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Global Media and Communications Watch The International Legal Blog for the Tech, Media and Telecoms Industry
Posted in e-commerce, Internet, Policy & Regulation Roy ZouAndrew McGintySherry Gong

China: Draft administrative measure for transaction rules of online retailing conducted on third-party platform

On 26 September 2013, China’s Ministry of Commerce (“MOFCOM“) released a draft of the Online Retailing Conducted on Third-Party Platforms Transaction Rules Administrative Procedures (网络零售第三方平台交易规则管理办法) (the “Draft Transaction Rules Procedures“), which aims to regulate transaction rules stipulated by third-party service platforms. The Draft Transaction Rules Procedures appear to cover new legislative ground, no doubt prompted by numerous consumer complaints.

The Draft Transaction Rules Procedures require third-party platform providers to include the following in their transaction rules:

(a) basic rules for transactions;

(b) rules for obligations and risk allocation;

(c) rules for intellectual property protection;

(d) rules for credit ratings;

(e) rules for consumer rights protection;

(f) rules for information and real-name system disclosure;

(g) rules for handling unlawful information;

(h) rules for disputed transactions resolution and handling of violations;

(i) rules for application, scope and term of transaction rules; and

(j) rules for modification of transaction rules.

These seem to be essentially common sense measures which a set of professionally drafted transaction rules would be likely to cover: the suggestion is that not all online third-party platforms have these basics in place. Under the Draft Transaction Rules Procedures, any third-party platform provider who wishes to adopt or modify its transaction rules must display the transaction rules or the revisions thereof on its website for at least 15 days for the solicitation of public opinion. Reasonable measures must be taken to ensure the relevant parties are aware of the transaction rules and any significant amendment to the transaction rules will require a transition period. Furthermore, the third-party platform provider must register and file its transaction rules and revisions, together with public comments received, with MOFCOM within 30 days of the implementation. Any person who believes that the transaction rules of a third-party platform provider do not comply with the Draft Transaction Rules Procedures may file a report with their local MOFCOM office, giving consumers the right to report violations. Failure to abide by the Draft Transaction Rules Procedures will attract a penalty between RMB 10,000 to RMB 30,000.

The Draft Transaction Rules Procedures are the first administrative regulation targeted at governing the transaction rules of third-party platform providers; they are almost certainly a reaction to certain market behaviour and consumer reaction to that behaviour. They represent a further attempt by the government to tighten the rules relating to e-commerce by regulating the behaviour of third-party platform providers, suggesting that there are issues with the current transaction rules of certain third-party platform providers.

There is also a clear intent on the part of the Chinese authorities to delegate the duties of monitoring online trading activities to third party platform providers. The new measures give third-party transaction platforms contractual powers to terminate registration agreements in the event the vendor has engaged in illegal activity. Unfortunately, while the Draft Transaction Rules Procedures demonstrate a positive and laudable attempt to protect online consumers, the fines seem very modest and may be too low to make a difference. It is envisaged that these new measures, once enacted, will boost consumers’ confidence, but are they enough to overcome the mistrust by the Chinese consumer of e-commerce borne out of harsh experience? This remains to be seen.