China issues new regulations on ecommerce shopping festivals

6.18, China’s 2nd largest online shopping festival, has just concluded. Platforms have been, as in the past few years, mute about this year’s GMV performance – only JD.com put forward a Weibo post saying that orders and GMV both “hit a record”, while live sales order volume grew “more than 200%”. 

We have noticed a few interesting changes during this year’s 618 shopping festival:

1. Platforms have greatly simplified the campaign mechanics: consumers no longer need to do complex calculations and actions to obtain the best discounts – they see immediately what the final price is;
2. No ‘pre-sales’ ordering as well, you just order, pay and wait for goods to be delivered; 
3. With the red ocean of competition between sales and brands on all of the existing platforms, many have started to explore Wechat Channels/Live as a new avenue to sell. Will Wechat also become a red ocean soon? 
4. Government stepped in. State Administration for Market Regulation (SAMR) actually issued a 9-point guideline to the platforms on how they should regulate their activities during the interestingly-termed “618 concentrated online promotions” phase. Full text below: 

Compliance guidelines for ‘618’ concentrated online promotions

To regulate promotional activities, maintain order in online transactions during the “618” shopping festival, and protect consumers’ legal rights, the State Administration for Market Regulation recently issued the “Compliance guidelines for ‘618’ concentrated online promotions” to comprehensive e-commerce, live-streaming e-commerce, cross-border e-commerce, and other platform enterprises. The main points include nine aspects:

1. Strictly Enforce Platform Responsibilities:
   • During promotions, platforms must rigorously fulfil their review and verification obligations, ensuring that platform operators display their business licences and certifications, and maintain accurate and valid business information to enhance online business transparency.

2. Strictly Regulate Promotional Activities:
   • Optimise promotion rules around key aspects such as promotional tools, discount displays, issuing of offers, and settlement of payments. Prohibit any practices that harm consumer rights, such as non-compliant pricing and price fraud. Auctions must not be conducted without proper licensing. Differentiate clearly between cross-border retail imports and non-cross-border goods to ensure consumer information rights and choices.

3. Strictly Review Advertisement Content:
   • Improve the registration, review, and archiving of advertising activities, especially regulating advertisements involving medical/beauty services and celebrity endorsements. Effectively intercept false and illegal advertisements.

4. Strictly Prohibit Unfair Competition:
   • Ban illegal practices such as “exclusive dealing”(note: i.e. platforms preventing sellers from selling on other platforms) and ensure fair market competition. Take proactive measures to prevent fake transactions, fraudulent reviews, and false advertising within the platform.

5. Strictly Regulate Live Streaming Marketing Activities:
   • Establish comprehensive management norms for live streaming marketing, strengthen the review and monitoring of live streamers and their business activities, ensure the quality of live-streamed products, and strictly control the selection and promotion processes in live streams.

6. Strictly Prevent the Sale of Counterfeit and Inferior Goods:
   • Strengthen intellectual property protection, improve quality control measures for goods, and strictly enforce rules for handling problematic products. Take timely restrictive measures against sellers and operators involved in counterfeit and inferior goods.

7. Strictly Prohibit the Sale of Illegal and Prohibited Goods:
   • Conduct thorough reviews and real-time inspections of product information, clear out illegal and prohibited goods, promptly remove or delete links to illegal products, and crack down on the sale of items harmful to minors’ physical and mental health, as well as over-packaged products like specialty teas and mooncakes.

8. Effectively Resolve Online Consumer Disputes:
   • Maintain open channels for consumer complaints and reports, handle complaints efficiently, and actively assist consumers in safeguarding their legal rights. Urge platform operators to comply with regulations such as the seven-day no-reason return policy for online shopping and the “three guarantees” (note: repair, replacement, return guarantees) for online purchases.

9. Strengthen Government-Enterprise Communication and Collaboration:
   • E-commerce platforms should enhance compliance management and report any illegal issues to market regulatory authorities at the county level or above, forming a positive interaction between platform self-regulation and government oversight, and jointly guiding platform operators to enhance their awareness of lawful operations.

The SAMR advises that during the “618” period, consumers should consume rationally, raise awareness of their rights, and report any illegal activities to the market regulatory authorities or relevant departments to safeguard their legal rights.