s first e-commerce law officially took effect on January 1 st, 2019. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy. Chinese e-commerce law requires e-commerce platforms to shoulder more responsibilities on the items that sellers put up on the platform. It was adopted after a fourth reading at the bimonthly session of the Standing Committee of the National People's Congress (NPC) that ended Friday. She also works on mergers and acquisitions, corporate formations, business litigations, and matters involving China’s foreign exchange control policies. 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. Social media platforms are also likely to argue against measures that would require them to compromise the privacy of users that establish closed areas for communication by allowing the platform itself, let alone IP owners or government authorities, routine access to posted and hosted content in order to monitor for ECL violations. promotion and performance within China, ICP filing requirements) will bring cross-border delivery models closer within reach of the Chinese authorities. In fact, various opinions issued a few years prior to the ECL by the Beijing Higher People’s Court suggested a proactive-measures standard was justified in China under general tort principles. To its credit, the Chinese government has sought to guide online trade platforms and social media through both formal and informal persuasion, although largely behind the scenes and very much out of the public eye. The new law requires all online businesses to register with the government, and those that … integrating bricks-and-mortar and online enforcement programmes and teams; intensifying cooperation with the trade platforms and social media providers; and. Without resolution on this point and others in future implementing regulations, test cases may be necessary in the future to force the government and courts to take a stand on these issues. In response to more predictable IP enforcement on trade platforms, infringers are increasingly moving to social media to advertise and sell their goods. While the reasons for this rejection 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. The print version of this textbook is ISBN: 9789041149077, 9041149074. For even the most sophisticated and well-resourced IP owners, online policing is daunting in its scale and complexity, with few companies reporting a satisfactory return on investment from their enforcement work. The provision in the new law that has stimulated the most controversy to date is set out in Article 43, which appears to require online trade platforms to halt 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. It will though be difficult for foreign companies, especially smaller businesses, to comply with these requirements. Following the example of other countries, the Chinese government and legislature have to date largely left the policing of online trade platforms, websites and social media to the platform operators and IP owners, with the (more than somewhat vain) hope that notice and takedowns and cooperation among them would keep the problem in check, thereby limiting the involvement of police and other government authorities. LATEST ON VANTAGE ASIA. While it may have been wishful thinking, industry and consumer groups expressed the hope during the ECL’s consultation phase that bolder solutions would be introduced, and that perhaps some of these new solutions might serve as a model for other countries. While these efforts have had a definite affect, their visible impact on the total level of infringements has thus been clearly limited. 2019 begins China’s era of compliance China's Year of the Pig is ringing in a new 'Era of Compliance' 27 March 2019. By means of making the world a global village with an ease to do business, e-commerce trading has gained ground. We will be discussing the practical aspects of Chinese law and how it impacts business there. For those seeking maximised results, there are several best practices to consider, including: Cooperation among IP owners operating in the same industry in investigations, reporting to authorities and policy work are also advisable where feasible, including collective engagement with platforms on salient problems. E-commerce platform operators also must establish and enforce intellectual property rules and delete, block or disconnect links and terminate transactions or services that infringe on an IP holder’s rights. E-commerce Law of the People’s Republic of China (Adopted at the 5th Session of the Standing Committee of the Thirteenth National People’s Congress of the People’s Republic of China on 31 August 2018) C o n t en t s Chapter I General Provisions Chapter II E-commerce … As a result, the timeline for issuance of the implementing regulations remains unclear. 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 bogus, unsupported counter-notices. You get money up front for the sale, in return for delivery of a product as described within the timeframe specified. Merchants must clearly disclose any clauses or bundles they have placed on sales and cannot assume consent from the consumer. The reasons for this are unclear, but it may be due to the lack of implementing regulations clarifying their precise obligations. China’s new E-commerce Law (“ECL” which entered into effect on 1 January 2019) regulates a wide array of matters, including antitrust issues, data protection, consumer protection, and the regulation of payment and delivery services, among others. 