Table of Contents

1. Primary Legal Relationship
2. Types of Disputes
3. Disputes Arising from Platform Penalties Against Merchants Under Platform Rules
4. Disputes Between Platforms and Merchants Over Settlement Payments
5. Disputes Arising from Platforms’ Subrogation Recovery After Providing Advance Compensation for Products or Services Sold by Merchants
6. Competent Court for Contract Disputes

I. Primary Legal Relationship

When merchants rely on a platform to sell products or provide services, they must sign a series of legal documents with the platform operator when入驻 the e-commerce platform, including platform入驻 agreements, platform rules, and platform confidentiality agreements. The platform operator is required to provide services to the merchant due to the merchant’s入驻. Therefore, the two parties form a service contract legal relationship.

II. Types of Disputes

Based on court cases from the past two years, the types of disputes can be categorized as: disputes arising from platform penalties against merchants under platform rules; disputes between platforms and merchants over settlement payments; and disputes arising from platforms’ subrogation recovery after providing advance compensation for products sold or services provided by merchants on the platform.

III. Disputes Arising from Platform Penalties Against Merchants Under Platform Rules

Based on the principle of autonomy, the platform, subject to compliance with laws and regulations, requires merchants to acknowledge the platform rules upon入驻, thereby regulating merchants’ behavior on the platform. Since these rules contain clear provisions regarding merchants’ conduct and directly affect their interests, any violation of the rules will result in penalties. Typical penalties include “cancellation of membership,” “account freezing,” and “fund freezing” due to activities such as “brushing transactions” or “false transactions.”

1. Burden of Proof

1.1 Merchant’s Burden

(1) The “Platform入驻 Agreement,” “Network Service Agreement,” or “Platform Service Cooperation Agreement” (2) Vouchers for annual fees or technical service fees stipulated in the service contract (e.g., invoices) (3) Evidence of factual actions such as “cancellation of membership,” “account freezing,” and “fund freezing” (4) Other evidence supporting the claim

1.2 Platform’s Burden

(1) The “Platform Rules” (2) Evidence of publication of the “Platform Rules” (3) Evidence of the merchant’s violation of rules during performance

2. Key Issues in Dispute

2.1 Legal validity of the electronic contract signed by both parties 2.2 Whether a violation actually occurred 2.3 Legal liability to be borne for the violation

3. Legal Analysis

3.1 Determination of the Legal Validity of Electronic Contracts

When merchants入驻, they typically enter into contracts and a series of legal documents through online signing to define their respective rights and obligations. Since online signing involves different methods of signing, signatures/seals, and contract texts compared with traditional offline signing, it places a greater emphasis on the authenticity, validity, and legality of the contract content.

As the provider of platform rules, the platform drafts standard terms prepared in advance for repeated use without negotiation with the other party at the time of contract formation. Such standard terms may be deemed invalid under the following circumstances: (1) the civil legal act violates mandatory provisions on validity or public order and good customs; (2) the act involves malicious collusion harming the interests of others; (3) the party providing the standard terms unreasonably exempts or reduces its own liability, increases the other party’s liability, or restricts the other party’s main rights; (4) the party providing the standard terms excludes the other party’s main rights.

3.2 Determination of Merchant Violations

Generally, violations by merchants are discovered through complaints filed by third parties to the platform or through the platform’s own self-inspection. The platform should preserve the content and evidence of third-party complaints or preliminary evidence of violations discovered during self-inspection. Some platforms immediately freeze the merchant’s “account” and “funds” upon receiving a complaint.

3.3 Legal Consequences of Breach of Contract

If the merchant has actually engaged in violations and the platform contract is legal and compliant, the merchant shall bear the liability for breach of contract as stipulated in the “Agreement” and “Rules.”

4. Compliance Recommendations

(A) In platform operations, to avoid rules being deemed invalid or inapplicable, attention should be paid to the following:

(1) Clicking to confirm or reading the rule terms should be set as a prerequisite for receiving services, and disclaimers should be presented in a conspicuous manner clearly distinguishable from other terms, such as through pop-up windows or individual term confirmation. (2) Contract terms should be clear in meaning and free from ambiguity. In judicial practice, when审理 standard terms with disputed interpretations, courts will interpret them in a manner unfavorable to the party providing the standard terms. (3) Platform rules may be modified from time to time as the platform develops and operates. After modification, updated rules should be promptly pushed to merchants or publicly announced in a conspicuous location on the platform.

