China represents the largest e-commerce market in the world, dominated by well-known e-commerce giants such as Alibaba Group (Taobao, Tmall), JD and Pinduoduo. Recently, many of these companies are making the newspaper headlines, and not only because of their sales records.
For example, last year, China’s State Council’s Anti-Monopoly Commission investigated Alibaba’s Alipay and Tencent’s WeChat Pay for using their strong positions to crush competitors.
Last December, they also opened an anti-monopoly investigation into Alibaba Group. The probe mainly focuses on Alibaba’s practice of forcing merchants to choose either their platform or its rival site to sell their products, instead of being eligible to work with both, potentially crowding out competitors.
In that same month, the authorities issued fines against Alibaba Group, China Literature and Hive Box Technology for breaking the Anti-Monopoly Law.
Even more recently, the Chinese authorities launched a probe into Vipshop (China) Co. Ltd and Guangzhou VipShop E-commerce because of suspected unfair market competition.
This indicates that regulators are rethinking the ‘laissez-faire’ approach taken from the beginning of e-commerce legislation, and are more and more opting for a well-regulated e-commerce market. But what is the legal framework that lies underneath?
First there is the Anti-Monopoly Law (August 2008) which aims to outlaw monopolistic practices. More recently the SAMR released the Anti-Monopoly Law Revised Draft (January 2020) which follows the current Anti-Monopoly Law but for example significantly enhances the legal liability of operators and increases fines.
Secondly there are the Cybersecurity Law (June 2017), The Draft Data Security Law (July 2020) and the Draft Personal Information Law (October 2020) which all contribute to a robust cybersecurity and data protection framework.
Furthermore, there is the E-commerce Law (2019) which for example requires business and individuals (except those who sell self-produced agricultural products and/or with narrow, occasional, and low value transactions) to handle business registration and to report and pay taxes according to applicable laws and regulation.
Finally, there is the (consultation) Draft of the Anti-Monopoly Guidelines on the Sector of Platform Economies (November 2020) which restricts behavior such as price discrimination favoring certain types of customers, preferential treatment for merchants who sign exclusive agreements with platforms, and compulsory data collection.
Together with the Civil Code of the People’s Republic of China (January 1, 2021), which expressly provides the right of privacy and personal information protection to citizens, and a ‘governmental eye’ on the EU data protection rules in relation to the investment treaty between China and the EU, this (nascent) legal framework is expected to have a direct impact on the E-commerce market in China and worldwide.
Our team at DaWo has extensive experience within the legal framework discussed above, and with addressing the issues the laws present for foreign and domestic companies. If you have any questions, please don’t hesitate to reach out.