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E-commerce law comes into force in China

An e-commerce law has come into force in China that seeks to regulate online business, protect intellectual property rights and increase cybersecurity. The law came into force on 1 January11 Jan 2019

The new legislation aims to protect the legal rights of all parties in online business activities; maintain 'order' in online markets, and facilitate a healthy development of online business. It seeks to protect intellectual property rights; cybersecurity; consumer rights, and personal information. It seeks to combat unethical online business practise to reduce counterfeiting. 

The e-commerce defines 'e-commerce operators' as people, legal entities and unincorporated organisations engaged in the business activities of selling goods or providing services via informative networks such as internet; e-commerce operators include e-commerce platform operators, operators within the platform, and those who sell goods or provide online business service via self-built websites and other online network.

Under the law platform operators are prohibited from imposing unreasonable restrictions, conditions or fees on goods and must keep transaction records, relevant information of goods and services for at least three years.

This means that people who shop abroad on behalf of consumers in China and sell goods to them at a higher price must register as e-commerce business in China and pay taxes. 

The new law has created regulatory requirements on e-commerce platform operators, such as an obligation to review the qualifications of operators, and a safety guarantee obligation. It also changes the regulation of e-commerce contracts, meaning that e-commerce operators may have to adapt their online transaction contracts or terms.

Violators of these new regulations will face fines up to half a million yuan. Operators can be fined up to two million yuan in serious cases of intellectual property infringement.

The law will create penalties for dishonest behaviour such as deleting negative reviews and faking positive reviews.

E-commerce expert Leo Xin of Pinsent Masons, the law firm behind Outlaw.com, said, "Regarding cross-border e-commerce, there could be some impact on foreign companies which have registered at a cross-border e-commerce platform and sell goods to China on a bonded import model. The new law applies to electronic commerce activities carried out within China but the law does not define 'within China'. Whether a foreign company which registered on the cross-border e-commerce platform is required to comply with the new law is not very clear."