It remains unclear for now just how thoroughly these provisions will be enforced. While Alibaba and certain other smaller Chinese platforms have achieved a great deal through the current regime of self-policing, the overall levels of infringement even on those with the best systems in place remain deeply concerning. Consistent with recent trends in Chinese law, this Guiding Opinion shows two underlying primary themes. Again China takes a very pragmatic approach to roof all these topics under the E-commerce Law, which however could trigger quite some practical implications which international operation shall pay special attention to. The provision in the new law which has stimulated the most controversy to date is set out in Article 43, which appears to require online trade platforms to release 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. Merchants must clearly disclose any clauses or bundles they have placed on sales and cannot assume consent from the consumer. 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 location of the infringer and its stocks are unknown. 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 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. In light of that language, social media service providers will likely argue that Article 9 should not be applied to their businesses, as they are not created with the main purpose of facilitating trade in goods and services. One of the hottest topics is e-commerce platform operators (EPOs) liability for … 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. The law aims to protect the legal rights and interests of all parties involved in e-commerce transactions while maintaining market order. The law came into force on 1 January The new legislation aims to protect the legal rights of all parties in online business activities; maintain 'order' in online markets, and facilitate a healthy development of online business. Regrettably, the new E-commerce Law does not specifically mention social media, but it is hoped that this gap will be addressed in the upcoming implementing regulations. Legitimate product manufacturers and designers will also be encouraged to join China's online environment, knowing that they will be protected against the counterfeiting of their designs and theft of intellectual property. 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. ​China's new and wide-reaching e-commerce law has come into effect. Article 2 This Law applies to the e-commerce activities within the mainland territory of the People's Republic of China. SIPS has offices in Beijing, Shanghai and Hong Kong. Many Chinese platforms have been lauded for their willingness to thoughtfully consider more complex infringement cases, but there is now palpable fear that those platforms will feel compelled to side with infringers due to the seemingly mandatory language in Article 43. 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. In June 2018, China’s internet userbase surpassed the 800 million mark,[1] making it the world’s biggest internet userbase holder and e-commerce market potential in the world. Of course, the ills of Article 43 may well be cured in part by the future implementing regulations to the E-commerce Law. The new law requires all online businesses to register with the government, and those that … Mr Simone speaks Mandarin Chinese and Italian. The new e-commerce law compliments this by also placing restrictions on abuses of consumer profiling, such as forcing consumers to "opt-out" of particular services. Mr Simone has been active since 1990 with International Trademark Association (INTA) committee work focused on legislative reforms and anti-counterfeiting in China. pushing for more favourable interpretations of the law through test cases. integrating bricks-and-mortar and online enforcement programmes and teams; intensifying cooperation with the trade platforms and social media providers; and. The provision in the E-commerce Law 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”. 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 … 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. To its credit, the Chinese government has sought to guide online trade platforms and social media through both formal and informal persuasion, although largely out of the public eye. the apparent obligation of platforms to release enforcement measures, rather than merely the discretion to do so. 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. While these efforts have had a definite effect, they have taken place largely behind closed doors and their impact on the total level of infringements is clearly limited. The ‘whac-a-mole’ syndrome is now regarded as the inevitable outcome for most online takedown programmes. However, the law’s provisions on IP protection seem to have attracted the most attention – both positive and negative. The world of e-commerce and the underling technological advancements, especially in areas such as artificial intelligence (AI), will require that laws, regulations, standards and other administrative machinery be continually revised and adapted to new realities. The E-Commerce Law of the People's Republic of China (E-commerce Law) was enacted on August 31, 2018. The new law further enhances China's regime of privacy protection. Chinese platforms will meanwhile need to continue investing greater resources to build their IP protection teams and technical capabilities in order to achieve more cost-effective results and keep the level of complaints by consumers, IP owners and governments in check. For those seeking maximised results, there are several best practices to consider, including: