The Chinese Congress has passed an E-commerce Law in its latest session that ended on August 31. The new regulations will come into effect from January 2019.
The legislative process has been quite unusual. It took the Congress four times to review the clauses designed to regulate China’s booming e-commerce market. Most Chinese legislative bills will only have three revisions before officially becoming laws.
India, the second biggest internet market is also in the process of enacting a similar law to protect consumers' rights and to bring about greater standardisation to the e-commerce sector in the country.
What exactly is in China’s new E-commerce law? The recently enacted E-commerce Law aims to ensure customers’ rights and protect e-commerce consumers from frauds and poor quality products. The law will hold e-commerce platforms more accountable to issues related to product qualities, bad-faith businesses, and potential fraud against the customers.
The law will make it easier for customers to sue online merchants and e-commerce platforms for issues related to products they purchased online. The law makes e-commerce platforms liable for any damages that customers suffer.
The legislation also stipulates that while e-commerce platforms can show personalized search results for different users, they must provide an alternative version for users who do not want to see personalized search results based on their personal viewer history or spending habits.
The era of e-commerce tax evasion may be over A key change in the E-commerce law, is the requirement of business licences for individual online sellers. After 10 years of operating without a proper business permit, individual E-commerce merchants may find their business stepping into tougher zones.
In 2015, online businesses paid at least CNY 43.6 billion less than regular business entities, studies reveal. It is believed that online businesses could possibly have evaded CNY 1 trillion worth of tax in 2018.
As per the 2008 version of the law, e-commerce platforms were not required to hold proper business permits and thus were not obliged to pay business tax. For individual online businesses, there was no cost associated with permit registration and didn’t not need an actual office for operation. The law treats e-commerce sellers at par with businesses with real physical presence offline, bringing to an end the huge benefits they had enjoyed over the last decade.
The new law could impact different platforms in different ways. For JD.com, the impact may be minimal the company’s online businesses have physical stores in China. Yet for platforms such as PinDuoDuo and Alibaba, the new law could make it more difficult for sellers on the platforms to make profits.
Will this really change China’s E-commerce market? Although the law may ensure greater consumers’ rights and eliminate low-quality products that are ubiquitous on China’s E-commerce platforms, the law seems to be vague on several key areas. For instance, the law is unclear on the specific requirements for online businesses to register. It is also hazy on the exact responsibilities that e-commerce platforms have in potential legal disputes.
The equivocal stances that the Chinese government takes on these issues, unfortunately, may water down much of its intention to spruce up quality.
However, the move of pushing for a law specifically designed for China’s e-commerce industry shows the government’s determination in addressing some of the urgent issues that need to be solved to regulate and standardize China’s e-commerce market.
Correction: The earlier version of the story said the law will come into effect from September 2019. It should be January 2019. The changes have been made to that effect. We regret the error.