Construction and Perfection of the Responsibility of Third-Party Platform Providers of the Online Food Trade in China

2.1. Existing legal provisions on the responsibility of third-party platform providers of the online food trade

At present, legal provisions regarding the responsibility of third-party platform providers are mainly found in the Food Safety Law, “Measures for the Management of Food Trade Licensing,” “Measures for Investigating and Prosecuting the Unlawful Acts in Online Food Safety,” “Measures for the Supervision and Management of Food Safety in Online Catering Services,” Consumer Protection Law, and more.

Article 62 of the Food Safety Law (revised in 2015) stipulates the statutory duties, such as review, stop and report (unlawful acts), and stop providing services, that shall be fulfilled by third-party platform providers of the online food trade. Article 131 stipulates the legal liabilities of third-party platform providers for failing to fulfill their duties. Both provisions were added by the aforesaid amendment, which innovated the institution of online food trade.

The “Measures for Investigating and Prosecuting Unlawful Acts Concerning Online Food Safety” further clarifies the duties of third-party platform providers of the online food trade. ⁴ It has been refined on the basis of the Food Safety Law and specifies the duties and responsibilities of third-party platform providers and the food producers or marketers who conduct trade through their own websites, so as to carry out strict management of the process of the online food trade, perfect the regulations on the online food trade, and further promote the responsibility system of third-party platform providers of the online trade.

The latest-published “Measures for Supervision and Management of Online Food Safety in Catering Services” specifies the duties that shall be fulfilled by the third-party platform providers. For example, third-party platform providers shall establish and carry out the review and registration of the online catering service providers, stop and report unlawful acts in a timely manner, and cease providing platform services for those with serious unlawful acts; they shall set up specialized food safety management institutions, deploy full-time food safety management personnel, and carry out training and assessment for food safety management personnel; they shall conscientiously and faithfully record order information of online reservations; they shall carry out timely spot checks and monitoring of the marketing behavior of the settled catering service providers; and they shall establish a complaint handling system, disclose how to file complaints, and report and handle complaints in a timely manner.

In addition, the duties and responsibilities of third-party platform providers are involved in provisions on platform providers of online trade in Article 44 of the Consumer Protection Law, as well as those on the application for online trade, the establishment of a central kitchen, or the engagement in the collective meal distribution by food marketers in Article 10 of the “Measures for the Management of Food Trade Licensing.”

2.2. Types of specific duties of third-party platform providers of the online food trade

According to provisions of Article 62 and Article 131 of the Food Safety Law, third-party platform providers shall bear corresponding duties before the event, during the event, and after the event.

In the pre-event stage, the third-party platform provider shall fulfill the duties of review, including “real name registration” and “review of license,” that is, they shall review the food marketers before allowing them to enter their platforms. Since the third-party platform provider is not an official food safety regulator and has many limitations itself, it is impossible for such platform providers to ensure that all the food marketers on their platforms will provide true and effective ID and meet all legal qualifications, so the review by the providers shall be considered as a formal review. As to the real name registration, the third-party platform provider shall register the real name, address, and effective way to contact the food marketer in order to achieve traceability of transactions and accountability. ⁵

The review of the license involves two cases: food marketers who are required to obtain a license shall be allowed to settle in and carry out online operations only after their food production license or food management license has been strictly reviewed, and the review standards may not be lowered; for food marketers who are not required to obtain a license, personal identification information and the industrial and commercial registration information of the main production and marketing body shall be reviewed. ⁶ The duty of formal review of the third-party platform provider may prevent non-qualified food marketers from settling in their platforms to a certain extent, reducing the production of food which does not meet online food safety standards, thus protecting consumer safety.