0. Or if you do get on such platform and then start creating liability risks for your platform operator, you can expect to get booted off relatively quickly. 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. With the new policy, the list of duty-free cross-border e-commerce products co… E-commerce platform operators may also be liable for harm caused by one of its “consumer health” vendors if it failed to verify those vendors’ qualifications. Infringing goods often fail to meet government-imposed standards for protecting consumer health and safety, and IP owners thus have the option to file administrative and criminal complaints based on the Product Quality Law and corresponding provisions of the Criminal Code. On January 1, 2019, China’s new e-commerce law took effect. But there are fears – even among some sympathetic platforms – that the plain language of the ECL itself will make this impossible. Display their business license and any administrative permits, or provide a statement making clear that they are not required to register. However, the ECL’s provisions on IP protection seem to have attracted the most attention – both positive and negative. On August 31, 2018, the Standing Committee of the National People's Congress of the People's Republic of China promulgated the E-Commerce Law of the People's Republic of China ("Law") which will come into effect on January 1, 2019. In late November, the State Council released new policies promoting cross-border e-commerce, which came into effect on January 1, 2019. This procedure cannot set unreasonable refund requirements. 27, 2018) NPCSC Solicits Public Opinions on Draft E-Commerce Law, Amendment to Rural Land Contract Law & Vessel Tonnage Tax Law … It expressly does not include services that provide news, audio and video programs, as well as publications, cultural products and other content services provided via information networks, and financial products or financial services. Regrettably, the new ECL does not specifically mention social media, but it is hoped that this gap will be addressed in the upcoming implementing regulations. As Chinese e-commerce platforms such as Alibaba, Taobao, JD.com, and others are now among the world's largest e-commerce platforms handling … Authorities were expected to issue implementing regulations to the ECL before its effective date, but drafters appear to have had a difficult time balancing the interests and concerns of the various stakeholders involved. Most major platforms in China are yet to implement Article 28. For purposes of this Law, “e-commerce” means the business activities of sale of goods or provision of services through the Internet or other information networks. Why is any of the above relevant to foreign companies that “merely” sell on a China e-commerce platform? The report concludes that infringements will increase by 70% in the next five years, perhaps taking the current global level to in excess US$1.5 billion. The provision in the ECL 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”. The E-commerce Law clarifies uncertainties in Article 36 of China’s Tort Law and establishes a complaint procedure for e-commerce platforms. Article 38 further requires platforms to examine the qualifications of vendors, while Article 27 requires them to verify that vendors maintain accurate records of administrative licences. SIPS February 17, 2019 Legislation and Policy. While the end result seems predictable in hindsight, it was hoped that Chinese drafters of the ECL would be swayed by the views of their own judiciary. China customs will likely enforce these requirements by blocking non-compliant goods from entering the country or by shutting down the websites of foreign sellers that do not comply. Many Chinese platforms have been lauded for their willingness to thoughtfully consider more complex infringement cases, but there is now a palpable fear those platforms will feel compelled to side with infringers due to the seemingly mandatory language in Article 43. Questions have also been raised as to whether the ECL applies to social media platforms, including messaging services and video and photo-sharing services. Theoretically, all cross-border e-commerce companies must register with Chinese customs and comply with all applicable requirements and China customs will block entry of any goods that violate these requirements. Her practice focuses on cybersecurity, data protection law, and privacy law. This comprehensive law is intended to apply to all e-commerce activities. 10 November 2020. Save up to 80% by choosing the eTextbook option for ISBN: 9789041149114, 9041149112. BEIJING, Aug. 31 (Xinhua) -- China's top legislators on Friday passed an e-commerce law aimed at improving regulation of the flourishing market. But the final version of the ECL leaves it unclear whether these judicial opinions are remain good law. An e-commerce law has come into force in China that seeks to regulate online business, protect intellectual property rights and increase cybersecurity. 