International Trade and Global Business

 

China Cracking Down on E-Commerce Cheats

Chinese regulators are cracking down on e-commerce cheats. Indeed, authorities are getting tougher on all kinds of commercial scofflaws.
 
This is good news for those of you who have a presence on Chinese-owned platforms like JD.com, Alibaba, or are weighing whether to have one in the future. For years, the sheer volume of traders on the sites attracted all sorts of bad apples, set on copying designs, stealing trademarks and engaging in other illegal behavior. Platform operators lamented that the volume of cheating was too great to design effective safeguards.
 
That’s largely changed thanks to improvements in computer programs that can spot fakes and scams amidst millions of different products. But what really might make a difference is criminal penalties that are being introduced into law. Civil penalties never terrified anyone, because crooks sensed that foreigners from afar were unlikely to take cases to Chinese courts, let alone actually winning there. The threat of the police knocking on the door may be the deterrent that actually works. It’s a safe bet that authorities will want to test this exercise in behavior mod by arranging some early show trials.
 
Since many Chinese companies sell on these platforms, they also have an interest in deterring thieves and other bad actors. Consumers are getting fed up paying for shoddy goods, fake goods and bad customer service.
 
Foreigners should applaud this newly found consumer advocacy. Where was it when they needed it? In one case, an American business person ordered a sock-making machine online from a Chinese producer. It wasn’t cheap at around $20,000. It arrived but without an operator’s manual, which was promised in the online description. The buyer contacted the seller, indicating the device was worthless without the manual. The reply was, “Sorry, we don’t have it.” Replies grew testier. The platform operator contacted the seller but that didn’t work either. It was unclear whether the operator threatened to throw the seller off the site. If it didn’t, it should have.
 
In retrospect the buyer should have insisted on partial payment until the goods arrived in satisfactory condition. Insurance might also have been available if the goods proved unusable for the intended purpose. This case probably isn’t a criminal fraud unless the seller intended to deliver a non-working machine. But a loss is a loss. And that was a loss.
 
Still, it’s clear that the Chinese are cracking down on rip offs of all kinds. It doesn’t matter whether the impetus comes from internal or external pressures. A trade agreement with the US, or no trade agreement.
 
Take shoddy goods. They were rampant on and off line not long ago, but authorities are responding with new vigor, insisting that consumer products be properly labeled and expiration dates scrupulously observed. Or else. But the tricks are inventive. In one store, a customer hid products under a counter until their expiration date passed, then demanded payment for the goods he didn’t pay for. Another broke open a bag of bread, inserted hairs and closed it up again. Irate, the customer demanded money or the store would be reported. Authorities were called by store management in both cases, but it’s unclear whether arrests were made.
 
The trend is clear. Consumers and honest traders need protection. However belatedly, the government is acting, and it’s a step in the right direction.
 
 

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