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E-retail sector control tightened

(Global Times)

09:19, October 20, 2011

Commerce authorities vowed Wednesday to strengthen management over the e-retail sector following a conflict between Taobao's B2C platform Taobao Mall (Tmall) and its small-scale merchants, which broke out earlier this month.

"A root reason (behind the conflict) is China's lack of relevant management rules for the e-retailing business," Ministry of Commerce spokesman Shen Danyang said Wednesday, adding that the ministry will lead the drafting of such a regulation.

The regulation will outline an access-and-withdrawal mechanism for third-party payment platforms and further clarify the responsibilities, rights and obligations of each party involved in e-retailing businesses, Shen said.

Tmall, the largest B2C online retail platform in China by transaction value, was attacked online by thousands of people on the night of October 11 after the platform announced an increase in the membership fee for merchants from 6,000 yuan ($945) to 60,000 yuan, depending on the size of the business.

As a compromise, Taobao announced Monday that it will postpone the membership fee increase for existing vendors until September 30 next year and until January for new merchants.

An additional 1.8 billion yuan ($282 million) will also be invested in Tmall online shopping units to improve the quality of service.

Shen Wednesday said Taobao needs to strengthen the guidance and service of its third-party payment platform and ensure the continuity of policies to ensure merchants' interests, a view supported by some Taobao shop owners.

"The merchants are against an unreasonable increase instead of fee increases indeed," Li Yang, a Beijing-based Taobao shop owner said.

Cao Junbao, chief analyst of iResearch, an online market research company, said the government agencies should stay out of market practices.

"For the third-party payment platform, it is better for the market to decide which one survives," Cao told the Global Times Wednesday.

"The government agencies should be cautious when making policies related to Internet-based businesses, and avoid setting overly detailed rules, considering the rapidly developing nature of e-business," Li added. "But the government can set some standards such as the maximum increase of fees by the platform to ensure a balanced growth among parties."

Alipay, an affiliate of Alibaba Group, is the world's biggest third-party online payment platform with more than 200 million users.

Zhang Xiulan contributed to this story

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