During the in-event stage, the third-party platform provider shall be obligated to “stop[ ] and report[ ] unlawful acts” and “stop[ ] providing services”—that is, they are required to stop the general unlawful acts of the food marketers in a timely manner and report such acts to CFDA, and also to stop providing platform services for those with serious unlawful acts. The duties of “stopping and reporting unlawful acts” and “stopping providing services” are obviously more crucial than that of “real name registration” and “review of license”; in particular, the duty to stop providing services grants third-party platform providers the power to “shut down” or stop providing network services to the settled food marketers who commit serious unlawful acts. We believe the reason for why third-party platform providers are granted the power to carry out such severe sanctions is that the third-party platform provider possesses key information about the settled marketers, and thus is able to respond in a timely manner, while their technology can support the exercise of such power. Therefore, the third-party platform provider is granted the duty to carry out such supervision and management. Once the third-party platform provider stops providing the service platform, the settled marketers will lose their online sales channels, which will have a huge impact on their business interests. As a result, the power to “shut down” the third-party platform provider may deter food marketers from illegal acts.

In the post-event stage, the third-party platform provider bears the duty of faithful notification—that is, in the event that any dispute arises from the infringement of consumers' legal rights and interests, the third-party platform provider shall provide the real name, address, and effective means to contact the relevant settled food marketer(s). The third-party platform provider shall register the real name, address, and effective means of contact of their settled marketers and disclose them on the platform to ensure that consumers can contact the settled marketers in time for settlement in the event that their rights and interests are infringed. Such duty may be fulfilled only after the third-party platform provider conscientiously fulfills the duty of formal review in the pre-event stage.

Many judicial cases show that third-party platform providers fulfill their statutory duties.

In a case concerning a dispute with respect to the service contract between Gao Chao, the plaintiff, and Shanghai Lazas IT Co., Ltd., the defendant, the plaintiff claimed that the dumplings purchased from the Eleme platform operated by the defendant did not conform to national food safety standards, and thus required it to bear the responsibility for refund and compensation. ⁷ The court eventually ruled that the defendant failed to provide the qualification certificate and an effective way to contact the settled marketer involved, failed to perform the duty to obtain the real name and review the license of the marketer, and did not provide a real and effective means of contact after the dispute occurred, resulting in the inability to check the settled marketer's qualifications, so that the defendant had to bear the responsibility for refund and compensation.

In a case concerning a dispute with respect to the online shopping contract between Qiu Yanhui, the plaintiff; Guangzhou Jianbaishi Pharmaceutical Co., Ltd., and Zhejiang Tmall Network Co. Ltd., the plaintiff claimed that the protein powder purchased from Jianbaishi Healthcare Products Franchised Store on the Tmall platform did not conform to food safety standards, and thus asked the Tmall platform to undertake joint and several liability for compensation. ⁸ The court of second instance believed that as Tmall had provided the license information of Jianbaishi, the company's current address was consistent with that in the Business License disclosed by Tmall, and Qiu Yanhui had been informed of the real name of the company by the details of the transaction, that Tmall had fulfilled its corresponding legal duties, and thus did not need to bear joint and several liability.

In a case concerning a dispute with respect to a sales contract between Wang Chunbo, the plaintiff, and Shanghai Chengji International Trade Co., Ltd., the plaintiff claimed that the “Nestle Hot Cocoa Mix” purchased from the imported food flagship store from zt-mall.com of JD.com (operated by Shanghai Chengji International Trade Co., Ltd.) didn't conform to food safety standards, thereby requiring JD.com, the third-party platform provider, to undertake joint and several liability. ⁹ The court believed that JD.com, as the e-commerce platform provider, had fulfilled the necessary duty of review and care and that the plaintiff didn't submit any evidence that could prove that JD.com had committed any unlawful acts in this case. Accordingly, it did not have any liability.

All the above cases reflect that the court is rather strict in deciding whether the third-party platform provider has fully fulfilled its statutory duties. The third-party platform provider shall conscientiously fulfill its duties under the law; otherwise, it must bear corresponding legal responsibilities. It is because the Eleme platform, mentioned in the first case, failed to fulfill the duty of license review and to provide a true and effective way of contact, that it was judged to be liable for refunds and compensation. If a third-party platform provider has conscientiously fulfilled its duty under the law, carried out real name registration and the necessary review of the licenses of the settled marketers in its platform, and can provide a true and effective way of contacting such merchants in the event of disputes, it will not bear any liability. For example, as JD.com and Tmall, in the second and third cases, respectively, had fully fulfilled their corresponding legal duties, they were not required to assume liability. A key factor in deciding whether a third-party platform provider shall be liable is whether it can provide true and effective information of settled marketers in the event of disputes.

