Summary
On Thursday, February 21, FAO Global attended a Hong Kong Chamber of Commerce (HKGCC) event centered around a presentation on the recently implemented the People’s Republic of China (PRC) Electronic Commerce Law. FAO Global tuned in to learn about how the recent policy change will affect the Chinese e-commerce market. Speaker Audrey Luo, a Partner at Shenzhen based Global Law Office, spent her afternoon informing Chamber members and guests about the origins, implementation, and consequences of China’s new e-commerce law.
In late August 2018, the Standing Committee of the National People’s Congress of the People’s Republic of China passed the PRC Electronic Commerce Law. Effective on January 1, 2019, the legislation is China’s first comprehensive attempt at regulating taxation, business registration, personal data collection, liability, and intellectual property protection for online business.
Caption: Ms. Luo fields questions from the audience in a closing Q&A
Top 3 Takeaways
Point 1: The effort was a collaboration between the Beijing central government and Chinese e-commerce retailers, including Tmall, JD.com, and Taobao. Attempting general balance in its interests, the law aims at protecting consumers, legitimizing business operations, and distributing liability.
Point 2: The law names three classes of e-commerce operators: Platform operators, merchants, and independent operators. Platform operators, are “marketplace” websites like Taobao and JD.com that connect buyers and sellers. Operators on platforms, or merchants, sell goods or services through platforms. Independent operators are merchants who operate outside of a major platform.
Point 3: The law sees the roles and responsibilities of each operator class differently in the context of its regulatory aims. Luo commented that although independent operators will be a continued focus of the law’s evolution, first the government wanted to focus on defining the responsibilities of, and relationship between, platforms and merchants.
Previously, the liability of business registration and intellectual property fell only on the merchants. Under the new law, platforms will also be held liable for failure of hosted merchants to comply with the e-commerce regulations. Both platforms and merchants are subject to fines in situations when merchants commit legal violations. Questions around the e-commerce law implementation primarily focus on this changing regulatory landscape, and it remains to be seen if each party will function effectively their new roles.
FAO Global Assessment
In one sense, the authority the law grants to large e-commerce platforms seem to solidify their position of influence and power in the government’s eyes. In another sense, if too much responsibility is placed on the e-commerce platforms to regulate and enforce the new legislation, the law could be in danger of conflating the distinct roles of the government and private businesses.
The PRC Electronic Commerce Law will likely continue to evolve, and Beijing will reevaluate as necessary. Several cases of gray areas in taxation, liability, the definition of independent operators have already surfaced, and lawmakers will have to continue to work to solidify the legislation.
Analyst Bio
Levi Rasmussen – International Business Development
Levi is an International Business Development Intern, focusing on internal strategy and development of FAO’s consulting services. Levi Rasmussen studies International Business, Finance, and Mandarin at the University of South Carolina. At FAO Global and his studies, Levi puts particular interest in facilitating the connection and integration of U.S. and Chinese firms through consulting work and building understanding between culture in dealing with organizations from the East and West. Levi will continue his studies in International Business at the Hong Kong Polytechnic University in Spring 2019.
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