Wednesday, April 05, 2006

Cross-Border eCommerce Legal Issues - China and Beyond

The drive to “localize” web site content and e-commerce into multiple countries is alive and kicking. Many of the largest companies have made tremendous progress since we began working on cross-border legal compliance issues in this area 6 years ago. Examples include, which is in 67 countries and 35 languages, and eBay, which is in 14 languages. Google is itself in multiple languages and expanding into countries such as China.

My fellow presenters at the Managing Global Websites and eCommerce Conference in San Francisco on March 28 and 29 were in an ideal position to help us understand the current state of global web site penetration. These voices from the front-lines included Dennis Hwang, Google’s Webmaster (pictured at the podium here), Marcia Hutchinson, the person behind’s drive for global consistency and market penetration, and Marcel Bregman, eBay’s kingpin for international web site expansion.

My own contribution to a panel moderated by Ion Global's Wei-Tai Kwok was a presentation on key legal issues in China for online content and e-commerce strategies. I addressed three important groupings of legal issues in the PRC: (1) online compliance, outlining important licenses, registrations and “web scrubbing” issues (such as advertising, consumer protection and privacy/data protection) for informational web sites and e-commerce providers, (2) enforcement of online agreements in China, including digital contracts and clickwraps, and (3) governing law and dispute resolution – should online agreements specify Chinese or foreign law and Chinese or foreign courts or arbitration?

Cross-border online issues have fit well with our law practice’s focus on providing cross-border market entry and transactions legal advice to companies entering multiple countries. As we have been seeing from the days of our first “cross-border web compliance” white papers and advisory projects 6 years ago (we were the legal compliance partners to a few of Silicon Valley’s early entrants into the cross-border online “localization” drive), while China shares many issues in common with other countries in Asia, Europe, Latin America and elsewhere, there are surely some twists.

Yes, content is carefully controlled in China, and I would not recommend testing this through ignorance of the political, religious, social and related standards. Sites are taken down with some regularity, and we are all aware of the challenges of Microsoft, Yahoo! and other companies in China. Of even more importance to the average corporate strategy, operating licenses and approvals tend to be more significant in China than in other countries and a range of local (Beijing, Shanghai, Guangdong, etc.) and national law is often difficult to interpret with the specificity that companies may be used to in the US. (Though China has no monopoly on open-ended legal provisions and selective enforcement - welcome to the realities of international expansion!)

For example, “Internet content providers,” – most companies providing information on their web sites whether or not they engage in e-commerce – must either obtain a license for their web site or at least register the site with PRC authorities. Such a requirement surely applies if a company has obtained a local “.cn” domain name and there is some uncertainty for companies which otherwise have business activities in the PRC and are targeting mainland Chinese users through their web sites.

One of the lessons of experienced companies at this conference, which was sponsored by the Localization Institute, is that careful “localization” of web site content pays off. This is partly a matter of the enormous investment in content management tools for rolling-out thousands of pages of online content in multiple countries. When Carly Fiorina resigns from HP, how is the content of 67 country web-sites changed before the press can even react to the morning news? (Marcia from HP had a good war story on this one.) How does a company avoid too much in-country control of web content with a dilution of the corporate brand through inconsistent local versions of a web site yet build local goodwill while avoiding damaging cultural gaffs? A combination of software “content management” and machine translation is coupled with the art of human translation. Language itself must be accompanied by the critical component of “culturalizing” the web content to more fully connect with local users.

Whatever the level of enforcement risk for violating local laws, whether due to actions of local authorities or individual user actions, a company’s branding and corporate reputation is also at stake unless it takes the online legal environment as seriously as it does its more traditional joint venture, licensing, agency/distribution and other global compliance obligations. We see this as one of the important international lawyering challenges of the next several years and are privileged to be playing a part as the cross-border ground rules begin to take form.


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Jessica Holyoke said...

What I want to know is if a US internet company has PRC customers and the PRC requests customer information using the PRC legal process, is there any reason for a US company to comply? What are the consequences for non-compliance? (Or if the PRC successfully used the US courts for information requests.)

I've used my blogger pseudonym to track why I'm asking this question.

Anonymous said...

According to Shaun Rein, though the overall retail sales in China in 2009 would fall because of the financial turbulence, ecommerce is still going to boom. he said "We're expecting a 20 percent growth in 2009, and we think it's actually going to be one of the strongest sectors in China this year because of the financial crisis".