SAIC regulates online group buying
March 29, 2012 | BY
clpstaff &clp articles &“Ke jixu goumai” (“The deal is on”) is the phrase that spurs Chinese consumers to use online group buying websites. The SAIC is taking action to regulate this rapidly expanding market that has led to fraud, fake products and price hikes
The Opinions on Strengthening the Administration of Online Group Purchase Activities (关于加强网络团购经营活动管理的意见) appeared on the website of the State Administration for Industry and Commerce (SAIC) on March 14.
“These measures are unlikely to have an immediate effect on banning fraud and fake products, though they could well help to encourage consumers to make complaints if they feel their rights are infringed,” said Maarten Roos, partner at R&P China Lawyers in Beijing.
China has an extensive system of regulations for protecting consumer interests. The PRC Product Quality Law (中华人民共和国产品质量法) governs quality control in respect of commodities and services and the PRC Protection of the Rights and Interests of Consumers Law (中华人民共和国消费者权益保护法) governs the merchandising of commodities and services.
The Opinions from the SAIC is the latest addition to a series of related laws and regulations on specific commercial and industrial sectors, but this is not the first time regulations have been released regarding internet platforms.
“Interim measures were adopted in 2010 on general internet platforms. However, group buying has become extremely popular and the SAIC is trying to establish some kind of control over the platforms and support for consumer complaints,” said Roos.
This is a thriving market, with multiple famous platforms such as Tuanbao (团宝). A Report released the same day as the Opinions by China E-Commerce Research Center, an independent research institute based in Hangzhou, Zhejiang province showed the number of group buying websites increased from 2,630 in January 2011 to 3,909 in December 2011.
A total of 203 million people participated in online shopping in China in 2011, up 28.5% from the previous year, according to the Report. One of the most important provisions in the Opinion is the establishment of a system to check products and services on offer, ensuring their quality.
“The platform's obligation to ensure the quality of the products and services on offer will be difficult to implement. The law does not provide any specifics on how this should be done, but in any case, it seems beyond a platform's capabilities to physically check the quality of the food, massage, or car on offer,” said Roos.
Another important provision prohibits online group buying platforms from refusing to return an advance payment to consumers if they do not make use of the goods or services by a certain deadline.
“The platform's obligation to return payment if a product or service is not used could, if implemented properly, have a very big impact,” said Roos. Consumers will be more aggressive in returning goods, affecting the whole business model. If platforms cannot guarantee sales to the providers, then some providers may decide not to join, or to offer fewer discounts, he added.
The Opinions are trying to regulate an industry worth Rmb801 billion ($126.5 billion) according to the same report.
Enforcement is always an issue in China, but with the Opinions and the China E-Commerce Report being released on the same day, there is a clear message the SAIC wants to control this problem.
PRC Protection of the Rights and Interests of Consumers Law (中华人民共和国消费者权益保护法)
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