The third-party platform provider must carefully verify the authenticity and effectiveness of the name, address, and contact information of the merchants settled in in the pre-event review stage to avoid any mistakes therein. Article 131 of the Food Safety Law further stipulates the standards that shall be observed when the third-party platform provider performs the duty of formal review, which requires that special care be given to the authenticity of the name, address, and way to contact the settled marketers.

2.3. Responsibilities of the third-party platform provider of online food trade

Article 131 of the Food Safety Law stipulates the legal responsibility that shall be borne by the third-party platform provider in the event that it fails to fulfill its duties or fails to fulfill such duties adequately. The first paragraph stipulates the joint liability that shall be borne by the third-party platform provider if it fails to perform duties, such as real name registration, review of the license, reporting unlawful acts in a timely manner, and stopping the service. A failure to perform those duties renders it liable for correcting its failures, confiscation of illegal income, fines, and even suspension of business or license revocation. The provider shall be jointly and severally liable with the food marketers in the event that the legitimate rights and interests of consumers are damaged. This shows that the third-party platform provider shall be liable for damages caused to consumers due to it failing to fulfill its duty of supervision and management. The third-party platform provider shall supervise and manage the settled food marketers and restrict and standardize their behavior so as to reduce the occurrence of food safety problems on the network platform.

Paragraph 2 stipulates the conditional joint and several liability that shall be borne by the third-party platform provider. There are conditions for a third-party platform provider to bear liability. The consumer may require a third-party platform provider to bear legal liability only in the event that the third-party platform provider fails to provide the real name, address, and effective means of contacting the marketers. Otherwise, the third-party platform provider shall not bear the relevant legal liability. This indicates that consumers may require a third-party platform provider to bear liability only when the law specifically requires them to bear such liability. Otherwise, consumers may only claim their rights against the food marketers. The law is designed to not only prevent consumers' rights from being abused, but also to protect the legitimate rights and interests of the third-party platform provider. It is an important embodiment of the principle of fairness and justice in the new Food Safety Law.

3.1. The ambiguity of the provisions of the law

First of all, the law fails to make clear the duty of care that shall be met by the third-party platform provider when the third-party platform provider performing the formal review is specifically required to bear liability for the authenticity of the information provided by the settled food marketers. The latter is currently interpreted in two ways. ¹¹ The first is that the third-party platform provider is required to review the information provided by the marketers in accordance with the standard of reasonable duty of care, yet is not required to bear liability for information fraud that cannot be identified through daily experience. The other is that the third-party platform provider is required to compare the information provided by the marketers with that in the comparable database of the administrative agency to find out whether the information is consistent; thus, they shall be liable for the authenticity of the information provided by the marketers. Article 131 of the Food Safety Law further improves the standard for the duty of formal review by the third-party platform provider, which requires it to ensure the authenticity of the name, address, and effective means of contact of the settled food marketers. However, the law has not made clear whether the third-party platform provider shall be liable for the authenticity of the information in the event that the settled food marketers pass through the review with false information, yet it fails to or is unable to identify such fraud due to limitations of its own.

In addition, there are no uniform legal standards with respect to the supervision of small and micro food marketers, such as small food production and processing workshops and food vendors. As small and micro food marketers are numerous in number, widely distributed, and considerably among different locations, it is difficult for the state to develop uniform standards. Therefore, management measures which are of local character, easy to implement, and which can be used to solve practical problems, should be developed according to local conditions. ¹² The provisions of Article 36 of the Food Safety Law stipulate that “small food production and processing workshops and food vendors, etc. shall observe the corresponding food safety requirements and ensure that the food produced should be healthful, nontoxic and harmless when engaging in production and management activities,” and that “specific management measures for small food production and processing workshops and food vendors, etc. shall be developed by the governments at the provincial and municipal level and of autonomous regions.”

