BEIJING: A draft e-commerce law in China has the potential to increase pressure on smaller online retail companies to crack down on the sale of fake and counterfeit products on their platforms.
The law, the latest draft of which made its way through China’s parliament last week, would make e-commerce platforms as responsible for the sale of counterfeit goods as the individual merchants, who are currently liable when caught, according to the South China Morning Post.
For the largest platform operators, the legislation is unlikely to disrupt the operations of the country’s largest e-commerce firms, who have been developing capabilities to identify and remove fakes from the platform.
In part, the legislation fits with a broader trend toward reducing the copycat perception of Chinese manufacturing, and can be read in line with the current Made in China 2025 plan to put innovation and high-technology at the core of the Chinese economy.
Meanwhile, the smaller platforms are the most likely to be hurt by the law, Paul Haswell, a partner at the law firm Pinsent Masons who advises tech firms. The legislation, he told the SCMP, “is almost certainly going to be passed.”
“Much of what will be required by the new law has already been put in place by these major platforms”, he continued, referring to companies such as Alibaba Group and JD.com. The proposed law indeed follows a lead taken by Alibaba and JD.com.
Both have significant computing power, which has been trained on fake goods. On its Taobao and Tmall marketplaces, Alibaba uses both image and character recognition to flag what might be a fake good. Last year, the company caught 240,000 stores selling counterfeit items.
Last year, Alibaba unveiled major upgrades to its Intellectual Property Protection platform, the online channel through which brands can file complaints, streamlining the reporting process and hiring more people to reduce response time.
Earlier in August 2017, Alibaba had been in the crosshairs of a lawsuit from the Gucci-owner Kering. The company dropped the suit following an agreement from Alibaba to form a joint task force to take action against counterfeit sellers.
JD.com, China’s second-largest e-commerce service, established a “Tracing and Anti Counterfeit Alliance,” last year to show how products are tracked through the supply chain. The company also leverages fines against counterfeit sellers.
However, the work is rarely complete, and new legislation will accelerate the need to clamp down. “All platforms play a game of cat and mouse with a small minority of sellers who wish to rip off the consumer,” said Haswell. “There is always more to be done.”
Sourced from SCMP, Forbes, Bloomberg; additional content by WARC staff