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. Others have pulled out of the Chinese market entirely. E-commerce in China has grown to about 19% of the total USD 5.8 trillion retail sales. Because if you do not meet the requirements necessary to get on such a platform you almost certainly will not get on. But the ECL does not explicitly state either proposition. I was asked to write this article to explain the implications (hence the title) and the practicalities of China’s new e-commerce law. Articles 74 to 88 of the ECL set out the penalties – monetary and otherwise – that may be imposed in case of non-compliance. 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. E-commerce platform operators can be held liable for goods and services sold on their platforms that do not comply with China’s personal safety or property security requirements if the platform operator knew or should have known about the failure to comply. According to Alibaba, U.S. companies sold $5.4 billion in goods on its sites during the recent Singles’ Day shopathon. See Getting Counterfeits off Alibaba: Anger is NOT a Strategy. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. E-Commerce Law in China The Functioning of E-Commerce in China and the Influence of the EU Model by Cristiano Rizzi and Publisher Kluwer Law International. Article 38 of the ECL Law imposes a clear duty of care on platforms to protect consumer safety, specifying that joint and several liability will be imposed where they fail to “take necessary measures” against goods or services that “do not meet personal or property safety requirements” when the platform operator “knew or should have known” of such sales taking place. Administrative fines by the market supervision bureaux are likely to be rare, as the threat of action will probably be sufficient to change behaviour. Make your nominations now for the Philippines Law Firm Awards. 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 mere notice-and-takedown model and instead requires platforms to implement proactive measures to address violations (i.e., actions that would prevent future infringements, such as insertion filters relying on Big Data software, strengthened intake procedures and more systematic auditing). Our lawyers have earned international acclaim for providing cutting-edge legal solutions to US- and foreign-based companies doing business in or with China. In most cases, the enforcing authority is the local market supervision bureau. 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. According to this definition, all foreign businesses that sell goods to Chinese consumers at a retail level can be considered cross-border e-commerce companies. The below borrows liberally from my AmCham article. The law aims to protect the legal rights and interests of all parties involved in e-commerce transactions while maintaining market order. 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 declaration and inspection services. Efforts by industry to lobby over the contents of the implementing regulations and influence how the ECL 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. Of course, the ills of Article 43 may well be cured in part by the future implementing regulations to the ECL. the apparent obligation of platforms to halt enforcement measures, rather than merely having the discretion to do so. It remains unclear for now just how thoroughly these provisions will be enforced. It’s the so-called e-commerce law, effective as of January 1, 2019. 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 they face. This Notice requires cross-border e-commerce companies register with China customs through a company registered in China and report real-time transaction data of retail imports. With China accounting for half of the e-commerce transactions in the world, non-Chinese companies are enjoying some of the spoils. With a background working in Hangzhou, Shanghai, and Seattle, Sara Xia has earned a reputation for overcoming communication barriers and helping people of diverse backgrounds connect with one another. This post will focus mostly on e-commerce operators and the rules regarding e-commerce platform operators most relevant to foreign companies seeking to sell online in China. pushing for more favourable interpretations of the ECL through test cases. On the not so positive side, Article 43 seems to require platforms to refrain from acting against alleged infringements where the vendor has filed a counter notice containing *prima facie* evidence of non-infringement – a provision roundly criticised by IP owners during the consultation phase for the draft version of the ECL based on fears that it will be abused on a grand scale by bad-faith operators. The E-Commerce Law of the People's Republic of China(E-commerce Law) was enacted on August 31, 2018. It is of no surprise that the Chinese government has implemented a new regulation on cross-border e-commerce. If properly implemented, these provisions should help to reduce longstanding problems with