Law Regulating Online Shopping Activities Enforced In China

China on Tuesday officially enforced a new law to regulate its vast e-commerce sector, with an aim to regulate the flourishing online shopping market that has been littered with counterfeit and copycat products.

The legislation, which passed in August and officially came into effect on January 1, 2019, aims to fight against unethical sales practices on the internet by demanding all e-commerce operators to protect consumer rights, interests, and personal information, as well as safeguard intellectual property rights and cyberspace security.

Aside from major e-commerce websites and mobile apps like Alibaba's Taobao and Tmall, JD.com, and Pinduoduo, merchants doing business on these e-commerce platforms and those who operate online business through their own websites are also subject to the regulation of the new law, a Chinese news report said.

According to the new law, those stationed outside of China and previously earned profits from shopping on behalf of consumers in China and selling goods to them at a higher price will now have to register as an e-commerce business in China and pay taxes.

Also, dishonest activities from online merchandisers such as "deleting bad reviews" and "faking good reviews" will result in penalties from regulators in the future. 

Consumers will also have to be notified prominently of any tie-in sales or services on e-commerce platforms, with these types of sales or services not being allowed to be set as a default selection by vendors. Violators of these new regulations will face fines up to 500,000 yuan.

The legislation aims to protect online consumers and intellectual property rights, as well reduce the amount of major counterfeits on e-commerce platforms, and is considered as a favourable move towards protecting the interests of major e-commerce platforms like Alibaba and JD.com that operate under strict compliance and regulations. 

China's e-commerce market reportedly grew to over US$1 trillion in 2018, a year ahead of predictions, according to research agency Forrester. 

With last year's predictions that China's retail sales reached US$1.1 trillion in 2018, Forrester also said that the amount of Chinese online shoppers is expected to grow by 4.6 percent annually to reach 631 million by 2022, up from the current 502 million.

Alibaba in November came to an agreement for Belgium to be a part of the e-commerce giant's Electronic World Trade Platform (eWTP), becoming the first European Union market to support the Chinese e-commerce operator's pitch to establish digital free-trade hubs. 

The objective of the agreement will be to create global trade zones that provide "simple and straightforward" regulations and lower barriers of entry for small- and mid-size businesses (SMBs) via e-commerce, said Alibaba. 

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