Electronic Commerce Law (second draft)

The growth of China’s e-commerce sector has driven the government to further regulate the activities of e-commerce operators. The National People’s Congress Standing Committee issued the first draft of the Electronic Commerce Law on January 26 2017; the second draft was published on November 7 2017. This report highlights some of the issues or proposed changes introduced by the second draft.

Scope of operation
The second draft clearly defines the scope of e-commerce operators in China, including:

• operators exploiting their own websites;
• e-commerce platform operators; and
• e-commerce operators that listed their web shops on e-commerce platforms.

The previous chapter in the first draft on cross-border e-commerce has been deleted. The second draft will solely cover e-commerce activities occurring within China without considering cross-border e-commerce operations involving consumers.

Safe harbour for e-commerce platforms
According to the second draft, if an IP rights holder can provide prima facie evidence of infringement, the e-commerce platform must initiate the takedown procedures, allowing the rights holder to request the takedown of infringing links or even the closure of the online shops. E-commerce platforms that fail to take appropriate measures will be jointly liable with the operators for the damages caused. This could be regarded as a codification of practice that has already been adopted by major e-commerce platforms, with a clear responsibility and liability imposed.

Registration of e-commerce operators
Under the second draft, e-commerce operators must be registered with the State Administration for Industry and Commerce, with limited exception. This is a welcome development for IP rights holders, as infringers operating online stores may be more easily identified.

Measures against false or misleading advertising
The second draft proposes to strengthen consumer protection. Specifically, fabricating false transaction information, posting false user reviews or deleting genuine user reviews are prohibited. It further requires that e-commerce operators should display search results according to indicators such as sales volumes, prices and credit ratings of commodities or services. It also requires paid or sponsored listings to be marked clearly.

Practical mechanism for users to access, correct or delete their information
Under the Second Draft, e-commerce operators must provide users with practical mechanisms to access, correct or delete their personal information. Users should be informed of the procedure for closing their accounts without unreasonable conditions. Further, e-commerce operators would be prohibited from circumventing these requirements through imposing onerous contractual conditions on the users. The second draft has strengthened the protection of users’ personal data.

The consultation period of the second draft ended on November 26 2017. It will now go through a third review by the Standing Committee before coming into effect.