China publishes the Draft E-commerce Law

E-commerce is rapidly growing in China and to further regulate and administrate the various e-commerce activities and facilitate its healthy development, China published the Draft E-commerce Law (“Draft”) on 27 December 2016 to solicit public opinions.

The Draft applies to e-commerce activities occurring within China or activities involving the participation of e-commerce operators or customers who are within China. As such, a foreign e-commerce website that targets Chinese customers, or a foreign e-commerce platform that allows Chinese vendors to trade on it, will also fall into the regulatory regime of the Draft and so must follow the applicable requirements. E-commerce is defined as the operational activities of conducting goods or service transactions through the internet and other information networks.

The Draft differentiates “3rd party e-commerce platforms operators” (such as the operators of Taobao and Tmall) from “other e-commerce operators” (which would include vendors residing on Taobao or Tmall, or organisations operating their own websites to sell their own goods). The Draft recognises the former’s leading roles in the development of e-commerce. Accordingly, a platform operator is required to (i) examine and supervise the operational activities of other e-commerce operators residing on its platform; (ii) formulate and publish fair and clear rules for transactions conducted through its platform; (iii) take necessary measures to provide stable and secure platform services, and keep operation records properly; and (iv) establish credit evaluation mechanisms, emergency response mechanisms, mechanisms for a vendor to terminate its trading activities through the platform, and other necessary mechanisms.

The Draft also sets out the requirements concerning electronic contracts (e.g. presumed capacity, formation of contracts, automatic transaction information systems, and electronic errors), electronic payments (e.g. rights and obligations of payment institutions, payers, and payees, pay confirmation, wrongful payments, unauthorised payments, and excess reserves) and express delivery services (e.g. delivery service alliances, service standards, responsibilities and liabilities, and delivery time).

Regarding the protection of customer interests, the Draft emphasises the importance of personal data protection, and specifies the requirements for utilising data generated in e-commerce projects. It also sets out requirements concerning the authenticity of information, quality control of goods and services, use of standard contracts, and security deposits for customer protection.

For the purpose of standardising the market order, the Draft provides requirements on IP protection and procedures for dealing with IP infringement complaints. The Draft also lists the prohibited activities that constitute unfair competition or manipulation of credit evaluation.

The Draft encourages China’s development of cross-border e-commerce, and states it will increase the digitalisation and convenience level of customs clearance, tax collection, inspection and quarantine procedures in the future.

The Draft is open for public comments until 26 January 2017 and comments from both domestic and foreign organisations are welcomed. The final version of the Draft is expected to be published soon.