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First Administrative Regulation on Online Trading Aims to Improve Market Accessibility and Protection


 On September 11, 2013, State Administration for Industry and Commerce of the People’s Republic of China (SAIC) published, for public consultation, a draft of the Measures for the Trading of Commodities and Services through the Internet (Consultation Draft) (“the Measures”). The Measures is the first Administrative Regulation in the field of trading through the Internet. Compared with the Interim Measures for the Trading of Commodities and Services through the Internet (“the Interim Measures”) published on May, 2010, the Measures provide more definite provisions regarding obligations of online commodity and service trading.

  • Clarification of scope and definitions. The scope of Network Transactions is narrowly defined as commodity and related services trading through the Internet (including mobile Internet), not including TV shopping or telephone shopping. Commodity Trading Network is defined as business activities of selling of goods or services through the Internet. The independence of third-party trading platform was especially emphasized by changing “online trading platform” to “third-party trading platform”.

  • Improved Market Accessibility. In accordance with the Measures, a natural person engaging in commodity trading through a third-party trading platform (like Taobao) should register his or her real name to such platform. Because current laws and regulations prohibit unregistered business operation, some natural person who fails to meet the requirements of registration (like the minimum registered capital) is banned from starting business. In accordance with the Measures, such natural person may register his or her real name with a third-party trading platform and then engage in commodity and related services trading.
    The aforementioned third-party trading platform operator should be a legal entity, which is registered in AIC and obtains a business license. Such third-party trading platform manages a huge number of operators, consumers’ information and business data in the network. It is also directly related to the operation of the network platform, and concerns market order and social public interests. Therefore, unlike the natural person operators, a third-party trading platform operator needs to have a certain business scale and technical strength to ensure the stable operation of the platform.

  • Obligations of third-party trading platform operator. The Measures provide that third-party trading platform operator shall fulfill the following obligations:

    • Publishing business license or information of the operator. The third-party trading platform shall review and register the basic information of any legal persons, economic organizations or individuals that apply to enter the platform. It shall also prominently publish such information and the business license or the electronic links of such information/business license;

    • Differentiate and mark self-operation business and independent business operation. Besides operating a third-party platform, increasingly more third-party operators also start their own commodity or service trading. In such mixed operation, the third-party operator bears very different obligations as an operator of trading platform and an operator of commodity/service trading. Customers also impose different levels of trust to these self-operation business and independent business. Therefore, the Measures require clear marks to distinguish different type of operators.
      For example, Taobao, founded by Alibaba Group on May 10, 2003, is one of the largest C2C (customer to customer) third-party trading platforms in China. In April 2008, Taobao introduced a B2C (business to customer) platform called Tmall to complement its C2C marketplace. Since then, Taobao become a mixed operation platform, managing tens of thousands of independent operators as well as its own trading. On its website, Taobao makes clear marks to distinguish Tmall operators and the abovementioned independent operators.

    • To modify the agreements within the operators, third-party trading platform operators should follow principles of openness, continuity and reasonableness. Such modification shall also be publicized in advance.

    • Notifications shall be publicized in advance if the third-party trading platform operators intend to terminate its service.

    • Third-party trading platform operators are encouraged to protect consumers through the establishment of the Consumer Protection Guarantee Fund.

    • Obligations of other services providers. In addition to third-party trading platform, the Measures also impose obligations on service providers of payment, logistics, express delivery, network access and other related services.