No more fake Chanel: China tightens regulations on counterfeit e-commerce sales

Tracy Qu and Minghe Hu, South China Morning Post

Posted at Sep 01 2021 11:33 AM

China’s top market regulator has revealed proposed updates to the country’s e-commerce law that promise harsher punishments for selling fake products online, as regulatory pressure on the companies behind the country’s booming digital economy continues to ratchet up.

The draft amendment, released for public feedback on Tuesday by the State Administration for Market Regulation (SAMR), gives detailed rules and adds extra punishments for those found to be guilty of serious violations, including the potential revocation of their online business licences.

The proposed revisions come amid a widening crackdown by regulators, including SAMR, on Big Tech and their internet businesses, including e-commerce. In March, the state-owned news agency Xinhua said the country will adopt more punitive measures to clean up the online shopping market and maintain a healthy environment.
The new draft extends the response window – the time a merchant’s business can be restricted while infringement claims are settled – from 15 days to 20 working days.

The original e-commerce law, which was passed in 2018 and took effect in 2019, aimed to clean up China’s reputation as a major source of counterfeit and knock-off merchandise for the world’s largest e-commerce market. It covers the requirement for registration and licensing of e-commerce operators, taxation, electronic payments and e-commerce dispute resolution, as well as the protection of intellectual property.

The law makes all e-commerce platform operators jointly liable with merchants for selling any counterfeit or copycat merchandise goods on their websites. A platform becomes liable if it knows, or should know, that a merchant on its website has violated intellectual property rights and fails to take action, such as deleting, blocking links or stopping transactions.

According to the law, e-commerce operators, such as Alibaba Group Holding and Pinduoduo, can be fined up to 2 million yuan (US$309,400) in serious cases of intellectual property infringement. Before the law went into effect in 2019, online merchants were only liable when caught selling fake products.

Alibaba is the owner of the South China Morning Post

In April, the country’s largest online retail platform Alibaba was slapped with a US$2.8 billion fine after a probe determined that it had abused its market position for years, which was about 4 per cent of the company’s 2019 domestic revenue.

Last year, SAMR said it had fined Alibaba’s Tmall, and Vipshop for pricing irregularities after consumers complained that the platforms raised prices before introducing discounts, engaged in fraudulent promotions and induced consumers into purchases during the Singles’ Day shopping festival.

According to the 2020 annual report on intellectual property protection by Alibaba, only 1.08 out of every 10,000 transactions on its online marketplace are suspected counterfeit, while the number of links suspected to involve rule infringements reported by consumers for deletion, decreased by 33 per cent compared with the previous year.