First ecommerce regulation introduced in China

On June 1, 2010, the first ecommerce regulation “The interim measures on administration of internet-based goods and service transaction” was introduced, the new regulation will hugely influence Chinese ecommerce market.

According to the new law, individuals will have to provide real name and residential address to apply with local administration of industry and commerce, for approval to deal with goods or service related ecommerce business. For store owner on C2C website, such as taobao.com, they can submit their personal information to taobao.com, then taobao.com will submit the personal information of their sellers to Administration of Industry and Commerce for registration and approval. Independent ecommerce websites run by individuals should register up directly with local Administration of Industry and Commerce.

According to statistics and report released by Alibaba Inc, in 2009, the ecommerce market in China has reached 3.5 trillion RMB, a 48.5% increase than previous year. Among which, the C2C ecommerce market has hit 234 billion RMB, an almost 100% increase than 2008. China urgently need this law to govern their ecommerce transaction, especially B2C and C2C transaction, as in those cases, normally there are no contract signed or evidence left, scam and dispute often happen to an extend to harm the healthy growth of ecommerce market.

Leading ecommerce portal such as alibaba.com(B2B), Taobao.com(C2C) are requested by the law to monitor the transactions, make sure illegal products, services and transactions will not exist on portal websites. Predictably, illegal and grey products and services will be deleted from those websites soon, such as counterfeit brand products.

With more than 30 million websites run by individuals in China, there is huge amount of work for the registration and approval work related with that huge amount of websites. As webmasters complain, many of them might work thousand miles away from their residential address listed on their identity card, it would be extremely difficult for those to go back to the local administration of industry and commerce to register and get for approval. Many of them are thinking to host their websites to overseas server to escape the regulation of this new law.

Another noticeable thing is that the law particularly point out that illegal competition through technique like search engine optimization is prohibited. It will be interesting to see that will be enforced in the legal practice.

Related links:

The interim measures on administration of internet-based goods and service transaction (Chinese version)

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Comments

4 Responses to “First ecommerce regulation introduced in China”
  1. Bart says:

    This law is a short-term action where the government only will reduce accounts who sell illegal products and services. This isn’t a long-term solution, because now the grey market will move to another web server or website in the country and the grey market will still exist.

  2. Diomede says:

    This is a good news, we are a distributor in China and we do not dare to start sales through Internet, things can get “luan” (乱, messy) in a very short time. I hope for the development of more of this kind regulations which can protect the fair players.

  3. Steven Chow says:

    Bart,

    I agree this can’t solve the illegal and grey business in one go, however, unless the illegal businessman move their hosting out of the country, they are under the radar.

    If they move out, some grey and illegal business in China are deemed as illegal in U.S, for example, copy branded products, so no server company will welcome their business.

    Even though they find a server to host their website outside of China, if they are still targeting China market, we have a great fire wall to block their website.

    Regards,

  4. Steven Chow says:

    Diomede, I agree, this will only benefit the ecommerce industry both in short and long run. When those standing in grey and black shadow cry, most businessman such as you do laugh and applause for the new regulation.