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Issue 52-April 2021 Veritas Update
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Issue 52-April 2021 Veritas Update


l  Latest Hot Spot

     Three departments jointly held an administrative guidance meeting for Internet platform enterprises

l  New Law Express

    The executive meeting of the State Council approved the 'Regulations of the People's Republic of China on the Registration and Management of Market Entities (Draft)”

【Latest Hot Spot】

Three departments jointly held an administrative guidance meeting for Internet platform enterprises

On April 13, the State Administration for Market Regulation, together with the Office of the Central Cyberspace Affairs Commission and the State Taxation Administration, held an administrative guidance meeting for Internet platform enterprises. The meeting implemented the arrangements made at the Central Economic Work Conference and the Ninth Session of the Central Financial and Economic Committee, affirmed the positive role of the platform economy, analyzed the prominent problems, required the Internet platform enterprises to give full play to the warning role of the Ali case. It is clearly proposed at the meeting that internet platform enterprises shall be in awe and abide by the rules, comprehensively rectify problems within the prescribed time limit, and establish a new order for platform economy.

         The meeting pointed out that the overall trend of China’s platform economy is good. However, in the rapid development, risks and hidden dangers are gradually accumulated, so the harm cannot be ignored, and it is urgent to standardize platform economy according to law. Serious rectification must be made for the forced implementation of the 'two choices', abuse of market dominance, 'pinch point M&A', burning money to occupy the 'community group purchase' market, 'data ripening', disregard for forged products, information disclosure, and tax-related violations. Among them, the problem of forced implementation of 'two choices' is particularly prominent, which is a prominent reflection of the capricious and disorderly expansion of capital in the platform economy, and is a blatant trampling and destruction of the market competition order. Forced implementation of the 'two choices' limits market competition, curbs innovation, causes damage to the interests of operators and consumers in the platform, which is so harmful that must be firmly eradicated.

With regard to the forced implementation of 'two choices and one' and other prominent problems, the meeting clearly pointed out that platform enterprises shall grasp the right direction, enhance the sense of responsibility, insist on giving priority to national interests, insist on operating in accordance with laws and regulations, insist on fulfilling social responsibility, and achieve 'five strict precautions' and 'five guarantees': strictly prevent disorderly expansion of capital to ensure economic and social security; strictly prevent monopoly disorder to ensure fair competition in the market; strictly prevent technology strangulation to ensure innovative development of the industry; strictly prevent the abuse of rules and algorithms to ensure legitimate rights and interests of all parties; and strictly prevent system closure to ensure open sharing of ecology. The platform enterprises should comprehensively investigate tax-related issues in accordance to tax laws and regulations, policies and systems, and take the initiative to carry out self-examination and self-correction.

The meeting required that the platform enterprises should conduct a comprehensive self-examination and self-correction within one month, thoroughly rectify each item, and make public the 'Commitment to Operate in Compliance with the Law' to the society and accept social supervision. The market regulatory authorities will organize a follow-up inspection of the platform rectification. If there is no change after the rectification, it will be strictly punished according to law.

The meeting stressed that the policy bottom line cannot be exceeded, and the legal red line cannot be touched. To strengthen the regulation and governance of the illegal and irregular behavior of the platform enterprises does not mean that the attitude of the state to support and encourage the platform economy has changed. Instead, it is required to adhere to the 'two unwavering', respect the law of the development of the platform economy, further play an important role in the platform economy, establish fair competition, innovation and development, open sharing, security and harmony of the new order of platform economy to promote platform enterprises to be more dynamic, online consumption to be more convenient and high-quality, and platform economy to be more prosperous and orderly.

【New Law Express】

The executive meeting of the State Council approved the 'Regulations of the People's Republic of China on the Registration and Management of Market Entities (Draft)”

Premier Li Keqiang chaired an executive meeting of the State Council on April 14, approved the 'Regulations of the People's Republic of China on the Registration and Management of Market Entities (Draft)', to provide legal protection to cultivate and expand market players and promote fair competition.

The draft integrates the promulgated administrative regulations on the registration and management of market entities, and makes unified provisions for the registration and management of various enterprises, privately or individually-owned business, and farmers' professional cooperatives that engage in business activities for profit in PRC, which includes:

(1) Improve the convenience of registration. Implement on-the-spot, one-time, limited-time, online, and off-site operations. The registration authority shall register on the spot if the application materials meet the statutory requirements; if the application cannot be registered on the spot, it shall generally register within 3 working days. Electronic and paper business licenses have the same legal effect.

    (2) Streamline application materials and registration procedures. The relevant information that the registration authority can obtain through the government information sharing platform shall not be required to provide repeatedly. If the application materials are incomplete or do not conform to the legal form, the registration authority shall notify the applicant of the materials that need to be supplemented and corrected at one time.

      (3) In order to resolve the “difficulty of cancellation”, it is clearly provided that if the market entities have not incurred or paid off the debts, employee wages, social security expenses, taxes payable, etc., and promised in writing to assume relevant legal liabilities and publicized in accordance with the regulations, they may apply for cancellation based on simplified procedures. Privately or individually-owned business does not need to be publicized.

(4) Establish a closure system to reduce the maintenance cost of market entities. In the event of business difficulties caused by natural disasters, accidents, disasters, public health events, etc., market entities may independently decide to close business within a certain period of time and file with the registration authority. The maximum closure period shall not exceed 3 years.

(5) Clarify integrity and regulatory requirements. Market entities implement real-name registration, responsible for the authenticity, legality and validity of the submitted materials, and are required to publicize annual reports and registered information in accordance with regulations. For those who submit false materials or commit other frauds during registration, their market entity registration shall be cancelled, and the person directly responsible shall not apply for registration again within 3 years. The registration authority implements hierarchical and classified supervision according to the credit status of market entities, and adopts a 'double random, one open' method to supervise and inspect registered items.

(6) Clarify the legal liabilities and penalties for illegal activities. It is required to strengthen the pertinence of penalties, revoke business licenses in serious cases, and maintain an honest, trustworthy, and fairly competitive market order.

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