New law promises to give China’s e-commerce orderliness

Meng Yan is a 28-year-old whitecollar worker who has recently noticed that there are fewer advertisements on her ‘WeChat Moments’.

She used to feel bothered by constant WeChat ads posted by her friends or acquaintances selling products ranging from import infant formula to skin-care products, a popular e-commerce practice on social media in China.

“I was cheated once. I bought one eye cream from a WeChat store, which turned out to be a fake. I complained to the vendor, only to be blocked,” Meng said.

The disappearance of some of the WeChat ads might be because such individual e-commerce practices are coming under tighter scrutiny.

China’s first e-commerce law, which took effect on New Year’s Day, aims to keep the world’s largest e-commerce sector running on an orderly track.

China started mulling an e-commerce law in 2013. After years of development, the much-anticipated law was adopted by the country’s top law-making body in August last year.

Protecting consumer rights is one priority. Shoppers will feel more reassured while purchasing online, as the new law bans vendors from unscrupulous practices like deleting shopper reviews, cancelling orders at will and click farming, a fraudulent practice that involves hiring a large group of low-paid workers to click on paid advertising links.

Vendors on e-commerce platforms, WeChat, live-streaming websites and other online platforms are required to register their business, receive a license, pay taxes accordingly and be held responsible for fraudulent goods. Rule-breakers can face fines up to 2 million yuan ($290,900).

A recent survey of over 12,000 online shoppers by the China Consumers Association showed that over 70 percent had been sold knock-off products by e-commerce platforms.

“Selling inferior-quality products is the most pronounced illegal practice found on WeChat stores and live-streaming platforms,” said Pi Xiaolin, head of the CCA’s commodities and services supervision department, citing that about half of surveyed consumers had run into such problems.

Starting in 1999, China’s e-commerce market has been expanding at break-neck pace, with emerging players, even individuals, joining industry giants like Alibaba and JD in mining the country’s consumption potential.

China’s e-commerce growth rate has been in double digits for years. E-commerce transactions totalled 22.69 trillion yuan ($3.3 trillion) in the first three quarters of 2018, up 11.2 percent year-on-year.

For the WeChat-based e-commerce business alone, the number of vendors rose from about 12.57 million in 2015 to more than 20 million in 2017.

China’s e-commerce market is generally expanding on a positive note, but some problems linger due to its rapid growth and low threshold for market entry, said Ma Zhengqi, deputy head of the State Administration for Industry and Commerce, an e-commerce watchdog.

The administration rolled out guidelines early last December to help e-commerce vendors register their businesses.

A vendor selling women’s apparel on Alibaba’s Taobao finished business registration on Dec 15, the first online store on the platform to follow the e-commerce law.

Cao Lei, director of the China E-commerce Research Center, expected that many small e-commerce vendors might be pressured out of the market due to tightening regulations and rising costs. “However, if seen in a long-term perspective, it’s a good thing for the sector’s sustainable growth.”

Meng said: “Cheaper price is, of course, welcome, but the most important thing about online shopping is the product must be authentic. I hope tough law enforcement can ensure that.”