' Nicholas Orr | MTTLR

Tighter Regulations, Less Competition

On August 31, 2018 the Standing Committee of the National People’s Congress (“NPC”) passed new regulations governing China’s e-commerce market. The passage of the legislation comes at the end of more than five years of drafts and negotiations with input from the country’s major technology companies. The new e-commerce law is set to take effect on January 1, 2019 and is predicted to have important effects on online transaction standards and protections for intellectual property. Despite the new requirements on e-commerce operators, the existing cohort of large internet companies is likely to benefit from the moat created by the new legislation. At $1 trillion, China’s e-commerce market is the world’s largest and is set to continue its expansion. In the country’s largest cities, more than eighty percent of adults shop online. Indeed, with more than 800 million internet users—more than the United States and India combined—the domestic internet companies are among the world’s largest. Unsurprisingly, the new e-commerce law was largely influenced by the likes of Alibaba, Tencent, JD.com and other major internet companies. The resulting regulations, though stricter, benefit those operators with the scale to adequately police counterfeit products. Article 42 provides “[w]here the intellectual property rights rights-holder feels that their intellectual property rights have been violated, they have the right to notify the e-commerce platform operator to take necessary measures such as deleting, blocking, disconnecting links, or ending transactions or services.” This provision directly addresses the longstanding problem of counterfeit goods sold on Chinese e-commerce platforms. The law imposes the duty that “[a]fter e-commerce platform operators receive notice, they shall promptly employ necessary measures and send the notice...