Cooperation among brand owners operating in the same industry in investigations, reporting to authorities and policy work is also advisable where feasible, including collective engagement with platforms on salient problems. Articles 74 to 88 of the E-commerce Law set out the penalties – monetary and otherwise – that may be imposed in case of non-compliance. Michael Tan and Lynn Zhao, Partner and Associate respectively at Taylor Wessing LLP, told DataGuidance, “The E-commerce Law had been on the Chinese legislator’s schedule for several … The new regulation however contains a lot of ambiguous points such as the “low-value transactions” threshold. Most major platforms in China are yet to implement Article 28. Foreign participation in owning or controlling e-commerce … First, e-commerce in China shall be conducted in accordance with Chinese law in a manner firmly under the control of the central government. But the new law leaves it unclear whether these judicial opinions are now good law. It is of no surprise that the Chinese government has implemented a new regulation on cross-border e-commerce. The new law builds upon earlier reforms of China's legal system. These proposals were clearly rejected by drafters of the E-commerce Law. But how then are platforms, government authorities and IP rights holders to monitor for violations? For more information please visit: http://www.china.org.cn/opinion/eugeneclark.htm. So, what can IP owners do in the meantime? The new Chinese e-commerce law, which was passed after four rounds of debates, is believed to have consulted different stakeholders in the legislative process. This includes more foreign participation which will both expand choice to Chinese consumers and work to address complaints that China has been too soft on IP protection. For example: prohibiting misleading promotions, fake reviews and other attempts to manipulate the market. It notes the need for major e-commerce entities to promote business guides and encourage fair competition and greater trust among all stakeholders. 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. An e-commerce law has come into force in China that seeks to regulate online business, protect intellectual property rights and increase cybersecurity. The report concludes that infringements will increase by 70% in the next five years, perhaps taking the current global level to in excess of US$1.5 billion. Article 80 meanwhile grants market supervision bureaux the power to impose fines on platforms that fail to verify vendor information. 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. One important aspect of the E-commerce Law is obviously to better regulate the mar­ket and protect consumers. 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. A new Chinese e-commerce law that went into effect January 1 may provide some relief, though some of its provisions are murky and its enforcement has yet to be tested. Finally, e-commerce will account for an ever increasing share of China's foreign trade. In fact, various opinions issued a few years prior to the E-commerce Law by the Beijing Higher People’s Court suggested that a proactive-measures standard was justified in China under general tort principles. 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 that they face. ​China's new e-commerce law: A step in the right direction. He also works with stakeholders towards the creation of pilot programme for the use of accelerated arbitration of IP disputes occurring on online trade platforms. Consumer interest groups, standards bodies, industry organizations, citizen action groups and others will have to be prepared to play their part in using the new legislation to better protect consumers, challenge bad actors and redress consumer grievances. On the positive side, Article 15 of the law seems to target long-standing concerns over vendor anonymity by requiring sellers to display their business licence (or links thereto) on their home page. The new law encourages self-regulation, the establishment and strengthening of industry and network codes of conduct. The new e-commerce law raises the standard of commercial conduct in cyberspace and thus constitutes an important step along the road to the continued growth of China's e-commerce market. 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. But there are fears – even among some sympathetic platforms – that the plain language will make this impossible. The new law builds upon earlier reforms of China's legal system. 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. On the positive side, Article 15 of the law seems to … food or drug-re­lated), such … In response to more predictable IP enforcement on trade platforms, infringers are increasingly moving to social media to advertise and sell their goods. Over the past few years, e-commerce in Chinahas developed at a rapi… 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. 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. 