(B) The platform has a duty of review. Upon receiving a complaint or discovering a violation, it should actively send a violation notice to the merchant, requesting the merchant to provide evidence and explanation within a reasonable period, allowing the merchant an opportunity to defend itself. If the merchant fails to provide evidence or explanation within the reasonable period, or if the evidence provided does not support its claim, the platform may then unilaterally terminate the contract in accordance with the rules.

IV. Disputes Between Platforms and Merchants Over Settlement Payments

Consumers purchase goods or services from merchants on e-commerce platforms and pay through electronic payment methods. For non-self-operated platforms, the basic model is the platform collection and payment model, where consumer payments are first made to the platform’s account, and then the platform settles with the merchant according to a certain settlement周期 and settlement amount. During the settlement process, issues may arise such as deduction of platform service fees, overdue settlement payments, and discrepancies in settlement amounts.

1. Burden of Proof

1.1 Merchant’s Burden

(1) The “Platform入驻 Agreement,” “Network Service Agreement,” or “Platform Service Agreement” (2) Settlement list (3) Sales details (4) Settlement application or payment demand documents (5) Other evidence supporting the claim

1.2 Platform’s Burden

(1) Basis for deducting service fees, liquidated damages, etc. (2) Evidence of abnormal transactions in violation of the agreement (3) Other relevant evidence

2. Key Issues in Dispute

3. Legal Analysis

Generally, when merchants入驻 an e-commerce platform, they need to sign a platform agreement that stipulates fees and settlement terms. The agreement specifies that upon入驻, the merchant agrees to pay platform usage fees, deposits, or technical service fees to the platform according to the standards. It also provides that the platform has the right to deduct amounts or preferentially pay corresponding fees under certain circumstances. If the merchant engages in false transactions or abnormal transactions in violation of the agreement, the platform may refuse to settle the abnormal order amounts based on the agreement.

4. Compliance Recommendations

(1) If the platform provides money transfer services for payers and payees or engages in payment business, it must comply with the “Administrative Measures for the Payment Services of Non-financial Institutions” and other regulatory requirements, and obtain a payment business license accordingly. Failure to obtain a payment business license may result in the risk of being deemed as operating a payment business without a license.

(2) The involvement of a third-party payment institution can reduce the platform’s collection and payment risks. However, when selecting a third-party payment institution, the platform should review the institution to ensure it meets legal requirements. If a third-party payment institution is chosen as the settlement partner, the merchant should be informed and its consent obtained, as the involvement of a third-party payment institution brings additional ancillary services, and user information, transaction information, and account information will be transmitted to the third-party payment institution simultaneously. Failure to obtain the merchant’s consent may involve私自 disclosure of merchant information to the third party, and the platform may be liable for compensation if the merchant suffers losses.

(3) The legality and authenticity of transactions affect the legality of electronic payments. If there is no genuine transaction between the parties, or if the underlying transaction is false or involves criminal activity, such illegitimate or false transactions may expose the platform to allegations of aiding information network crime. The platform should establish a risk detection system to monitor and control transactions with明显 abnormal prices or methods in a timely manner, effectively preserve evidence, and promptly report to the public security authorities if criminal activity is suspected.

(4) If a merchant engages in selling counterfeit products on the platform, the platform should take prompt action to阻止 it. If funds are deducted from the merchant in accordance with the platform agreement, the platform should send a deduction notice to the merchant with an explanation.

V. Disputes Arising from Platforms’ Subrogation Recovery After Providing Advance Compensation for Products or Services Sold by Merchants

Since the products/services provided on the platform are operated independently by merchants, there may be instances where merchants sell substandard products or products that infringe on intellectual property rights, resulting in losses from third-party claims. The platform then seeks recovery from the merchant pursuant to the service agreement or platform rules.

