China: E-Commerce Law Passed

(Nov. 21, 2018) On August 31, 2018, the Standing Committee of the National People’s Congress (NPC) of the People’s Republic of China (PRC or China) passed the PRC Electronic Commerce Law. The Law will take effect on January 1, 2019. (Zhonghua Renmin Gongheguo Dianzi Shangwu Fa [PRC Electronic Commerce Law] (promulgated Aug. 31, 2018, effective Jan. 1, 2019) (E-commerce Law), NPC website.)

According to the Law, “electronic commerce” includes all business activities of selling goods or providing services though information networks such as the internet, with the exception of financial products and services and services that provide news, audio and video programs, publications, or cultural products. (Id. art. 2.)

The Law defines three types of “e-commerce operators”:

(1) platform operators, referring to any legal persons or unincorporated organizations that provide virtual places of business, transaction matching, information release, and other services to the parties of an e-commerce transaction to enable them to carry out independent transaction activities

(2) operators on platforms, referring to e-commerce operators that sell goods or provide services to customers through e-commerce platforms

(3) other e-commerce operators, referring to e-commerce operators selling goods or providing services through self-established websites or channels other than the platforms. (Id. art. 9; Nick Beckett & Amanda Ge, New Law Governing E-commerce Is Published in China, LEXOLOGY (Sept. 4, 2018) (by subscription).)

Highlights of the New E-commerce Law

  1. Taxation and Business Registration

The Law requires e-commerce operators to register as market entities, with certain exceptions, such as individuals who sell their own agricultural products or handcrafts or who carry out sporadic and small transactions. (E-commerce Law art. 10.)

The Law further provides that all e-commerce operators be subject to taxes but enjoy preferential tax treatment. (Id. art. 11.)

  1. Protection of Personal Data

When collecting and using users’ personal data, e-commerce operators must abide by existing Chinese laws and regulations in respect of protection of personal data. (Id. art. 23.) The Law further requires e-commerce operators to clearly specify to users the procedures for inquiring about, correcting, and erasing user information, and for cancelling users’ accounts. When an e-commerce operator receives a request for such inquiries, corrections, or erasures, the operator must respond in a timely manner upon verifying the requester’s identity. When a user cancels his or her account, the e-commerce operator must immediately erase the user’s information, unless otherwise provided by laws or regulations or agreed on by the parties. (Id. art. 24.)

  1. Liability of E-commerce Platform Operators

The Law specifies responsibilities of platform operators with regard to products and services provided on their platforms. If a platform operator knows or should have known that goods or services provided by an operator on the platform do not comply with the requirements for personal or property safety protection, or an operator on the platform has otherwise infringed the legitimate rights and interests of consumers but fails to take any necessary measures, the platform operator is jointly and severally liable with the infringing operator on the platform. (E-commerce Law art. 38, para. 1; Beckett & Ge, supra.) If the goods or services may affect consumers’ life and health, and a platform operator fails to examine the qualifications of the operators on the platform or fails to fulfill the responsibilities of protecting consumers’ safety, the platform operator will bear corresponding liability according to law. (E-commerce Law art. 38, para. 2; Beckett & Ge, supra.)

The government market authority may order a platform operator that fails to fulfill the abovementioned responsibilities to make corrections within a specified time period; failure to do so is punishable by a fine ranging from 50,000 yuan (about US$7,200) to as much as 2 million yuan (about US$290,000). (E-commerce Law art. 83.)

  1. Intellectual Property Protection

According to the E-commerce Law, if an intellectual property (IP) rights holder believes that an operator on a platform has infringed its IP rights, the IP rights holder may notify the platform operator and request the latter take necessary preliminary measures, such as deleting or screening information about the alleged infringement, disconnecting the relevant webpages, or terminating the transaction or service. If the platform operator fails to promptly take the necessary preliminary measures upon receiving the notice, it is jointly and severally liable for additional damages along with the operator on the platform. (E-commerce Law art. 42; Beckett & Ge, supra.)

Whenever the platform operator knows or should have known that an operator on the platform has infringed others’ IP rights but fails to take the necessary preliminary measures, the platform operator is jointly and severally liable for all damages caused. (E-commerce Law art. 45; Beckett & Ge, supra.)

A platform operator that has failed to fulfill the abovementioned responsibilities and make corrections as ordered by the government IP authority within a specified time period is also punishable by a fine ranging from 50,000 yuan to 2 million yuan. (E-commerce Law art. 84.)

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