Brief Analyze on China Food Safety In Online Trading

With the unified-colored motorbikes going through every street and lane of cities and various apps available to deliver you the fruit of season from the southernmost part of the country on the very next day, the massive development of food e-commerce in China does not even require for any further demonstration. Since online sales is no longer included in the restricted industries in the Catalogue for the Guidance of Foreign Investment Industries (2015 revised), considerable foreign investments has been attracted into this newly-developed yet popular industry, and more to be expected.

Food safety had always been a highlighted issue that draws much public attention even before the network technology brought more regulatory challenges. Nowadays, food e-commerce is operated in multiple models, including but not limited to the traditional B2C model (e.g. Yihaodian, which operates through its own website, and Tmall, which is a third-party platform), C2C and O2O model. The development of logistics and web application enlarge the business area, and the rapidly updated business models enable more parties to participate in the industry, thus supervision of the industry is now facing more troubles/difficulties.

To pertinently regulate the emerging yet influential industry that is more and more closely related to people’s daily life and also to keep the development of food e-commerce positive and sustainable, the authorities have strengthened the supervision by formulating laws and regulations, including Food Safety law of the PRC (2015, by the Standing Committee of the NPC),Administrative Measures for Food Operation Licensing (2015, by the CFDA), Interim Measures for the Administration of Internet Advertising (2016, by the State Administration for Industry and Commerce) and Measures for the Investigation and Handling of Online Violations of Food Safety Laws (2016, the “Measures”). Among the foresaid, the Measures was most-recently promulgated by the China Food and Drug Administration (CFDA) in July 2016 and just became effective on October 1st.

A Closer Look to the Measures

1. Regulated objects

With the changing of the business models, much more complicated legal relationship developed among participants of the business other than sellers and buyers. To clarify the obligation of participants of the business, the Measures divided regulated objects into three categories, naming:
a) Online third-party food trading platform providers (“third-party platform providers”).
b) Food producers and traders doing business through third-party platform.
c) Food producers and traders doing business through self-built websites.
(b and c collectively referred to as “online food producers and traders”)

2. Main obligation

​1) Websites owners
Websites owners include third-party platform providers and online food producers and traders operate through self-built websites. One of the main obligations imposed to these participants is to file for records [1] . Websites owners participate in food e-commerce shall file for records with food and drug administration authorities (provincial authority for third-party platform providers and city or county authority for producers and readers operates through self-built websites) within 30 days after getting approval from competent communication authorities. The information shall be filed for record includes domain name, IP address, telecommunication business license, name of the corporate and the legal representative and so on, and such information shall be made available to the public.

Requirements like technical support and information preservation are also imposed [2] . The websites owners are required to guarantee the reliability and security of online data and information and to retain trade information of food for a period of no less than six months upon the expiry of the shelf life of such food. Where there is no definite shelf life, the information shall be retained for no less than two years.

A substantial obligation imposed by the Measures on third-party platform providers is to establish a system to ensure food safety [3] . Such system shall be publicized to the public on the platform and shall include the review and registration of online food producers and traders operate through the platform, conducting self-inspection on food safety, prevention and reporting of illegal behavior in relation to food safety, service suspension on serious illegal conducts and complaints by customers. In addition to review and registration of the information of food producers and traders, the platform providers shall also open files for the producers and traders who use the platform in order to record their basic information and personnel concerning food safety. Also, the third-party platform providers are required to establish a dedicated department or to designate full-time personnel to check operation conducted and information posted on the platform. For any suspected conduct found, the platform providers are obligated to report to local food and drug administrations.

Under certain circumstances [4] where the food producers and traders are under investigation or prosecuted for alleged food safety crime, or where any producers and traders are imposed penalty or punishment by any court or public security authority for illegal conduct concerning food safety, or punishment of revoking license or ordering to cease business by food and drug administration, third-party platform providers are required to cease to provide service to such producers and traders.

2) Online food producers and traders
Online food producers and traders include those operate through third-party platform and those who operate through their self-built websites. All producers and traders shall only conduct business with relevant licenses and only operate within the scope indicated on their licenses. Relevant licenses should be posted on the platform and made  available to the public.

The authenticity and accuracy of the information of food published online by the online food producers and traders are strictly required and any special requirement on storage, transportation and consumption shall be specified [5].  Any violation could lead to a fine no less than RMB 5,000 and no more than RMB 30,000.