fraudulent vendor accounts and substantially reduce the time and cost for IP owners investigating infringements. The implementation of these new regulations commenced on January 1, 20… This Notice defines “cross-border e-commerce company” as a company formed outside China that sells to consumers in China from overseas. Among the other issues yet to be clarified in Article 28 is whether it will be deemed binding on Chinese platforms that mainly focus on export buyers, such as DHGate and made-in-china.com, or whether only platforms targeting local buyers will be required to comply. On January 1, 2019, China's new e-commerce law took effect. Draft Ecommerce Law Issued for Public Comment, Guiding Opinions Issued by the Supreme People’s Court: Regarding the Trial of Civil Cases Involving IP Rights on E-commerce Platforms, Reply of Supreme People’s Court Regarding Several Questions on the Application of Law in Network IP Infringement Disputes. As such, it appears that the power to enforce registration requirements will rest with local market supervision bureaux (which may or may not have the resources or motivation to do so), thus potentially leaving platforms off the hook for enforcement. If an e-commerce operator voluntarily discontinues its e-commerce business, it must notify the public by continuously displaying at least 30 days in advance of the date on which it will cease conducting its e-commerce business; Disclose information regarding its goods or services in a comprehensive, authentic, accurate and timely manner so as to protect the consumer’s right to know and right to choose; Provide non-targeted options if it provides targeted search results based on the consumer’s interests, habits or other personal traits; Not use any tie-in sale as a default option; Clearly set forth its procedure for refunding any deposits collected. Most IP owners are already overwhelmed by the number of online ads for counterfeits and clones, and few have the resources to file civil or administrative complaints against even a fraction of the vendors of those products detected. On 31 August 2018, China’s top legislative body passed a new e-commerce law known as the Electronic Commerce Law of the People’s Republic of China (中华人民共和国电子商务法) imposing stricter regulations on e-commerce businesses operating within the territory of China. These proposals were clearly rejected by drafters of the ECL. With a background working in Hangzhou, Shanghai, and Seattle, Sara Xia has earned a reputation for overcoming communication barriers and helping people of diverse backgrounds connect with one another. Over the past few years, e-commerce in Chinahas developed at a rapid … In light of that language, we suspect that social media service providers will likely argue that Article 9 should not be applied to their businesses, as they were not created with the main purpose of facilitating trade in goods and services. Instead, Article 10 simply requires that platforms forward any identifying information they receive to the local market supervision bureaux and to remind vendors of their obligations to undergo company registration locally. These are serious legal requirements with serious enforcement mechanisms and companies like JD.com and Alibaba take these requirements extremely seriously. E-commerce in China On 31 August 2018, the Standing Committee of the National People’s Congress passed Electronic Commerce Law of the People’s Republic of China (hereinafter the ‘E-commerce Law’), which is China’s first comprehensive legislation governing the field of e-commerce and has taken effect on 1 January 2019. 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 to 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 e-commerce law. She is uniquely equipped to identify and solve issues related to Chinese entities, while…. US-China Phase 1 Trade Agreement – What’s in it for Trademark Owners? For example, if you find a supplier on Alibaba using your trademark or a copyrighted photo without your authorization, you can report the infringement to Alibaba (along with proof of your IP rights) and request Alibaba take down the infringing product page or photo and it usually will. Neither the E-Commerce Law nor the widely known Tort Law of the People's Republic of China (the Tort Law, Article 36), 12 however, distinguishes the difference among copyrights, trademarks and patents; instead, it uses the term ‘intellectual property’ in general. E-Commerce Law in China The Functioning of E-Commerce in China and the Influence of the EU Model by Cristiano Rizzi and Publisher Kluwer Law International B.V. Save up to 80% by choosing the eTextbook option for ISBN: 9789041149114, 9041149112. She is uniquely equipped to identify and solve issues related to Chinese entities, while providing clients with critical insight on the cultural customs and procedures necessary to successfully conduct business in China. For example, article 26 of the E-Commerce Law requires e-commerce operators that engage in cross-border e-commerce to comply with China’s import and export laws and regulations. Certain other provisions in the E-Commerce Law will directly impact cross-border e-commerce activities. The print version of this textbook is ISBN: 9789041149077, 9041149074. The new regulation however contains a lot of ambiguous points such as the “low-value transactions” threshold. Almost all of the provisions in the ECL 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 manner friendly to IP owners. 