China Proposes Updated Rules For Online Trading Operators.

China is consulting on new administrative measures for online trading which reinforce the existing obligations on online trading operators and expand the regime in a number of areas. In particular, the new draft measures propose clearer guidance for both online trading operators and China’s State Administration for Market Regulation (SAMR) on the implementation of China’s E-Commerce Law which was effective from 1 January 2019 (E-Commerce Law) (please refer to our e-bulletin on E-Commerce Law here) including responsibilities in areas such as online trading conducts and use of personal data. They also elaborate on the supervisory role and powers of the SAMR.

The proposed new Administrative Measures for Online Trading will replace the existing measures introduced in March 2014. They are open for public comment until 29 May 2019. This e-bulletin highlights some of the key developments proposed by the draft measures which will impact e-commerce market players in China.

Key obligations in the E-Commerce Law repeated with implementation details

The draft measures reiterate many key obligations in the E-Commerce Law but provide online trading operators and SMAR with clearer guidance on the implementation. Some of the key implementation measures are set out below:

 

• Requirement to publish online trading operators’ details

 

The E-Commerce Law is silent as to the time limit for updating any change to the publicized information. Article 12 of the draft measures requires online trading operators to update their publicized information within 20 days if there is any change.

 

• Regulation on online trading conducts

 

Article 17 of the E-Commerce Law requires e-commerce operators to fully, authentically, accurately and timely disclose the information about the goods and services and safeguard consumers’ right to know and right of choice. Article 16 of the draft measures elaborates the scope of information about the goods and services that must be disclosed by the online trading operators to the customers. Such information includes the business place, contact information, quantity and quality of the goods and services, price or cost, performance periods and methods, transportation arrangements, payment methods, return and replacement policies, any safety precautions and risk warnings, after-sale service and civil liabilities.

 

If online trading operators use standard form contracts, such contracts must comply with PRC laws and regulations. Online trading operators must also explicitly inform customers of any term which may have a significant impact on customers’ rights and interests. Online trading operators’ must not contain in the contract any term that limits the customers’ rights, increase the customers’ obligations or exempt the online trading operators’ obligations, nor shall they force the customers to transact using form contracts or other technical means.

 

• Personal data protection

 

To supplement the requirements in the E-Commerce Law on lawful personal data collection, the draft measures propose new requirements on information disclosure, obtaining consent and confidentiality obligations.

 

Article 22 of the draft measures reiterate the principle that online trading operators must obtain consumers’ consent and clearly display the purpose, method, scope and rules when collecting or using consumer or business information. It further requires that online trading operators should seek the consumer’s consent each time they collect or use the customer’s personal information; a one-off consent from the customer is not sufficient. If the customer refuses to grant his/her consent to the collection of personal information that is irrelevant to the relevant online trading activity, the online trading operator shall not refuse to sell goods or provide services to the consumer.

 

Article 22 of the draft measures also requires online trading operators and their employees to keep confidential consumers’ personal information and trade secrets that they have obtained in the course of carrying out their operations. Online trading operators must not leak or sell such information or illicitly provide it to a third party, and must take necessary measures to ensure the safety of information and prevent it from leakage or loss. If there is actual or potential leakage or loss of such information, online trading operators are required to promptly take remedial measures.

 

• Information reporting

 

The draft measures require that online trading platform operators to report certain information about the businesses trading on the platform to the SAMR at least once half a year. Information to be reported includes details of the business license, administrative permits, contact information, online store names and premises. For purpose of administrative investigation, the SAMR may also require the platform operators to provide other information about the businesses trading on the platform, such as information about the products or services, sales volume, revenue and trading records.

Penalties for failure to report include rectification orders and fines of up to RMB30,000.

 

• Verification obligations of online trading platforms

 

Platform operators are required to verify the information of the businesses trading on the platform such as their identity, addresses and administrative licenses, and keep such information updated. Platform operators are prohibited from providing platform services to those businesses which cannot provide such information or the information provided cannot be verified.

 

• SAMR’s supervisory powers

 

The SAMRs at county level or above are responsible for supervision of online trading activities. They can carry out random inspections and use big data technical measures to perform their supervisory responsibilities.

Non-compliance by online trading operators will be publicised on the National Enterprise Credit Information Publicity System and may also be publicised for example by being listed at the top of search engine outcomes.

 

Non-compliance may also be subject to administrative penalties in accordance with the E-Commerce Law and the draft measures including an order to cease illegal activities, onsite inspections, closure or seizure of online trading equipment, products or materials, access denial to webpages, closure of websites and fines.

Our observations

The draft measures provide useful additional guidance to both market players and the SMAR on the implementation of the E-Commerce Law. They provide guidance on the compliance requirements for market players on the one hand and also facilitate the SAMR’s enforcement against non-compliance on the other hand.

 

Market players should keep an eye on any updates to the draft measures. We also suggest that MNCs with online trading in China should conduct a self-assessment against the requirements in the draft measures and get prepared for the implementation of the new measures in the near future.