1. Burden of Proof

1.1 Platform’s Burden

For this type of dispute, the platform mainly needs to prove that the merchant’s conduct caused the platform to pay compensation to the third party, and that the platform seeks recovery based on the agreement signed by both parties. This includes but is not limited to the following evidence:

(1) Information on the store involved (2) Details of the order involved (3) Order transaction log (4) Third-party rights protection records (5) Compensation records (6) Notice and penalty records (7) “Platform Service Agreement” and “Platform Rules”

1.2 Merchant’s Burden

As the party from whom recovery is sought, the merchant primarily needs to provide evidence showing that the products or services it sold did not cause losses to third parties requiring compensation, and that the agreement relied upon by the platform is not binding on the merchant or is inapplicable in this case.

2. Key Issues in Dispute

3. Legal Analysis

3.1 Factual Basis

In advance compensation cases, most arise when consumers purchase products/services from merchants on the platform, and the merchant engages in conduct such as “failure to ship within the agreed time,” product/service “defects,” “wrong shipment,” or “product does not match description,” leading consumers to demand “return for refund,” “refund plus triple damages,” or “refund plus ten times damages.” When the merchant fails to address the issue, the platform uses its own funds to compensate the consumer on behalf of the merchant.

3.2 Contractual Basis

When merchants入驻 the platform, the platform service agreement generally includes provisions regarding the platform’s subrogation right after advance compensation. For example, if the merchant should provide a refund, pay liquidated damages, or compensation to the consumer, the merchant agrees that the platform may use its own funds to pay the consumer on behalf of the merchant, and the platform has the right to seek recovery from the merchant for the amount paid. Similarly, if the merchant violates laws, regulations, policies, platform rules, or its commitments to consumers in activities related to listing products, executing transactions, or performing transaction-related activities, or if the merchant is subject to consumer complaints or claims, the platform has the right to directly deduct from the merchant’s deposit after compensation, and if the deposit is insufficient, the platform has the right to seek recovery from the merchant.

3.3 Legal Basis

According to the relevant provisions of the Civil Code of the People’s Republic of China:

Article 509: The parties shall fully perform their obligations as agreed.

Article 577: If a party fails to perform its contractual obligations or performs them in a manner inconsistent with the agreement, it shall bear liability for breach of contract, including continuing performance, taking remedial measures, or compensating for losses.

Article 579: If a party fails to pay the price, remuneration, rent, interest, or fails to perform other monetary debts, the other party may request payment.

Article 584: If a party fails to perform its contractual obligations or performs them in a manner inconsistent with the agreement, causing losses to the other party, the amount of damages shall be equivalent to the losses caused by the breach, including the benefits obtainable after the performance of the contract; however, it shall not exceed the losses that the breaching party foresaw or should have foreseen at the time of entering into the contract as可能 resulting from the breach.

4. Compliance Recommendations

(1) In litigation where the platform seeks recovery from the merchant after advance compensation, the most crucial factor is the provision regarding the subrogation right in the platform service agreement. Therefore, as a platform, the content of the platform agreement signed upon merchant入驻 must clearly stipulate this subrogation right.

(2) The platform service agreement serves as an important basis, and its legality and validity must be ensured. Compliance recommendations for electronic contracts have been detailed in section 3.3 and will not be repeated here.

(3) For various violations of obligations by merchants during transactions, the platform should promptly preserve effective evidence, handle the violation in a timely manner, notify the merchant, and require the merchant to file an appeal within a reasonable period. If the merchant fails to respond within the prescribed period, the platform has the right to handle the matter in accordance with the platform service agreement/rules.

VI. Competent Court for Contract Disputes

In the event of a contract dispute, if the contract contains a jurisdiction clause, either party may file a lawsuit in the court designated by the agreement. If no jurisdiction is agreed upon, either party may file a lawsuit in the court of the defendant’s domicile or the place of contract performance.

According to Article 20 of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China: For sales contracts concluded through information networks, if the subject matter is delivered through the information network, the buyer’s domicile is deemed as the place of contract performance; if the subject matter is delivered through other means, the place of receipt is deemed as the place of contract performance. If the contract stipulates the place of performance, such stipulation shall prevail.