New Compliance Requirements for E-Commerce Platforms under The E-Commerce Law

Before the appearance of E-Commerce Law of the People’s Republic of China (hereinafter referred to as The E-Commerce Law), there was no specific law regulating E-Commerce subjects and behaviors in China. As the first specific law that regulates E-commerce activities conducted within the territory of China, The E-commerce Law has gone through a five-year legislative agenda, eventually coming into force on January 1st, 2019. The E-Commerce Law is also a comprehensive law integrating the E-commerce promotion law, the consumer rights and interests protection law, the E-commerce platform specification law and the green development law, which plays an important role in the field of E-Commerce. The enactment of E-Commerce Law also brings about an increased number of compliance requirements for E-Commerce operators, E-Commerce platforms and Self-Operation platforms.

According to the definition in ART 9 of The E-Commerce Law, the subject of E-commerce, also known as “an E-commerce operator” (hereinafter referred to as E-Commerce Operator) refers to a natural person, a legal person or an unincorporated association that carries out business activities through information networks such as the internet to sell commodities or offer services, which mainly includes the 3 following types:

  • “Operator of an E-commerce platform” (hereinafter referred to as E-commerce Platform) refers to a legal person or an unincorporated association that provides certain services in respect of online business sites, trading matchmaking and information release for two or more parties involved in deals in order to facilitate their efforts to conduct trading activities independently. Some well-known E-commerce platforms in China include Taobao, Tmall, JD and so on.
  • “Operators on a platform” (hereinafter referred to as Business Operator) refers to businesses engaging in E-commerce to sell commodities or offer services on E-commerce platforms. Various shops on the E-Commerce platforms would be deemed to be the most common type of business operator.
  • “Other E-commerce Operator” (hereinafter referred as Self-Operated Platform) refers to other E-commerce operators that sell commodities or offer services on the website they develop themselves or through other network services. Some well-known self-operated platforms include NetEase Yanxuan, Kaola and so on.

The enactment of the E-commerce law regulates more specifically upon the activities of E-commerce platforms, business operators as well as self-operated platforms. It also raised higher compliance requirements for E-commerce platforms, which mainly includes the following aspects:

  1. Verification and Safety Obligation

In ART 27 of E-commerce law, it stipulates that the E-commerce platform shall require business operators that apply to sell commodities or provide services on its platform to submit truthful information, including the identity, address, contact and administrative license, verify and register such information, establish registration archives, and have them verified and updated regularly.  ART 28 of The E-Commerce law also stipulates that an E-Commerce platform shall submit information on the identification of operators on its platform to the department for market regulation.

The Safety Obligation originates from the relevant regulations in ART 37 of Tort Law of the People’s Republic of China. As for the safety obligation for E-commerce platforms, as stipulated in ART 38 of E-commerce Law, “Where an E-commerce platform fails to fulfill its obligations to examine the qualifications of the operators on its platform which provide commodities or offer services having a bearing on the consumers’ life and health, or fails to fulfill its obligations to safeguard the safety of consumers, which results in damage to consumers, such E-commerce platform shall bear the corresponding liability.”

  1. Protection of Personal Information

The E-commerce law stipulates detailed regulation regarding the protection of personal information and the important clauses shall be concluded as follows:

In collecting and using the personal information of its users, E-Commerce operators shall abide by the provisions of laws and administrative regulations on the protection of personal information. E-commerce operators should make clear to users the ways and procedures of information inquiry, correction, deletion and user logout, which can be made clear in the platform service agreement or rules, but cannot obstruct users’ inquiry, correction, deletion and user logout information through additional or restrictive conditions. When a user requests to inquire, correct or delete user information, the E-Commerce operator shall, after verifying the user’s identity, promptly provide the user information to be inquired or corrected or deleted. If a user logs out, the information of that user shall also be immediately deleted.

As an E-commerce platform, it shall record and save information released on its platform about commodities and services and deals concluded, and ensure the completeness, confidentiality and the availability of such information. Information about commodities and services and deals concluded shall be kept for no less than three years from the date on which deals are completed.

  1. Forbidden Behavior of E-Commerce Platforms that Limit or Eliminate Competition

In recent years, the competition of E-Commerce platforms has become increasingly fierce, represented by the two horse race between JD and Alibaba. JD claims since 2013, Tmall and Taobao under Alibaba Group have continuously carried out unfair competition behavior through a variety of means, including but not limited to, requesting shops registered on Tmall not to participate in promotional activities such as 618 and Double Eleven on JD, not to register for operation on JD or to register for exclusive operation on Tmall. Such behavior can be considered as limiting or eliminating competition.

Under the premise that the Chinese Government has issued a series of policies to forbid such limitation or elimination of competition carried out by E-Commerce platforms, ART 35 of the E-Commerce Law further stipulates that : “An operator of an E-commerce platform shall neither take advantage of the service agreement, transaction rules, technologies or other means to impose unreasonable restrictions over or add unjustified conditions to the deals, as well as their prices, concluded on the platform by business operators on its platform, and their deals with other business operators, nor charge operators on its platform any unreasonable fees.” Otherwise, the department for market regulation (“AIC”) has the right to order it to make corrections within the required time limits and may additionally impose a fine of more than CNY50,000 but less than CNY500,000; where the case is serious, it shall be fined more than CNY500,000 but less than CNY2 million.

  1. Protection of Intellectual Property Rights

The E-Commerce law stipulates detailed regulation regarding the protection of IPR and an E-Commerce Platform shall establish rules on the protection of intellectual property rights and strengthen its cooperation with intellectual property right owners, so as to protect intellectual property rights in accordance with the law and perform the obligations as follows:

  • Obligation to take necessary actions

Where the E-commerce platform knows or should have known that an operator on its platform has infringed any intellectual property rights, it shall take necessary measures, such as deleting or blocking relevant information, disabling relevant links, and terminating transactions and services; otherwise, it shall be held jointly liable with the infringing party.

  • Obligation to forward the notice

As the bridge between the rights holder and the infringing party which provides the “Place” for the transaction, the E-commerce platform shall, upon receipt of such notice from the rights holder, take necessary measures in a timely manner and forward the notice to operators on its platform; if it fails to take the said necessary measures in due time, will be held jointly liable with the concerned operators on its platform for the exacerbated damage.

  • Obligation to notify

After the E-Commerce platform has forwarded the notice to the infringing party, the infringing party may make a statement that no infringement exists upon receipt of a transferred notice. The statement shall subsequently specify preliminary evidence that excludes the existence of any infringement.

Upon receiving such statement, the E-commerce platform shall transfer the said statement to the intellectual property rights owner that had sent out such notice, and inform the rights owner of the opportunity to make complaints to the related competent authority or file a lawsuit with the people’s court. Where the operator of the E-commerce platform does not receive any notice from the rights owner to make a complaint or bring forward a lawsuit within 15 days of the statement having been successfully delivered, it shall promptly lift all measures taken.

  • Obligation to announce

The E-commerce platform shall make notices and statements it has received as per the abovementioned provisions as well as resolutions public in a timely manner.

Considering the fact the E-Commerce Law came into force on January 1st,2019, it is suggested for E-commerce operators, especially E-commerce platforms, to attach great importance to the content related to its compliance obligations under The E-commerce Law and to ratify any non-compliant behavior based on the company’s actual situation so as to further improve every sector of business operation, including but not limited to the review and registration system upon operators on the platform, the review system of personal information, the review system of limitation or elimination competition as well as the intellectual property rights infringement dispute handling system to ensure the long-term and stable development of the company.