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 late November, the State Council released new policies promoting cross-border e-commerce, which came into effect on January 1, 2019. The Law clarifies e-commerce operators into e-commerce platform operators such as Taobao (淘宝), merchants on e-commerce platforms, e.g., Walmart having its own e-commerce platform, as well as those doing business on their own websites or via other web services, such as individuals who might be selling goods via social networks such as the popular chatting app WeChat. E-commerce operators must also meet their tax obligations and are now required to issue a tax invoice (fapiao). E.g. E-commerce in China has grown to about 19% of the total USD 5.8 trillion retail sales. The new legislation will also protect consumers against fake reviews. Second, e-commerce in China shall be conducted by Chinese companies. Therefore, it is important that China takes steps to protect this market, and ensure it has a regulatory framework in place that will promote its continued development. the very broad definition of e-commerce activities/operators and the explicit reference to cross-border operation could likely grant the administrative authorities … @WTRmagazine RT @WebTMS: Some important tips here for practitioners in the post-Brexit landscape courtesy @HGF_IP via @WTRmagazine https://t.co/9yk2YF43… Read more, @WTRmagazine RT @MarksmenTweets: Dealing with cut budgets and fighting fakes during a pandemic: interview with @Starbucks’ Batur Oktay | @WTRMagazine ht… Read more, @WTRmagazine RT @globalIPcenter: [email protected] is partnering with the Girl Scouts of Greater Los Angeles to promote the importance of #trademarks + educate abo… Read more, @WTRmagazine RT @MarksmenTweets: “A logical step” – Gleissner #trademarks set to be auctioned in Latvia | More via @WTRMagazine https://t.co/b4uSIE7X86… Read more, © Copyright 2003-2020 Law Business Research. For example: Business registration: except for very few types of rare and small person­al businesses, Article 10 of this law requires all e-commerce operators to handle businesses’ registration (市场主体登记 in Chinese). The new e-commerce law of China is a step forward toward a more regulated and stable environment for China’s e-commerce development. Article 38 of the E-commerce 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. In fact, The Diplomat claims the e-commerce law is a mere codification of an already existing law established by China’s courts. The Frontier Report (commissioned by the International Trademark Association and the Business Action to Stop Counterfeiting and Piracy) estimated that as of 2013 the scale of counterfeiting and copyright piracy worldwide was approximately $900 billion, with just over half estimated to emanate from China. E-commerce platform providers will have to be more diligent in regulating the information, content and conduct on their platforms. 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 for 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 law further fosters consumer protection and competition by requiring the e-commerce operator to disclose accurate product/service information and to avoid engaging in misleading and deceptive practices. He is also a Uniform Domain-Name Dispute-Resolution Policy arbitrator. The legislation also strengthens intellectual property protection and addresses the problem of manufacturing and sale of counterfeit goods. While the reasons for this 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. On January 1, 2019, China's new e-commerce law took effect. Often, advertising and transactional behaviour takes place behind the veil of members-only chat rooms that cannot be monitored by IP owners or even Chinese enforcement authorities using normal software tools. 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. With the new policy, the list of duty-free cross-border e-commerce products c… 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. Consumers will now have stronger legal protections under the new e-commerce law. By Joseph Simone. Due to the huge potentials provided by cross border e-commerce. 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. http://www.sips.asia. The new law also creates a higher cost of entry which may dissuade some small players from entering the e-commerce market. The framework of the new law is comprehensive. By means of making the world a global village with an ease to do business, e-commerce trading has gained ground. Under the new law, operators can be fined up to RMB 2 million ($292000) in serious cases of intellectual property infringement. It also puts the onus on platform operators to remove listings, disable web pages and terminate transactions if IP rights infringement is detected. The Legislature passed the E-Commerce Law, which is due to come into effect from Sept 1st next year. In most cases, the enforcing authority is the local market supervision bureau. Social media platforms are also likely to argue against measures that would require them to compromise the privacy of users who establish closed areas for communication. Eugene Clark is a columnist with China.org.cn. It is noteworthy the 38th clause of the law stipulates the e-commerce platform operators assume joint liabilities if the commodities and services retailers provide through them encroaches on consumers' legal rights and interests. However, the law’s provisions on IP protection seem to have attracted the most attention – both positive and negative. As a result, the timeline for issuance of the implementing regulations remains unclear. In addition, these operators must keep transaction records, as well information of products and services provided, for at least three years. 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. China will implement a new e-commerce law from 1 January 2019 with the intent to further enhance legal protection for consumers and brands, especially in relation to curbing the counterfeit goods market, for which China has gained an unhealthy reputation. E-commerce platforms will also have to establish a system to post consumer comments and introduce other measures to ensure accurate information. Free Practical Law trial To access this resource, sign up for a free trial of Practical Law. 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. Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn. A discussion on China's first e-commerce law from the perspective of intellectual property protection. One concern is the impact of the new law on small businesses which have fewer resources to implement the site development, training and business model adaptations required to be compliant in the new regime. 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 flimsy counter notices. Joseph Simone is a partner with SIPS, a firm focused mainly on IP protection in greater China. While establishing a set of laws and regulations, aiming to regulate the vast online retailing business and to protect the rights of consumers and intellectual property is a step in the right direction, there is clearly room for improvements. 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. China's cross-border e-commerce trade saw its turnover rise 80.6 percent from 2016 to 90.24 billion yuan last year. Under the new law, online shoppers will be further protected from fake products and … Businesses will have to engage in significant compliance program development, training and implementation to ensure their systems are compliant with the new regime. China's Cyber Security Law came into effect on June 1, 2017 and dealt with personal data protection, privacy and personal data protection. 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 widely criticised by IP owners during the consultation phase for the draft law based on fears that it will be abused on a grand scale by bad-faith operators. 31 August 2018 E-commerce Law of the People’s Republic of China Authorities were expected to issue implementing regulations to the law before its effective date, but drafters have had difficulty balancing the interests and concerns of the various stakeholders involved. Article 17 E-commerce operators shall comprehensively, truly, accurately and timely disclose the information of goods or services, protect information rights and selection rights of consumers. While the end result seems predictable in hindsight, it was hoped that Chinese drafters of the E-commerce Law would be swayed by the views of their own judiciary. Article 28 of the E-commerce Law requires platforms to publish the identifying information of vendors. Efforts by industry to lobby over the contents of the implementing regulations and influence how the law 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. Also, Article 42 imposes joint and several liability on online trade platforms that knowingly allow the sale of goods that pose a risk to consumer health and safety – thereby offering a potentially powerful tool for addressing items that are not deemed by platforms to infringe IP rights. Almost all of the provisions in the E-commerce Law 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 a manner friendly to IP owners. While official data shows a sharp rise in complaints lodged related to cross-border e-commerce. But the new law does not explicitly state either proposition. E-commerce operators shall not deceive or mislead consumers through false or misleading commercial promotion by means of fictitious sale, making up 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. The reasons for this are unclear, but it may be due to the lack of implementing regulations clarifying their precise obligations. 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. This includes the need to address issues of counterfeit goods, consumer fraud, privacy, intellectual property (IP) theft, tax evasion and promotion of competition and consumer protection. He currently serves as the Chair of INTA’s Global Bad Faith Trademark Registration Task Force. What does it mean for market platforms and consumers. 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 the mere notice-and-takedown model and instead requires platforms to implement proactive measures to address violations (ie, actions that would prevent future infringements, such as insertion of filters relying on Big Data software, strengthened intake procedures and more systematic auditing). Mr Simone has been advising clients on China IP matters since 1988. Individual chapters cover: e-contracts and e-payments; guarantees for e-commerce transactions; data protection and promotion of consumer protection, fair competition and mechanisms for dispute resolution; cross-border commerce; and the provision of substantial civil and criminal penalties. China is one of the countries that has embraced e-commerce. After several years of preparation, China’s first e-commerce law officially took effect on January 1 st, 2019. E-Commerce Law of the People’s Republic of China 中华人民共和国电子商务法 [CURRENT TEXT: Chinese, English] (adopted Aug. 31, 2018, effective Jan. 1, 2019) Status: Passed; Legislative Body (Vote): NPCSC (167–3–1) Drafter & Submitter: NPC Financial and Economic Affairs Committee; Legislative Plans Where a special licence is required (e.g. Questions have also been raised as to whether the law applies to social media platforms, including messaging services and video and photo sharing services. Administrative fines by the market supervision bureaux are likely to be rare, as the threat of action will probably be sufficient to change behaviour. The law has for centuries struggled with and always limped behind advances in technology. For example, many questions remain about how all of this will be implemented, especially in regard to foreign entities that seek to enter the Chinese e-commerce market. In order for all the new law's goals to be achieved, all stakeholders will have to lift their game. 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