In China, operations of digital platforms are considered a value-added telecoms service and subject to licensing requirements under the Administrative Measure for Telecoms Business Licences issued by the MIIT and effective in 2009, and later amended in 2017. Depending on the nature of the digital platforms, additional regulations may apply.
With respect to the operation of e-commerce platforms, the e-commerce law of China (E-commerce Law) applies. The E-commerce Law is promulgated by the Standing Committee of the People’s Congress of China and effective as of 1 January 2019. It is China’s first comprehensive legislation governing the field of e-commerce. It sets out the definitions such as ‘e-commerce operator’ and ‘e-commerce platform operator’ and different requirements on e-commerce operators and e-commerce platform operators.
E-commerce operators are broadly defined as individuals, legal entities and organisations who carry out business activities through information networks such as the internet to sell goods or provide services, including e-commerce platforms operators, business operators on e-commerce platforms, and others selling goods or providing services on their self-operated website or other network services. The key requirements for e-commerce operators include:
- with a few exemptions such as home-made small individual businesses, all e-commerce operators are required to complete business registration and obtain the requisite sector licence where required (eg, food, drug, medical device trading), and shall disclose this licence information on its website in a notable way;
- e-commerce operators shall pay applicable tax and shall issue invoices or receipts;
- e-commerce operators shall disclose product information in a complete, truthful, accurate and timely manner;
- the goods or services provided by the e-commerce operators shall comply with requirements for personal or property safety and environment protection; and
- e-commerce operators shall comply with data protection regulations in relation to the collection and use of customer personal information.
E-commerce platform operators are defined as a legal entities or organisations that provide services, including online trading sites, trading matchmaking and information distribution in order for two or multiple trading parties to conclude transactions independently. The key requirements for e-commerce platform operators include:
- e-commerce platform operators must verify the real identity of the operators who apply to sell goods or provide services on the platform and submit the identification information and tax-related information to competent market administration and tax authorities;
- e-commerce platform operators are required to keep records of goods and services information as well as transaction records for not less than three years; and
- e-commerce platform operators will have joint and several liability with e-commerce operators, where the e-commerce platform operator knows, or should have known, that the relevant goods and services do not comply with the relevant requirements for personal or property safety or other legitimate interests of consumers, or has violated another’s intellectual property rights and the e-commerce platform operator fails to take any necessary measures.
In addition to the above, the E-commerce Law also sets out the requirements in relation to e-commerce contracts, e-payment, e-commerce dispute resolution, cybersecurity measures as well as platform policies.
With respect to live-show platforms, the Administrative Rule on Internet Live-show Service (the Live-show Rule) issued by the Cyberspace Administration of China (CAC) and effective as of 2016 applies. The Live-show Rule provides for, among others, that the live show platform operators must verify the real identity of the performers before allowing them to perform on the platforms and must maintain the technical capacity and management mechanisms to block the broadcasting of illegal shows immediately upon discovering the illegality.
With respect to operation of P2P lending platforms, the Provisional Measure for Administration of Network Lending Information Intermediate Services (P2P Measure) was issued by the China Banking Regulatory Commission, the MIIT, the Ministry of Public Security and the CAC and effective in 2016. The P2P Measure requires online lending information intermediaries to register with the local financial regulatory bodies upon their establishment, include online lending information intermediary in the business scope of their business licence and obtain a telecommunication business licence from MIIT. The local financial authorities shall categorise the operators and disclose their filing information to the public. P2P lending platforms shall check borrowers’ creditworthiness before allowing them to post borrowing requests on the platforms and to adopt proper measures to ensure information security. The P2P Measure also prohibits platform operators from, among other things:
- borrowing money through their P2P lending platforms for their own use or for use by their affiliates;
- directly or indirectly pooling money from borrowers;
- providing guarantees or assurance for repayment of principals or interest, or both;
- marketing lending products to those other than users registered with their platforms on a real-name basis;
- distributing banking, security, fund, insurance or trust products or tying lending products with banking, security, fund, insurance or trust products sold by third parties; or
- splitting financing projects.
In the year from 2017 to 2018, the Chinese government and relevant regulatory authorities issued various regulations governing the P2P online lending industry, including, among others, the Guidelines on Information Disclosure of the Business Activities of Online Lending Information Intermediaries, the Notice on Rectification of Cash Loan Business, the Notice on the Special Rectification and Inspection of Risk of Online Lending Intermediaries, the Notice on Conducting Compliance Inspections of Online Lending Intermediaries, the Compliance Checklist of Online Lending Information Intermediaries, or the Compliance Checklist. The main purpose is to regulate P2P industry behaviour and enhance supervision of the industry.
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