(Yicai) Dec. 8 -- Online vendors are calling into question the fairness and gatekeeping functions of Chinese e-commerce platforms amid disputes over deposits and penalties. 

Merchants complain about online marketplaces' obscure procedures and judgments in disputes done in the name of protecting consumers without a clear system to ensure sellers’ rights.

A dietary supplements retailer based in Wuhan said a leading e-commerce platform had unfairly treated the firm by freezing its transaction funds and a CNY50,000 (USD7,000) security deposit for alleged “misrepresentation and exaggeration of the product‘s efficacy.” The product in question had been approved by the platform, the merchant pointed out.

When asked about the case, a customer service representative for the platform told Yicai that the seller’s store displays a picture that implicitly exaggerates the product’s effectiveness, violating the platform’s rules, but it did not offer more details about the decision.

Many retailers have suffered similar penalties, Yicai found. Black Cat, Sina’s customer complaints service, has more than 7,500 related to the keywords 'deposit' and the above-mentioned platform’s name. These include cases where the platform did not refund the store’s security deposit after the store closed, including instances where it gave no explanation, and the platform does not offer an official channel to resolve the dispute.

This is not the only platform censured on Black Cat, as vendors on other e-commerce marketplaces report similar issues. One merchant said that after two months of poor sales, they did not get back their CNY50,000 store-opening deposit two months after wrapping up. Then the merchant noticed that the platform had quietly changed the refund period to 360 days after store closure, from the 60 days previously.

China should step up the regulatory overhaul of e-commerce platforms and their merchants to avoid disputes arising from disgruntled vendors, lawyer Ma Cong said to Yicai. Ma suggested that the government should introduce policies to regulate the monitoring practices of e-commerce platforms towards sellers at the institutional level.

If a seller does violate the law, the platform should report it to the government’s market oversight and management departments which decide the penalty, Ma said. China’s e-commerce regulations do not give platforms the power to enforce laws, so it is illegal for them to freeze funds or withhold security deposits, he said. 

Editors: Tang Shihua, Emmi Laine