Food Safety in China’s e-Commerce Platforms

This article has been contributed by the GIC Group, originally published on the Global Food Safety Forum (GFSF) Newsletter.

Growing Market of e-Commerce

Following the immense success of Alibaba.com, the Chinese e-Commerce market has developed rapidly in recent years. A large number of online shopping platforms have been launched, and they have become a new distribution channel for Chinese merchandise, including foods and agricultural products. The revenue of online Food shopping in China was RMB 32.4 billion in 2013, increasing 47.9% over revenue in 2012. Today, revenue of online food shopping accounts for 2.5% of the total turnover of the Chinese e-commerce market.

Specialisation in Food e-Commerce

The online shopping platform can be divided into two categories: general product sites and specialised product sites. Although most e-Commerce platforms offer food products, specialised platforms for agricultural services / product trading have enjoyed rapid development in China: State-owned-enterprise COFCO launched its food shopping website in 2009, which has become one of the largest Business-to-Customers (B2C) platforms in China. Meanwhile, online food shopping is undergoing industry segmentation. Platforms for a specific branch of food trading, like Efruit for fruit trading, or Ye Mai Jiu (Yes My Wine) for alcohol trading, have been introduced to the market. Moreover, GIC Group is partnering with a Chinese group and Hudson Harvest Group (HHIG) in launching an electronic platform with provincial coops in this space.

Food Safety Concerns

Although plenty of food providers are making use of the e-Commerce platforms, few of them have obtained licenses for food production and operation. Online food providers are often unverified and hard to trace, which adds to the risk of introducing counterfeits, fakes and forgeries into the market. Meanwhile, there are notable gaps in China’s food safety regulations and enforcement capabilities for third-party online food platform providers. Food safety in those e-commerce platforms has become a great concern for Chinese consumers.

Regulation Development

To address this growing concern, on June 23 2014, the NPC Standing Committee approved amendments to China’s basic Food Safety Law, including compliance requirements for online food shopping platforms. According to the amendment, third-party online platform providers will be held responsible for accurate, real-name registration of food providers and license verification for all suppliers listed and transactions on the platform. When a dispute arises, the online platform is required under the compliance provisions to provide the tracing information for food provider(s); failing to do so will result in a fine between 50,000 and 200,000 RMB issued by China Food and Drug Administration (CFDA). Moreover, the online food trading platform will be the first in line to cover compensation to consumers of the products in question. After the compensation, the platform provider is entitled to recover losses from the responsible food providers. In case of a major food safety incident, an online food trading platform may even face license revocation and business suspension. Clearly, the B2B/B2C food platforms present regulatory challenges but CFDA is certainly trying to stay ahead of the game.

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