Draft amendments would significantly increase penalties for online platforms and expand regulators' enforcement powers.
China has unveiled draft amendments to its E-Commerce Law that would significantly tighten liability for online platform operators. The proposal, released by the State Administration for Market Regulation (SAMR) and the Ministry of Commerce (Mofcom), is open for public consultation until Aug. 4.
The key change is the introduction of turnover-based fines of up to 5% of an offending platform operator's previous year's turnover for particularly serious violations. The current law caps fixed fines at 2 million yuan ($290,000), but the draft would raise the maximum to 5 million yuan while adding turnover-based penalties. According to experts, this could expose China's largest online platforms to fines running into the billions of yuan, bringing the E-Commerce Law more closely into line with the Antimonopoly Law's sanction regime.
The tougher penalties would apply to particularly serious violations, including failures to verify merchants' identities and qualifications, take necessary action against illegal merchants, goods or services, report violations to the relevant authorities, refrain from imposing unreasonable restrictions or fees on merchants, and take necessary measures after becoming aware of conduct that harms consumers.
The draft would also expand regulators' enforcement powers, allowing them to issue warning letters, launch special investigations and order rectification. In serious cases, regulators could suspend relevant business operations, request the suspension of user registrations or network access, or revoke operating licenses.
The proposal would also broaden the scope of the law by bringing providers of order-generation services within the definition of platform operators. This would extend regulation to newer platform models, including WeChat mini programs and social media platforms that increasingly incorporate e-commerce functions. Chinese authorities argue that the current law was designed for earlier forms of online retail and no longer adequately addresses emerging business models such as livestream commerce.
The amendments also introduce a stronger international dimension. The draft would extend the law's extraterritorial application to certain e-commerce activities conducted outside China that disrupt the domestic market or harm the legitimate interests of Chinese businesses or consumers. It would also authorize Mofcom to take responsive measures against countries or regions that impose discriminatory restrictions on Chinese e-commerce and investigate foreign entities that violate internationally recognized principles of non-discrimination, fair trade and transparency.
In addition, the draft would introduce a tiered supervisory model for e-commerce platform operators based on their size, type and business reach. It would establish a State Council coordination mechanism for platform-economy governance and strengthen the accountability of local governments for enforcing the law.
Source: MLex
