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China: e-commerce sales targeted in SAIC’s “red shield net sword” campaign

RedNetBEAs reported previously, China’s State Administration for Industry and Commerce (“SAIC”) pulled through its annual online piracy crackdown campaign – called the “red shield net sword” campaign – from July to November 2015. The campaign aimed at curbing online sales of counterfeit and sub-par goods and mainly targeted infringements on e-commerce platforms.

According to a recent SAIC notice, SAIC and its local offices mainly focused on:

  • inspecting operators of online stores to ensure they correctly registered their identity or their business license information on their online sales platforms
  • increasing scrutiny of online sales of goods that are frequently counterfeited, including automobile parts, clothing and accessories, etc. SAIC added in its notice that it also focused on types of goods for which it received numerous complaints from consumers, such as home appliances
  • strengthening supervision over online sales platform operators to ensure they are performing their legal duties, including the review of the identity of online-store operators, inspection of product quality, efficiency and availability of notice-and-take-down procedures, etc.

According to SAIC’s debrief, the “red shield net sword” campaign had the following results:

  • 1.911 million online stores and websites were checked for compliance
  • 198,000 on-site inspections were performed
  • 75,000 unlawful product advertisements were removed
  • 12,554 rectifications (e.g., in relation to unlawful content or products) were ordered
  • 2,170 websites were marked for deletion by the Ministry of Industry and Information Technology
  • 1,134 online stores were closed down
  • 6,737 cases of illegal conduct were investigated, of which 78 cases were transferred to the Public Security Bureau for criminal investigation
  • A total of RMB 123 million was confiscated
  • According to SAIC, in the course of the campaign, multidisciplinary teams were set up, consisting of officials from several administrative authorities (e.g. officials from the Public Security Bureau, financial regulators etc.) to tackle online infringements. SAIC also clarified that priority was given to those cases that were considered most harmful to consumers.

Moreover, SAIC explained that it set up compliance seminars for e-commerce players, and cooperated with industry organizations in order to increase active compliance by online web shop operators.

In short, the SAIC’s “red shield net sword” campaign in 2015 was a commendable effort, offering an opportunity for IP owners to work with the authorities and the online sales platform operators toward more efficient and effective online enforcement of IP rights in China. Nonetheless, commendable though it may be, the “red shield net sword” campaign is not a panacea for the serious online counterfeiting problem that still persists in China. IP owners must therefore continue to be proactive and dedicate resources for enforcing their IP rights on China’s booming e-commerce platforms.

First published on 17 February 2016 in Hogan Lovells’ TMT China Brief