Recently the Beijing Administration for Industry and Commerce announced new regulations for online merchants, including the millions of individuals selling through sites such as Taobao, Eachnet, and Paipai, China's top three C2C e-commerce websites:
According to the e-commerce supervision and management regulation promulgated on its website by the Beijing Administration for Industry and Commerce, from August 1, 2008 profit-making online shops must get a business license before starting operation.
However, the regulation also says that nonprofit online shops that are intended to sell or exchange items for personal use do not need to register.
The C2C online markets have been growing very fast since 2002, in part because there were few restrictions or taxes on sales. But I'm not so sure this new regulation, which aims to cut down on fraudulent merchants and fake products, will really be helpful for the industry. If it is strictly enforced, I think it's more likely to make make some sellers give up their small online businesses rather than pay the registration fees, which were not listed and are likely to be different for different products.
An even bigger problem for many merchants is the registration process itself. The government appears to want to force every single individual to register a business as if it were a normal bricks-and-mortar operation. This process can take weeks or months. But Taobao and others have made it so easy to sell things online, many of these merchants haven't had to put in much effort beyond registering an account and posting a few advertisements. Many may not have the time or motivation to go through this ordeal.
It's also questionable just how much this policy will clean up the online marketplace. In the real world, there are many regulations in place, but fake goods and fraud abound. A dissatisfied Taobao customer can return products to the seller if there's a problem. Try doing that at many offline shops and you'll simply get ignored by the merchant.
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