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What's inside the draft of China's proposed e-commerce law?
The draft law on e-commerce in the country was submitted to the National People’s Congress (NPC) Standing Committee for review on December 19.

The draft law on e-commerce in the country was submitted to the National People’s Congress (NPC) Standing Committee for review on December 19.

The draft law — Electronic-Commerce Law of the People’s Republic of China — is expected to resolve problems of regulatory gaps and outdated legislation covering the booming e-commerce sector. Six questions addressing how to protect the rights and privacy of consumers, how to tax e-commerce, and other issues are addressed in the draft.

Should micro-business and online car-hailing be regulated – and if so, what related activities will be regulated in the e-commerce law?

Problems exposed by growth in the sharing economy, online-to-offline, social networking and internet finance have triggered heated debates across the country.

According to the draft law, e-commerce refers to transacting a commodity or service over an information network, such as the internet. E-commerce law would apply to any commodities or services that are specially provisioned by laws or administrative regulations.

Shi Yuzhi, a senior official with the Financial and Economic Affairs Committee of NPC, said that the law generally referred to sustained business activity for lucrative purposes. Private individuals selling second-hand goods, unused personal items or self-produced agricultural products, and other occasional online exchanges, would not be held accountable in the e-commerce law.

Insiders believed from a board sense that online insurance, online security trading and online car-hailing are being considered transactions over the internet and will be regulated by the new law. However, online insurance and online security trading belong to financial service and should be regulated independently.
Will “credit speculation” be terminated?

Credit speculation is a shady practice of boosting the popularity of an e-commerce platform by click farming. Regulators held that such a practice can not only mislead consumers but also disrupt the order of market competition and damage the overall reputation of the industry.

The draft law identified bogus transactions, deleting unfavorable comments, posting fake comments or improving business reputation by employing click farming or other means to obtain favorable comments are among those behaviors that may damage the credit evaluation system of e-commerce. Such practices, therefore, will be forbidden.

How will interests and rights of consumers be protected?

Safeguarding the legal rights of consumers has been a crippling challenge for exisiting laws don’t specify who should assume responsibility if there are any questions in transactions.

Many areas of the draft aim to provide protection for the legal rights of consumers. The draft law requires, for example, that third-party-e-commerce platforms that fail to offer real information about the operators on the platforms should compensate consumers when their legal rights are violated. Obligations and liabilities of the third-party e-commerce platforms are also specified in the draft law. An online dispute settlement mechanism was suggested in the draft law to improve efficiency and convenience to help resolve disputes.

How to protect consumers’ personal information?

Websites that provide e-commerce are unique in that they require visitors to provide substantial personal information –- telephone numbers, private addresses, credit card or banking information, and more — when they place an order. If a lawbreaker obtains this information, they can employ it to commit fraud. Limiting the amount of personal information disclosed has been a focus of concern for consumers.

Operators would be responsible for ensuring personal information security for consumers by offering technical support, under the draft. The new draft law goes on to clarify that operators would need to take remedial action, inform users and report to related departments if personal information has or may have been leaked, lost or damaged.

How to tax those opening an online shop?

Compared with physical stores, online shopping sites do not always provide invoices or charge tax. Regulatory departments have been missing out on receiving real data from online transactions, which is causing difficulty for them to carry out related policies to supervise these platforms.

E-commerce operators have an obligation to pay taxes and should provide paper or electronic invoices under the draft.

Will consumers have safer online shopping after third-party e-commerce platforms are regulated?

Statistics show that transactions on third-party e-commerce platforms account for 90 percent of online retail trade volume. These platforms may provide a place for selling fake or prohibited goods.

According to the draft, third-party e-commerce platforms should check and monitor all products or services provided in the platform. If a good or service fails to conform to regulations or laws and is discovered, third-party site operators should report the violation to relevant government departments and take necessary actions.

(By John Wu, Louis Berney)
Editor:Joanna You
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