China's new ecommerce law strengthens IP protections

By Synnove Vandal

According to Statista, 28.6 percent of all retail sales made in China this year were ecommerce sales. And by 2019, this number is predicted to grow another 10 percent.

But fake goods, minimal oversight and lackluster market regulation continue to negatively impact China’s ecommerce reputation.

To rebuild this reputation, Chinese lawmakers introduced a new ecommerce law that will take effect January 1, 2019. The law provides additional protection for consumers and brand owners on ecommerce platforms.

Law clarifies three types of ecommerce operators

Initially reviewed in December 2016 by the National People’s Congress Standing Committee, the law took more than two years to be approved.

Prior to the law there were no official classifications to differentiate ecommerce operators. Under the new law, operators are separated into three categories:

• Platform operators – People and organizations assisting in and providing a space for online sellers. For instance, Taobao is a platform operated by Alibaba.
• Operators on platforms – Merchants selling goods on ecommerce platforms.
• Online sellers – Sellers doing business through personal websites or other online channels, like social media platforms.

The categories clarify what types of operators fall under the new law’s jurisdiction. A significant inclusion being non-traditional shopping channels, such as social media and buying apps.

Platform operators are now held more accountable for IP violations

The new law makes an ambitious promise to “protect legal rights and interests of all parties”. Article 22 of the legislation specifically highlights fair competition for all operators.

The law emphasizes platform operator obligations and responsibilities. By focusing on the most advantageous playersin the ecommerce market, lawmakers hope to encourage operators to take responsibility for actions made on their platforms.

Under the new law, a platform operator is as liable as a merchant caught selling counterfeit goods on its platform. This fault previously lied solely on the merchants caught selling substandard goods.

And in a bid to strengthen IP protections, the new law requires ecommerce platforms to establish rules to protect IP rightsand respond to violations in a timely manner.

The law also works on strengthening consumer protections. The legislation bans fake reviews written by paid agents and incentivized customers. And it requires merchants to clearly disclose clauses and bundles placed on sales.

As more consumers turn to online platforms, ecommerce laws will be essential in promoting a healthier Chinese ecommerce market.

For more information on the changes to China’s ecommerce laws, follow the link below.

China’s New e-Commerce Law: Businesses Should Ready for Stronger Compliance Norms – Lauren Eiko Fujino, China Briefing

Synnove Vandal is a Client Manager at InTouch Manufacturing Services, a QC firm that performs product inspections and factory audits in Asia for clients in the US, EU and Australia.