China Threatens to Ban E-Commerce Companies That Flout IP Laws

China plans to tighten oversight of e-commerce companies like Alibaba Group Holding Ltd. and Pinduoduo Inc., including by holding them accountable for intellectual property violations.

E-commerce platforms will be restricted from online business operations or even have their licenses 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 U.S. government added PDD to its Notorious Markets list for hosting pirated good, joining Alibaba and other Chinese firms under that label.

PDD 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 to remove the identified goods,” the U.S. Trade Representative’s office said in its report.

PDD 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 that it was difficult to root out fake goods on the company’s platforms because they were so 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.