Chinese social media apps held to same standards as e-commerce platforms under new draft regulation

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Social media apps such as Douyin, WeChat and Kuaishou may be subject to the same regulatory oversight as e-commerce platforms like Taobao, Pinduoduo and in China if a new draft regulation is passed, as live-streaming e-commerce on these apps grows increasingly popular in the country.

(Taobao is operated by Alibaba Group Holding, the parent company of the Post.)

“Social networks, live-streaming and other platforms that provide vendors with business space and support services related to completing transactions such as product browsing, order generation and online payment ... should perform the responsibilities of e-commerce platform operators in accordance to the law,” according to the draft regulation published by China’s State Administration of Market Regulation (SAMR) on Tuesday, which does not name any specific platforms.

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These responsibilities include monitoring the qualifications of vendors and the quality of products on the platform, protecting of consumer rights and intellectual property rights, and providing data and information upon request by authorities, according to the document.

SAMR is now seeking public feedback on the draft regulation.

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Live-streamed shopping campaigns on platforms such as ByteDance’s Douyin, TikTok’s mainland Chinese sister app, Kuaishou and Tencent Holdings’ WeChat are the fastest-growing area of China’s internet, receiving a massive boost from the stay-home economy during the coronavirus pandemic.

China’s live-streaming e-commerce industry is expected to grow from 433.8 billion yuan (U$61 billion) in 2019 to 916 billion yuan this year due to increased traffic during the coronavirus pandemic, according to a report from research firm iiMedia in February.

But the growing popularity of such campaigns has also come with a surge of complaints about fake or damaged goods, missing deliveries or lack of after-sales service, attracting greater regulatory scrutiny.

In June, the China Advertising Association and another industry body, the Professional Committee of Media Shopping of China General Chamber of Commerce, drafted separate codes of conduct in the first steps toward regulating the booming industry.

CAA’s code of conduct recommended content censorship and real-name user registration for live-streamed shopping promotions, while the Chamber of Commerce committee’s guidelines addressed product quality and practitioner qualifications.

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SAMR also issued a notice in July outlining plans to strengthen regulations on China’s live-streaming e-commerce industry, reiterating penalties in areas including false advertising and sales of counterfeit or low-quality products.

In a statement explaining the latest draft regulation, SAMR said the emergence of new e-commerce trends during the pandemic this year made it necessary to “better research the functional roles of different service providers and their obligations under these new business models”.

“With the continuing popularity of live-streaming e-commerce, stricter supervision is expected for both consumers and live-streaming e-commerce practitioners,” said Huang Wei, an analyst at Hangzhou-based research firm China E-commerce Research Center.

“The draft regulation puts forward more standardised and functional regulations for the live-streaming e-commerce industry, which will also result in the survival of the fittest,” Huang said. “Top live-streaming anchors with more professional teams will be able to adapt to the stricter regulatory environment, while some smaller anchors without much substance and inconsistent product quality may gradually be eliminated.”

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