The measures for supervising such small and micro food marketers vary in different places. For small food production and processing workshops, the majority of places, such as Ningxia, Jilin, Shanxi, Gansu, Zhejiang, Shanghai, Beijing, Heilongjiang, and Guizhou, adopt the licensing system; some places like Henan adopt the filing system; other places, such as Inner Mongolia and Guangdong, adopt the registration system. For food vendors, the majority of places, such as Jilin, Gansu, Shanxi, Shanghai, Beijing, and Hunan, adopt the registration system; other places, such as Henan and Guizhou, adopt the filing system. ¹³ The differences in supervisory system in various places make it more difficult for third-party platform providers to review the settling qualifications of such small and micro food marketers. There is hardly a uniform standard for third-party platform providers to review the settled food marketers, which may lead to the entry of some unqualified food marketers, thus aggravating the online food safety issue.

3.2. The lack of internal motivation for third-party platform providers to implement the duty of review

With the vigorous development of the Internet economy, the network effect and the platform effect become increasingly significant. How to attract more users and visitors is a problem with great importance to network platforms as the network field sets a higher demand than the traditional economic field due to its interconnection and intercommunication. ¹⁴ It is imperative to reduce the per-transaction cost through economies of scale. If a third-party platform provider of the online food trade wishes to take a place in the fierce market competition, it has to attract a large number of online food marketers and online shopping consumers, for the larger the number of users, the larger the scale of the platform, the lower the per-transaction costs, and the greater the benefits to the provider.

In the early stage of development, a third-party platform provider usually regards expanding the number and market share of users as a core task. Under such circumstances, some third-party platform providers may lower their standards for online food marketers; what's more, some of them even tacitly consent to and wink at false material information provided by food marketers—and even help them make up such information so that they may enter the online market. Actions that expand the scale of the platform at the sacrifice of the entry standards for food marketers leads to the entry of many unqualified food marketers, thereby aggravating the online food safety issue. At present, such phenomena as unlicensed sales, incomplete licenses, black-hearted workshops, forged and fake commodities, and more are not uncommon and the food safety issue is prominent. Take the takeout platform as an example: the Chinese media exposed the “takeout village” event in August 2016, where more than 90% of the suppliers were without a “food and beverage license,” but nonetheless were allowed to settle in the takeout platform with the platform's acquiescence and to become popular regular stores, which formed a “takeout village” of thousands of people. ¹⁵ From this, it can be seen that many illegal food marketers reap staggering profits by selling products that do not meet food safety standards on third-party platforms by taking advantage of such platforms' lax review, while the third-party platform provider turns a blind eye to such phenomenon in order to enlarge its scale, which contributes to the increasingly severe online food safety issue.

Tempted by the huge potential profits, a third-party platform provider may neglect its duty under the law. Even though the new Food Safety Law has stipulated the sanctions for breach of a provider's duties, such measures are unable to completely prevent third-party platform providers from committing unlawful acts, and there will still be some third-party platform providers cutting corners for the sake of benefits. Compared with the revenues of online catering platform providers with millions of dollars in financing, fines of 50,000 to 200,000 yuan are a drop in the bucket and an insufficient deterrent. Therefore, innovative and diversified means of supervision and punishment are required. ¹⁶

3.3. Division of responsibility of food safety supervision authority and the third-party platform provider

Differently from the supervision of the traditional offline food safety, supervision of online food safety requires the joint efforts of both governance bodies—the food safety supervision authority and the third-party platform provider. Therefore, the division of responsibilities between these two governance bodies has become a very important issue.

