It was not all that long ago that Alibaba called for "tougher laws, stricter enforcement and stiffer penalties to crack down on purveyors of counterfeit goods in China." During a press conference at its headquarters in Hangzhou in February 2017, the Chinese e-commerce giant called China’s existing laws that regulated the intellectual property “ambiguous” and argued that such laws were hampering authorities’ ability to build legal cases against counterfeiters, resulting in a low conviction rate that is “the fundamental reason for the inefficiency in combating counterfeiting and protecting intellectual property.”
Now, a year and a half later, the Chinese government is preparing to pass the country’s first e-commerce-specific law, which includes provisions that aim to remedy the widespread availability of counterfeits online. The catch for Alibaba and its peers, including JD.com and Tencent? The law will hold them liable for counterfeit and other infringing goods sold by third-party vendors on their sites.
In addition to providing a formal framework for the notice-and-take-down procedures that already exist on most e-commerce platforms, including those in China, and explicitly prohibiting false advertising (including the fabrication of false transaction information, and writing/posting fake user reviews or deleting genuine user reviews), the legislation contains language that enables brands to hold e-commerce operators liable for infringement.
Specifically, the legislation states that e-commerce platforms that do not take appropriate measures to promptly address notice-and-take-down requests from brands (i.e., the formal requests from trademark or copyright holder to the platform’s operator requesting that infringing material be removed) will be jointly liable for the damages caused to the rights holder.
"The draft law aims to further support and promote the development of e-commerce, regulate market order, and protect the legitimate rights and interests of all parties in e-commerce," Cong Bin, deputy chairman of the NPC Constitution and Law Committee, said in a report to the lawmakers.
According to London-based law firm Hogan Lovells, which maintains a practice in Beijing, the new legislation is “fairly balanced and largely in line with existing practices.”
And speaking of existing practices, the legislation follows in the footsteps of the U.S. and other nations in putting a focus on the disclosure of sponsored posts, as it mandates that sponsored listings on e-commerce sites must be clearly marked as such.
UPDATED (Sept. 5, 2018): Following a fourth reading by Chinese lawmakers, the law was passed by the Standing Committee of the National People's Congress. While the official text has not yet been released, the law is set to go into effect on January 1, 2019.