[Significance]

Since online shopping have characteristics such as rapid trading, large trading volume, broad cross-regional scope, decentralized subjects, it is increasingly difficult for administrative departments to supervise e-commerce, and the self-regulated rules of platforms are playing an increasingly significant role. This case clarified that the registration agreement signed between the platform and the merchants stipulating the “consumer compensation” belongs to a self-regulated behavior of the online community, provided that the content of the agreement does not violate the compulsory provisions under the laws and administrative regulations. When a merchant sells counterfeits on the platform that constitutes a breach of contract, according to the agreed “consumer compensation” rules the e-commerce platform is entitled to hold the sum of the compensation from the merchant’s accounts and directly make payments to the compensated consumers, which helps affirm the effectiveness of the self-regulated rules of the Internet platform.

[Case Summary]

On July 4, 2016, Fuzhou Jiunong Trade Co., Ltd. (“Jiunong”) and Shanghai Xunmeng Information Technology Co., Ltd. (“Xunmeng”)’s e-commerce platform signed an agreement which stipulated that: The merchant shall pay liquidated damages ten times of the historical sales of the counterfeit goods, and the platform shall have the right to directly freeze the merchant’s account and deduct the payment therefrom. If the merchant cannot prove that the suspected counterfeit goods are genuine after receiving a notice from the platform, the platform will compensate the consumer with the deposit in the merchant’s account. As Jiunong sold counterfeit goods on Xunmeng’s platform, Xunmeng froze the Jiunong’s account and paid the full amount of the deducted money to the corresponding consumers of the counterfeit goods. Jiunong claimed that it did not sell any counterfeit goods, and Xunmeng’s unilateral request of the ten-times penalty, formulation of other harsh punishment rules, and freezing Jiunong’s account violated its legitimate rights and interests Therefore, Jiunong brought this civil case before a court asking for a refund and compensation.

[Decision]

The court held that, the merchants had full freedom to choose when registering in the e-commerce platform, and the platform company had fully performed the obligation of reminder when signing the contract. Therefore, when the plaintiff Jiunong registered on the platform operated by the defendant Xunmeng , the terms of the contract signed online became valid. The plaintiff Jiunong’s selling activities was a sale of counterfeits according to rules of the platform and was considered as a violation of the agreement between both parties. Therefore, it had no right to request the defendant Xunmeng to refund or compensate for its loss. The consumer compensation system set up by the defendant Xunmeng’s e-commerce platform was different from the traditional liquidated damages system in terms of the beneficiary subject, source of rights, responsibility target, applicable standards, etc. The purpose of the consumer compensation system was not to make profit, but to maintain an honest and credible e-commerce environment, to protect the legitimate rights and interests of consumers, which complies with the principle of public order and good customs, and its effect should be affirmed. On May 31, 2018, Shanghai Changning District People’s Court made a civil judgment, which rejected all relieves requested by the plaintiff. The plaintiff filed an appeal after the first instance judgment was pronounced, but failed to pay the appeal fee on time. The court of second instance ruled that the appeal should be considered as withdrawn, and the judgment of first instance had become effective.