As offline food safety problems are very prominent and have already imposed great pressure on the food safety supervision authority, the authority is willing but unable to carry out comprehensive supervision of online food marketing. Unlike offline food marketing, since online food marketing relies on Internet technology, so, too, must supervision of online food marketing. Accordingly, the public power-dominated supervision mode is very limited in online food marketing, and the third-party platform provider has more advantages in this respect than the food safety supervision authority. Therefore, the third-party platform provider has an important role to play in the supervision of online food marketing and taking pressure off the food safety supervisory authority. Obviously, it is vital for the third-party platform provider to supervise online food safety. To this end, the updated and revised Food Safety Law in China stipulates that third-party platform providers are required to carry out real name registration and review of licenses of the settled food marketers and must stop providing platform service as soon as any unlawful act is identified. This indicates that the food safety authority has great expectations for the supervisory role played by the third-party platform provider. But in practice, this system has too often become an excuse for the food safety supervision authority to shirk its responsibility for supervision. It is worth thinking about how to better divide labor between third-party platform providers and the food safety supervision authority, and how to have them undertake their respective supervision responsibilities.

A very important issue is how to get government-related supervisory data while giving play to the supervisory role of the third-party platform provider. In the case of serious unlawful acts, whether concerning the registration of real names or the review of licenses, it is necessary to obtain the relevant government supervisory data to compare to that provided by the would-be food marketer in order to detect false or fraudulent applications. Unfortunately, as the Chinese government's supervisory data have not been effectively shared, third-party platform providers may not obtain or access some of the germane information, making it difficult for a third-party platform provider to verify food marketers' information. Therefore, the question is in what way should relevant governmental organs cooperate with the duty of review of the third-party platform provider?

4.1. The establishment of the prevention system and the reward reporting system

The third-party platform provider is required not only to review the settled food marketers, but also to establish preventive mechanisms to protect the rights and interests of consumers. The third-party platform provider is a virtual platform where all food transactions are carried out through the network, so it will be very difficult and costly for consumers to maintain their legal rights in case of any dispute. Therefore, the margin system is a good practice. For example, the provisions relating to the margin are included in the service agreement of Tmall and Taobao. The platform has the right to directly provide compensation to consumers with the margin delivered by the settled marketers in the event that settled marketers in its platform violate the laws and regulations, or otherwise break their commitments to consumers, thus causing losses to the rights and interests of the consumers.

Furthermore, a third-party platform provider may set up a reward reporting system where informants may receive a reward for reporting settled food marketers who do not meet the national food safety standards. At the same time, it is necessary to provide convenient channels for complaints and reports, such as online or by e-mail, so that consumers may easily make complaints. ¹⁹ This system can incentivize legitimate food marketers on the third-party platform to take the initiative to support online food safety; it is also beneficial for the third-party platform provider and government agencies by expediting their awareness of violations, allowing speedier action to protect food safety.

4.2. The implementation of “social co-governance” on the online food safety issue

“To implement the social governance of food safety,” we should give full play to the supervisory roles of consumers, industry associations, news media, and more, and guide all parties to participate in the governance in an orderly manner in order to form a social governance mechanism for food safety. ²⁰ Online food safety is an important part of overall food safety, which requires us to stick to the concept of social co-governance and requires attention from all walks of life. The public authority, the third-party platform providers, marketers, consumers, and so on, are the important subjects of social co-governance. Therefore, not only the food supervision and management authority or third-party providers, but also the food marketers and consumers should be responsible for the supervision of online food safety. The joint efforts of the whole society are required to solve the problem of online food safety. Social co-governance is an important part of the solution.

Among the many governance bodies, the third-party platform provider should become the main force to supervise the online food safety issue and play a leading role, for it has advantages that cannot be found in other governance bodies. It is able to grasp the information of many settled food marketers, knows better the situation of the online food trade, and has technical means or capacity, which makes it more convenient for it (as compared to other parties) to manage the food marketers settled in its platform. The third-party platform provider has the advantages of information and resources appropriate to solving problems in the era of big data, which enables it to build powerful platform supervision through information integration and accumulation of resources, ²¹ as evidenced by the power to “shut down” granted to it by Article 62 of the new Food Safety Law. In the meantime, the government supervisory authority shall also play its role in stopping or punishing settled food marketers in the event that they carry out online business activities without licenses. The governmental authority can report relevant information to the concerned platform provider to ask it to stop providing platform services for such marketers.