New Regulations for Online Transactions

Dan Xu

Dan Xu is a partner and is in charge of the firm’s Intellectual Property & Data Compliance practice. She holds a bachelor’s degree from the Eastern China University of Political Science and Law in Shanghai, and a master’s degree from Leiden University (the Netherlands). Dan passed the China Bar examination in 2012. Prior to joining DaWo Law Firm, Dan worked at the China Desk of a Dutch law firm in Rotterdam and at De Wolf Law Firm Shanghai.

Recently, the e-commerce landscape in China has developed rapidly, with various unique new business models springing up such as social e-commerce and livestreaming sales. With this in mind, on March 15, 2021, China’s State Administration for Market Regulation (“SAMR”) issued Measures for the Supervision and Administration of Online Transactions (the “Measures”) as an implementation of the E-commerce Law of China, which codifies and enhances the supervision system for online transactions involved in such ventures.

Below are some highlights:

1.Legitimizing and Legalizing Novel Business Models

Article 2 of the “Measures” states that e-commerce operators must meet certain legal and regulatory requirements related to e-commerce once it begins business activities involving the sale of products or services through information networks.

Additionally, Article 7 provides that online sellers, including those engaged in social e-commerce and livestreaming, whose services represent online business transaction platforms, including commodity browsing, order generation, and online payment for operators, must fulfill the legal and regulatory obligations of online transaction platform operators. In other words, if you carry out online transaction activities through the above-mentioned online transaction platform services, you will be defined as a platform-based operator.

2.Clarifying Exemptions from Registration

Article 10 of the E-commerce Law of China, the “Measures” initially clarifies the two types pf exemptions from registration.

Specifically, individuals who engage in the online ‘convenience’ labor activities such as cleaning, washing, sewing, hairdressing, moving, key making, pipeline dredging, household appliance and furniture repairing and replacement that legally require no licensing, shall be exempt from registration.

Additionally, isolated small-amount transactions, operated by individuals, will be defined as ‘online transactions with the cumulative annual turnover less than CNY100,000’. That said, if an individual operator sets up multiple online stores on either the same platform or different platforms, the transaction amount of all online stores shall be aggregated, potentially eliminating this exemption.

3. Inspections and Regulation
Section II of Chapter 2 of the “Measures” details the duties that online transaction platform operators shall be responsible for.

Among these clauses, Article 24 stipulates that an online transaction platform operator shall verify the registration information of the operator applying for access to the platform by requiring it to submit authentic information about its identity, address, contacts, administrative licensing, etc. Also, online transaction platform operators shall establish registration archives, which shall be updated at least every 6 months.

Additionally, an online transaction platform operator shall, in January and July of each year, provide the identity information of each platform-based operator (business name, unified social credit code, actual business address, contact information, online store name, etc.) to the provincial-level Administration for Market Regulation where it is domiciled.

Also of note is the fact that if any commodity or service information on a regulated platform violates laws, regulations or rules on market regulation, damages state interests and public interests, or goes against public order and good customs as identified, the online transaction platform operator will be required to take certain measures, including retaining relevant records, and promptly inform the Administration for Market Regulation at or above the county level where the platform is domiciled.

As you can see, it seems likely that not only traditional e-commerce platform operators but also those that simply provide social e-commerce or livestreaming will be more tightly monitored in the future. So, we would advise platform operators to err on the side of caution and become proactively compliant with related laws such as the ones we mentioned here. DaWo can help with this by assessing the service modes, business models, etc., as well as setting up enhancing the internal compliance management systems. Feel free to reach out.