China to Regulate Live Streaming E-commerce Starting in July

Terms:

Group Standard: Standards jointly formulated by social organizations and industry technology alliances such as associations, societies, chambers of commerce, and leagues, to meet market and innovation needs. They are voluntarily adopted and have no legal force.

Live Streaming E-commerce: Stars, influencers, social celebrities, public figures, etc. intentionally or unintentionally promote a certain product using live streaming.

Livestreaming has become one of the significant marketing methods on China’s e-commerce platform while false promotion and substandard product quality are also commonplace there. On Jun. 24, 2020, China Advertising Association unveiled the “Live Streaming Marketing Code” ^[1], which came into effect on July. 1^st. It is the first standard specializing the live stream marketing activities.

Earlier on June 8, 2020, Professional Committee of Media Shopping, China General Chamber of Commerce released two draft Group Standards, Basic Standards of Video Live Shopping Operation and Service^[2] and Guidelines for the Evaluation of Service System of Online Shopping Integrity ^[3], expecting to be implemented in July 2020. The public consultation lasted until June 30, 2020. Any suggestions can be mail [email protected].

Main Contents of the Code and Group Standards

1.  Live Streaming Marketing Code

The “Live Streaming Marketing Code” specifies the rights and obligations of the enterprises, live streamers, livestreaming platforms and other stakeholders. Here are some key obligations for the enterprises:

• The product sold or service provided should be legal and conform to the rules drafted by the livestreaming platforms.

• The product/service promoted should comply with the quality and safety requirements stipulated in corresponding laws and regulations. The sales of special products including drug, medical devices, health food, and food for special medical purposes need to be granted qualification or administrative approval.

• The product/service information shall be true, science, accurate and cannot mislead consumers. If those information published belong to commercial advertisement, the “Advertising Law” are required to be compliant with.

• The enterprises need to protect the consumer rights and provide after-sales service such as product changing or refunding.

2. Basic Standards of Video Live Shopping Operation and Service

This standard clarifies the requirements on industry terms and definitions, product quality, software and hardware, codes of conduct for live streamers, service specifications for Multi-Channel Network institutions, the operation management of industrial enterprises, platforms’ compliance, the supervision and administration of regulatory authorities, etc.

• Product Quality

The products sold by live streaming should meet the requirements of national laws and regulations for product quality, standards, and measurement, and have production and sales permit certification, product quality certification, etc. Cosmetics, beauty products, medicines, health care products, etc. should also have the ID number of relevant approval documents, manufacture date, shelf life, and precautions.

• Promotion

The terms used by live streamers need to comply with the Advertising Law. "The lowest price in the whole network (全网最低价)," "national level (国家级)," " superlative (最高级)," "best (最佳)" or similar comparative words are illegal terminology.

• Practitioner Qualification

Live streamers and other relevant personnel need to participate in training organized by relevant departments, obtain qualification certificate or working & operation certificate, and register in professional institutions.

Sun Zhisheng, Secretary-General of the Professional Committee of Media Shopping, China General Chamber of Commerce and leader of the Standards Formulating Working Group, said that the official standard will make clear explanations on how to obtain qualifications and certification authorities ^[4].

3. Guidelines for the Evaluation of Service System of Online Shopping Integrity

This standard clarifies the basic requirements, operating principles, and management, social supervision, evaluation index system, evaluation level, and procedures of enterprise integrity management in the online shopping industry.

Live Streaming E-commerce Urgently Needs Supervision

According to statistics from the Ministry of Commerce ^[5], in the first quarter of 2020, there were more than 4 million live streaming e-commerce channels across the country. Regulation of the sector has failed to kept pace with developments in the industry. Problems such as vulgar contents, fake data of likes, sharing, watching and transaction volume, false and exaggerated promotion, unqualified products, and poor after-sales service are major challenges facing the sector.

Online Survey Report on Consumer Satisfaction of Live Streaming E-commerce released by the China Consumer Association on March 31, 2020, showed that 37.3% of consumers surveyed had encountered problems in live streaming e-commerce ^[6]. The main concerns for refusing live streaming e-commerce are "product quality is not guaranteed " and "poor after-sales service."

Source: Online Survey Report on Consumer Satisfaction of Live Streaming E-commerce

“Live streaming solves the problem of supply and marketing for enterprises, but once problems occur, it’s difficult to protect consumers’ rights due to the lack of management standards and supervision mechanisms.” Expressed by Li Yougang, deputy director of the Expert Committee formulating the Group Standards ^[7].

Industry Comments

From the industrial perspective, commentator Zhang Shule believes that the newly released Group Standards will have a positive impact on live streaming e-commerce ^[8]. “The disorder in the live streaming e-commerce industry even makes enterprises unclear how to choose a live streaming platform. Second- and third-tier brands and enterprises need standards to protect their rights and interests, and define their responsibilities and obligations."

Zhao Kun, general manager of Guangzhou Pinhe Biotechnology Co., Ltd., said, "Under supervision, cosmetics live streaming e-commerce may have a short adaptation period, but standardized live streaming e-commerce will get more traffic in the future." ^[9]

Legal professionals pointed out that the Group Standards do not have the mandatory effect of laws and regulations ^[8]. The impact of the Group Standards depends on whether the China General Chamber of Commerce has the right to punish violations.

Sun Zhisheng, Secretary-General of the Professional Committee of Media Shopping, China General Chamber of Commerce and leader of the Standards Formulating Working Group, responded that the establishment of the Group Standards has referenced to laws such as the Advertising Law, Consumer Rights Protection Law, Radio and Television Advertising Broadcasting Management Measures, etc. If practitioners violate existing laws, they will be punished by relevant departments ^[4].

Going forward the Professional Committee of Media Shopping, China General Chamber of Commerce will increase cooperation with the Ministry of Public Security, the Ministry of Commerce, the General Administration of Customs, State Administration for Market Regulation, etc. and establish a blacklist and a national supervision and reward system ^[7].