China threatens to ban e-commerce companies that flout IP laws

Merchants found Pinduoduo's takedown system to be sometimes unresponsive and slow in removing the identified goods.
Merchants found Pinduoduo's takedown system to be sometimes unresponsive and slow in removing the identified goods.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - China plans to tighten oversight of e-commerce companies like Alibaba Group Holding and Pinduoduo, including by holding them accountable for intellectual property (IP) violations.

E-commerce platforms will be restricted from online business operations or even have their licences revoked if they fail to deal with serious violations of IP rights by vendors on their platforms, according to a draft revision of the country's e-commerce law posted by the State Administration for Market Regulation.

The market watchdog is seeking opinions on the draft revision until Oct 14.

Chinese companies have long struggled with allegations that they allowed pirated or counterfeit goods to be trafficked through their websites.

In 2019, the United States government added Pinduoduo to its Notorious Markets list for hosting pirated goods, joining Alibaba and other Chinese firms under that label. Pinduoduo and Alibaba's Taobao were also on the 2020 list, released in January.

Merchants found Pinduoduo's takedown system "to be sometimes unresponsive and slow in removing the identified goods", the US Trade Representative's office said in its report.

Pinduoduo has also faced IP issues in China. Shanghai court documents show hundreds of legal challenges against the company over copyright infringement or trademark registrations.

Alibaba co-founder Jack Ma once said that it was difficult to root out fake goods on the company's platforms because they were of high quality.

"The problem is that the fake products today, they make better quality, better prices than the real products, the real names," he said at the time.