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Home > Compliance
How would Chinese E-commerce Law affect you (1)?
By Henry Chen | 2018/9/20 8:52:58

On August 31st, 2018, after five years examination and debating, the E-commerce Law of the People's Republic of China ("E-commerce Law") was finally published.  It will come into effect on January 1st, 2019.  The E-commerce Law defines e-commerce business operators' duties to ensure their legitimate operation.  It also clarifies the e-commerce business operators' legal responsibilities to protect consumers' rights and personal information.  It is a heavy-duty milestone in e-commerce industry.

The E-commerce Law distinguishes "e-commerce platform operators" (hereinafter as "Platform Operator(s)") from "e-commerce business operators using an e-commerce platform"(hereinafter "On-platform Operator(s)").  The former (i.e., Platform Operators) is just like a broker to match-make the latter (i.e., On-platform Operators).  Therefore, the "Platform Operators" is defined as "legal persons or non-legal-person organizations who provide online business premises, transaction matching, information dissemination services etc. for both parties or multiple parties in e-commerce transactions, so as to facilitate both or multiple parties in transactions to carry out transaction activities independently".  And the "On-platform Operator" is defined as "selling goods or providing services through an e-commerce platform".

In addition to the Platform Opearors and the On-platform Operators, there is a third category of e-commerce business operators which engage in sale of goods or provision of services through their self-built proprietary websites or other network services ("Proprietary Operators").

Among many differences, a Platform Operator has many more compliance obligations to meet than an On-platform Operator or Proprietary Operator (which we are going to discuss in our subsequent serial articles).  Therefore, it is important to know, what is a Platform Operator vis-à-vis an On-platform Operator or Proprietary Operator.

According to the E-commerce Law, the key factors to differentiate a Platform Operator from other operators are as follows:

(1)  Does this operator provide online business premises?

(2)  Does this operator provide transaction matching services?

(3)  Does this operator provide information dissemination services?

(4)  Does this operator provide services mentioned above to facilitate both or multiple parties in transactions for them to carry out transaction activities independently?

For example, Taobao, a famous Chinese online shopping website, is a Platform Operator because it brokers both sellers and buyers on its platform, and provides them with services like communication, product display, placing order and so on, which fall within "providing business premises, matching the transactions and information dissemination".

Usually, there is no difficulty in telling a Platform Operator from others.  However, sometimes, it could be a touch-and-go.  For example, a company integrates logistics services of airliners or some other logistics service suppliers to e-commerce sellers.  That said, the sellers do not enter into contracts with and do not make any payments to the airliners or some other logistics service suppliers.  However, wherever there is any dispute in relation to the logistics services, it is the wish (as provided in contracts) of integrating company that the integrating company shall not get involved.  Is the integrating company a Platform Operator or not?  We may make analysis from contract flow, logistics flow, money flow and liability flow.

From the contract flow, the integrating company is not like a platform because the integrating company enters into contracts directly with sellers.  However, the logistics flow shows the integrating company matches the services of the logistics service suppliers to requirements of the sellers.  The sellers pay the money to the platform, but the platform pays for the services of the logistics service providers like an agent of the sellers.  Because the integrating company chooses not to assume liabilities from either sellers or the logistics service providers, the integrating company is more like a platform trying not to get involved in any dispute.  In totality, the integrating company is more like a Platform Operator than an On-platform Operator or a Proprietary Operator.

We are going to write and publish on-line articles about the E-commerce Law.  Please stay tuned.

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