Electronic Commerce Law of the People’s Republic of China (Mainland China)

Karl Zhang

Recently, the Electronic Commerce Law of the People’s Republic of China (the “Law”) was adopted during the fifth meeting of the Standing Committee of the 13th National People’s Congress in August 2018, later promulgated on August 31, 2018, and will go into force on January 1, 2019.  The Law mainly stipulates the scope of the Law, the responsibilities of e-commerce operators, the formulation and performance of e-commerce contracts, and the resolution of e-commerce disputes, as detailed below.

1. Scope of the Law

From the perspective of business activities, the “e-commerce” in the Law refers to conducting the business of selling goods or providing services through information networks such as the Internet.  However, if there are other laws or administrative regulations concerning the sale of goods or provision of services, such provisions shall apply.  The Law does not apply to financial products and services that use information networks to provide services such as news information, audio and video programming, publishing, and cultural products.

From the perspective of a business entity, an “e-commerce operator” under the Law refers to natural persons, legal persons and unincorporated organizations that engage in the business of selling goods or providing services through information networks such as the Internet.  This includes e-commerce platform operators, business operators on the platform, e-commerce operators who sell goods or provide services through their own websites and other online services.  The term “e-commerce platform operator” as used in the Law refers to a legal person or unincorporated organization that provides online domains for conducting business, transaction matching, information disclosure, etc., to both parties of a transaction, or otherwise enable them to independently develop trading activities.  The “operators on the platform” refer to e-commerce operators who sell goods or provide services on an e-commerce platform.

2. Liability of e-commerce operators

Pursuant to the Law, e-commerce operators primarily assume some of the following legal responsibilities in conducting their business:

(1) Registration as market entities should be completed, and the registration information disclosed.

(2) Perform taxpayers’ obligations, and issue proofs of purchase or service receipts.  Such as paper invoices or electronic invoices should be issued.

(3) Full, accurate and timely disclosure of product or service information to protect consumers’ right to know and to choose.  There shall be no sham transactions or fake user evaluations to create false or misleading commercial advertisement for deceiving or misleading consumers.

(4) For search results of goods or services that are tailored according to the consumer’s interests and purchase habits, the consumer should be provided with options that are not so tailored to give respect and equal protection to the consumer’s rights. Those who send advertisements to consumers shall abide by the relevant provisions of the Advertising Law of the People’s Republic of China.

(5) The collection and use of the personal information of users shall comply with the laws and administrative regulations concerning the protection of personal information.

(6) The manners and procedures by which user information may be inquired, corrected, and deleted, as well as how user accounts may be cancelled, shall be clearly set out without requiring unreasonable conditions.  If a request for user information inquiry, correction or deletion is received, the request shall be fulfilled immediately after the identity of the applicant is verified; and in case of user cancellation, the user’s information shall be deleted immediately unless such information is required to be retained pursuant to law, administrative regulations or mutual agreement between both parties.

Platform operators shall also assume the following responsibilities:

(1) They shall not impose unreasonable restrictions or conditions on the transactions conducted by operators on the platform, their pricings, and transactions amongst operators on the platform, by means of service agreements, trading rules and technologies, or otherwise charge unreasonable fees from those operators.

(2) When conducting its own business operations on the platform, they shall clearly indicate which business operations are self-operated and which are carried out by the other operators on the platform to avoid misleading consumers.

(3) If they know or ought to know that the goods or services provided by certain operators on the platform do not meet the relevant requirements for the safety of persons and properties, or are otherwise infringing on the rights and interests of consumers through failure to take required measures, the platform operators shall be held jointly liable.  For goods or services that are related to consumers’ life and health, if the e-commerce platform operator fails to fulfill its obligation to review the qualifications of the operators on its platform, or otherwise fail to adequately perform its obligations to protect the safety of consumers, the platform operator shall be held liable for any damage incurred by the consumers as a result.

3. Execution and performance of e-commerce contracts

With respect to the execution of e-commerce contracts, the E-commerce Law provides that if the goods or service information disclosed by an e-commerce operator meets the conditions of an offer, a contract is formed once a user selects such goods or service and successfully submits an order, unless the parties have agreed otherwise.  An e-commerce operator shall not stipulate in the form of a standard clause that no contract has been established after payment by the consumer; any standard clause containing such provision shall render such provision void.

With respect to the performance of an e-commerce contract, the Law provides that if the object of the contract is the delivery of goods by courier, the time the consignee signs for the delivery shall be considered as the delivery time.  If the object of the contract is to provide a service, the time specified in the physical or electronic receipt shall be the delivery time.  If such receipt does not specify a time, or if the specified time is inconsistent with the actual time the service is provided, the actual time the service is provided shall be the delivery time.  If the object of the contract is delivered digitally, the time the object of the contract enters a specific system designated by the other party and becomes searchable and identifiable shall be the delivery time.  If the parties agreed otherwise on the delivery method and delivery time, such agreement shall prevail.

4. E-commerce dispute resolution

Pursuant to the Law, the state encourages e-commerce platform operators to establish quality assurance mechanisms are conducive to e-commerce development and consumer rights protection for the goods and services provided on its platform.  Where an e-commerce platform operator and an operator on the platform agree to set up a consumer rights bond fund, the parties shall reach a clear agreement on the amount of withdrawals, the management, use and refund of the fund.  If consumers demand for an e-commerce platform operator to assume liability and provide compensation for damages first before seeking indemnification from the operators on the platform, the relevant provisions of the Consumer Rights Protection Law of the People’s Republic of China shall apply.

In addition, the Law also contains provisions concerning e-commerce promotion and legal liabilities.  In general, the newly promulgated Law provides a clearer legal basis for resolving all kinds of disputes arising from current e-commerce activities, as well as causing e-commerce activities to be conducted in a more orderly fashion overall, and protecting the interests of the consumers and merchants.  For e-commerce operators, they will need to inspect and make changes to their own business activities so as to avoid compliance problems after the new law goes into effect officially.