China: New e-commerce law aims to curb counterfeits

China: New e-commerce law aims to curb counterfeits

China’s new online trading law, which is yet to come into force, aims among other things to protect intellectual property and consumers. In order to achieve this, the operators of online retail platforms are to be held more to account. Yet critics doubt the law will hold much sway.



New law aiming for regulation of online trading

Author: Elena Bose, Online & PR Manager at tesa scribos

China’s newly passed e-commerce law claims to deliver comprehensive regulation of online trading. Speaking recently at a press conference of the Standing Committee of the National People’s Congress, lawmaker Yin Zhonqing said that the legal text—which at the time of writing is not publicly available—will define provisions covering operators, contracts, dispute settlements and liability in e-commerce. The new law is scheduled to come into force on 1 January 2019.

The new legislation will not only affect platform operators such as internet giant Alibaba or its rival Pinduoduo and the retailers who are active on these platforms. The law also covers all retailers selling products on dedicated websites or via social networks and messengers such as WeChat, WhatsApp and Yupoo. Social media platforms and messengers in particular have in the past also been repeatedly linked with the sale of counterfeit products (as reported by Anti-Piracy Analyst).

According to Chinese media reports, financial penalties expected to range from 50,000 to 2 million Yuan (roughly equivalent to between 6,000 and 250,000 euros) will soon be providing better protection for intellectual property. However, critics fear that this will not be adequate to protect IP rights effectively.

One main criticism is that rights holders could face critical problems when it comes to enforcing their claims, if a similar provision is in force for property rights infringements as the new law is likely to introduce for the infringement of customers’ rights. In this case, operators of online marketplaces will likely only have ancillary liability secondary to the actual retailers on the platforms, as lawyer Eugene Low, partner at the law firm Hogan Lovells in Hong Kong, explains to WTR.

According to Low, this may mean that ‘an aggrieved party may have to first establish liability and claim against the merchant first, and only if the merchant cannot satisfy the full claim then the aggrieved party can claim or have remedies against the e-commerce operator.’
It remains to be seen to what extent China's new e-commerce law will prompt operators of big online retail platforms to take independent action for property rights infringements.

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