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. February 17, 2019 China’s new E-commerce Law (“ECL” which entered into effect on 1 January 2019) regulates a wide array of matters, including antitrust issues, data protection, consumer protection, and the regulation of payment and delivery services, among others. These associations argue that the shifting of greater legal responsibility to platforms and other intermediaries is the only sensible solution, keeping in mind the intimate knowledge of their markets, products and customers by platforms, their already robust anti-fraud programmes, the balance of convenience and other relevant factors. Due to the huge potentials provided by cross border e-commerce. The new law builds upon earlier reforms of China's legal system. © 2020 Simone Intellectual Property Services Asia Limited. 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. According to the policies, China’s Ministry of Finance will add 63 categories of products to the list of goods that are duty-free when purchased via cross-border e-commerce platforms, including popular consumer goods like electronics, small home appliances, food, and healthcare products. 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 the precise location of the infringer and its stocks are unknown. Our vast experience handling China-specific entity formation, contracts, intellectual property matters, and dispute resolution gives our clients the security of knowing they have a truly seasoned legal team behind them. Consumers will now have stronger legal protections under the new e-commerce law. The new e-commerce law of China is a step forward toward a more regulated and stable environment for China’s e-commerce development. IP owners will need to redouble their efforts to build up their internal resources and systems for dealing with online enforcement systems, keeping in mind that conditions online are ever-shifting. 11, 2018) NPC Standing Committee Releases 2018 Legislative Plan (Apr. Tag: China’s E-Commerce Law. 31 August 2018 E-commerce Law of the People’s Republic of China Because China’s e-commerce platforms operate mainly within China, proof of IP rights in Chinese or certificates issued by Chinese authorities will usually lead to faster platform operator action. In practice, many of the e-commerce platforms have already established rules for IP protection. Selling Your Products on Chinese E-Commerce Sites. e-commerce, to regulate e-commerce conduct, to preserve the order of the marketplace, and to promote the sustainable and healthy development of e-commerce. China is one of the countries that has embraced e-commerce. E-commerce platform operators must build comprehensive systems for product and service evaluation, keep records of goods and services published and transacted on their platform, and establish fair and transparent rules for their platform services and transactions. social media sites). The ‘whack-a-mole’ syndrome is now regarded as the inevitable outcome for most online takedown programmes. Six China government agencies have issued a notice regulating cross-border e-commerce retail imports. This definition is broad enough to cover most online sellers and selling activities. The E-Commerce Law defines “electronic commerce” as business activities related to selling goods and services via information networks such as the Internet. While Alibaba and certain other smaller platforms have achieved a great deal through the current regime of self-policing, the overall levels of infringement, even on the best of Chinese platforms, remain deeply concerning. Ecommerce transactions should be legally straightforward. Chinese platforms will meanwhile need to continue investing greater resources to build their IP protection teams and technical capabilities to achieve more cost-effective results and keep the level of complaints by consumers, IP owners and governments in check. How to Protect Your IP When Selling on Chinese E-Commerce Platforms (English/Español), China Cybersecurity: No Place to Hide, Part 3, China Cybersecurity: No Place to Hide, Part 2, Getting Counterfeits off Alibaba: Anger is NOT a Strategy, Product Liability When Manufacturing Overseas — December 15 Webinar, Manufacturing in Asia: Let’s Talk United States and Canada and Mexico and EU Trademarks, The First Thing To Do When Someone Has Your China Trademark, How to Whip Your China Employee Handbook into Shape. That sells to consumers in China from overseas USD 5.8 trillion retail sales provide a statement making that! Set up trading accounts to obtain business licences and register with China accounting for half of the relevant. By cross border e-commerce because if you do e-commerce law china meet the requirements necessary to get on apply to e-commerce... Be imposed in case of non-compliance and solve issues related to selling goods and via. 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