September, 2018

Will China's new e-commerce law deter counterfeiters?

Original article: World Trademark Review

China's new e-commerce law will come into effect on January 1, 2019. Applicable to any entity doing business its own websites or through web services, including social media, the law aims to reduce misconduct in China's burgeoning e-commerce sector. Online platform operators who run afoul of the law face fines of RMB 500,000 to RMB 2 million.


China's new e-commerce law comes amidst surging growth in the sector. Cross border-trade is growing especially fast. An August Xinhua report notes that China's cross-border e-commerce trade increased almost 81% to reach RMB 90.2 billion last year. Consumers most frequently complained about food, milk, milk powder, healthcare products and cosmetics purchased from overseas, Xinhua says. Chinese consumers often prefer to buy foreign-made milk powder, medicine and cosmetics as the imported products are viewed as safer.

Many of those complaints occurred because the consumers bought fake or sub-standard products. Counterfeiters have the means to package a product so that it appears to have come from overseas, when in fact, it is a China-made fake.


With that in mind, foreign brands selling to Chinese consumers shouldn't be concerned about the law. "I actually think it's a very positive development, it shows the (Chinese) government is supporting the e-commerce channel. And the more regulated it is, the more trusted it is," Kristy Carr, co-founder and managing director of an Australian infant formula maker, told The Sydney Morning Herald in September.


To be sure, the law marks a positive step for IPR protection in China. Yet some experts worry it does not go far enough. Eugene Low, a partner at Hogan Lovells, was quoted as saying by World Trademark Review in a September 3 report that the final version of the law has reduced the liability of e-commerce platform operators with respect to infringement of customer rights by e-commerce merchants on their platforms. "Instead of being jointly liable with merchants, this new law provides that e-commerce platform operators would only bear a ‘supplemental’ liability on top of the merchants' primary liability," Low said.


That change in wording is an area of potential concern, Low said. It "somewhat suggests that an aggrieved party may have to first establish liability and claim against the merchant first, and only if the merchant cannot satisfy the full claim then the aggrieved party can claim or have remedies against the e-commerce operator," he added.