One may recall the stipulation in the Food Safety Law impose stricter obligation on producers and traders concerning health foods and infant food, such stricter obligation is also stipulated in the Measures. Online producers and traders of health food, formula food for special medical purpose and infant formula milk powder are not only required to publicize the business license and food production license, additional requirement for posting the registration certificate or record-filling certificate and the hyperlink connecting to corresponding search page on SFDA website is also imposed. For health food, the notice stating that the product cannot substitute drug shall be clearly marked. For food for special medical purpose (FSMP), special total nutrition formula FSMP is not allowed to be traded online. For infant formula milk powder, no advertising indicates the benefit of increasing intelligence, improving resistance to diseases, enhancing immunity or other health care benefits shall be published online. A fine may be imposed if any violation occurs.

3. Regulatory approach

One of the challenges the supervisory authority of food e-commerce facing is the difficulty in determining administrative jurisdiction that brought by the uniqueness of e-commerce. The Measures clarifies the jurisdiction issue. Any illegal conducts by the third-party platform providers shall be governed by the food and drug administration at county or higher level of place where the provider locates. Any illegal conducts by the online food producers and traders shall be governed by the food and drug administration at county or higher level of place where the producers/traders locates or the premises for their production or operation locates. If food traded online causes food safety accidents or other serious consequences, the food and drug administration at county or higher level of the place where such illegal conducts occur or where the damage occurs shall have the jurisdiction over the illegal conduct. In case there are two or more competent administrations, the one first registers and starts investigation over the case shall have the jurisdiction.

Since part of the participants of food e-commerce conduct business without any physical operating, it would also be challenging for authorities to preserve evidences in the process of supervision. It is mentioned in The Food Safety Law that the food and drug administration shall purchase samples for random inspection. In the Measures, more detailed process of purchasing samples online is stipulated. The administration could act as anonymous buyer to purchase food online while record all detail information concerning the purchase, such as the purchasing personnel, the payment account and delivery address. The unpacking of the sample shall also be recorded by taking photos or videos. Samples purchased according to the process stipulated could be deemed as competent evidence. And for the business participants, there is possibility for each production sold online to be included in the regulatory process.

In addition to regular administrative penalties such as issuing warning, imposing fine and revoking licenses for any illegal conduct confirmed, there is also newly stipulated means of accountability interview added in the Food Safety Law last year with details being launched in the Measures. Basically, food and drug administration is entitled to conduct interview with the legal representative or the person in charge of the third-party platform providers and online food producers and traders if it deems the later with potential food safety hazards or risks. Accountability interview consists part of risk prevention mechanism against food safety issues by food and drug administration.

Our  Suggestions

The Measures has taken the supervision over the food e-commerce to a new level where the obligations of the industry participants are more comprehensive. For corporates who operate third-party platforms, it would be top priority to conduct self-inspection of internal system of management and control regarding food safety issues against stipulations in the Measures. A systemized and integrated scheme shall be established to help the corporate to sort out its responsibility in each step through the process of the online trading. It shall be taken into account that the Measures impose a continuing obligation on the third-party platform providers. The providers are not only required to review and register information of the producers and traders when the cooperation begins, but also required to keep the recorded information updated and assure its authenticity. Besides reviewing and establishing  files for all necessary information before the traders joining the platform, the scheme shall also include the time-to-time inspection on business of the producers and traders, setting up dedicated department (or designated personnel) for food safety issue, conducting self-inspection concerning food-safety, reporting illegal conducts of producers and trader to competent authorities and timely suspension of service to the non-compliance.

For online food producers and traders, it is naturally their priority concern to keep the safety of production itself. Besides that, under the perspective of compliance, the authenticity and integrity of information and description of production posted online is also of great importance to the producers and traders, no matter they operate business through a third-party or self-built platform. For these corporates, it would be advisable to conduct a review of all information posted. The wording and content for special food (e.g. infant formula milk powder, health food) calls for intensified attention.

For such an emerging industry as food e-commerce, it is expected for local governments to formulate regulatory policies. The Interim Measures of Supervision and Administration of Online Food of Beijing Municipality [6]  and the Measures of Supervision and Administration of Online Food Delivery Service of Shanghai Municipality [7] have already respectively entered into force in March and September this year. It would be advisable for relevant corporates to pay continuous attention to local policies.

Footnotes