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Govt prepares online retail rules

(China Daily)

09:18, October 20, 2011

BEIJING - China will step up efforts to provide regulation of the online retail market for the first time.

The Ministry of Commerce with other government departments, is drawing up regulations on companies entering and exiting the market, improving market rules, and clarifying the rights, responsibilities and obligations of all players, Shen Danyang, a ministry spokesman, said on Wednesday.

His remarks came after last week's online protest against the e-commerce giant Alibaba Group Holding Ltd. The company had attempted to raise the fees it charges vendors on its business-to-consumer site, Taobao Mall.

Taobao Mall said that, next year, it will increase service fees by up to 10 times, plus a maximum 15 times increase in the cash deposits it takes from vendors.

After a massive number of complaints and pre-planned "malicious buying" operations on large Taobao Mall vendors, Alibaba on Monday placated the vendors with a number of measures including a grace period for regular vendors and a reduction in their deposits.

The protest revealed "a weak legal framework in the online retail market", Shen said, which makes more stringent regulation a must, he added.

After a few years of rapid development, China has become the world's second-biggest online retail market after the United States. It is expected to overtake the US by 2015, according to a report by Credit Suisse Group earlier this year.

The government has already set out licensing and other regulations in the online video, gaming, and mapping sectors.

China's State Administration for Industry and Commerce is also drawing up the first regulatory document for the group-buying market, according to sources in the sector.

Feng Xiaohai, CEO of Manzuo.com, a major player in the market, said the administration has been working on a plan to regulate the market for some time.

The new rules are likely to deal with qualification criteria for group-buying websites after a number of players in the market engaged in fraud, according to Feng.

The administration was not available for comment.

By September, more than 1,000 group-buying websites had closed, according to the Chinese group-buying navigation site Lingtuan.com.

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