China raises anti-counterfeiting pressure on e-commerce platforms

China has introduced legislation that will hold e-commerce platforms, such as Alibaba and Pinduoduo, jointly responsible for counterfeit goods sold by third parties on their site.

The proposed legislation was adopted by the 13th National People’s Congress on Friday, August 31.

“E-commerce platform operators must establish rules to protect IP rights,” article 41 of the new law states.

Currently, sellers on online retail platforms are solely liable for the distribution of counterfeit products on that platform.

The government’s new law seeks to make online retail platforms (in China) jointly accountable with sellers for the distribution of fake goods.

It is due to be implemented on January 1, 2019.

Under the new legislation, e-commerce operators will be required to act quickly when a violation has been reported.

Failure to take “the necessary measures” in “a timely manner” will lead to a fine of between RMB50,000 ($7,328) and RMB500,000 ($73,282). However, for serious violations, a fine of up to RMB2 million ($293,130) can be imposed.

The incoming law includes non-traditional shopping channels, like social media operators, as e-commerce providers, meaning that popular social media app WeChat will be covered by the legislation.

WeChat, which is owned by investment holding company Tencent, had 1 billion active monthly users in Q1 2018. Around 90% of the users are based in China, and the platform is frequently used as a way to sell goods as well as for social networking.

China’s e-commerce platforms have been the focus of much IP-related concern recently.

In July, China’s State Administration for Market Regulation asked regulators in Shanghai to investigate online retailer Pinduoduo for hosting IP-infringing goods, an allegation that the platform’s CEO strongly denied.

Earlier this year, Alibaba announced that its anti-counterfeiting alliance had tripled in size since its inception in January 2017. More than 1,000 members, including international brands such as Louis Vuitton and Samsung, are part of the alliance.

The US Trade Representative’s Notorious Markets list 2017 included Alibaba’s online marketplace, Taobao.com, which reportedly continued to sell a high volume of infringing products last year.

It noted that in 2017, more small and medium-sized enterprises requested support from the US regarding Taobao than any other e-commerce platform.