(By You Yunting) Abstract： Tencent will make no compensation to WeChat users who lost all their money in purchasing its LiCaiTong (an online financial services product) in accordance with Tencent’s Users Agreement. However, where the mobile client system of WeChat’s LiCaiTong is so simple that WeChat users are deliberately not informed of the fund name before making investments and where WeChat discloses the risk of higher interest rates in an overly optimistic way, were there any loss in the view of LiCaiTong, Tencent will face the risk of assuming compensation liability on the grounds of its fault of inadequate risk disclosure.

Recently a 3 billion yuan ($495 million) high-yield wealth-management product (the “WMP”) sold by Industrial and Commercial Bank of China ( “ICBC”) and managed by China Credit Trust will not be paid to investors on time due to the actual controller of Shanxi Zhenfu Energy Group Ltd being caught in 2013. A piece of news reported recently this WMP would be paid on time on the ground that ICBC will assume lead responsibility and China Credit Trust will take some responsibility (note: the Link is in Chinese). This news reminds me of the legal risk ofTencent’s latest online WeChat LiCaiTong.

Despite the fact that Tencent professed in a statement of WeChat LiCaiTong that placing money in LiCaiTong is roughly equivalent to buying monetary fund with smaller risk and that Tencent has not promised it to be capital preservation. In the event that any loss was to occur, it is a question of whetherTencent will compensate WeChat users, as ICBC did in the aforementioned report. The following are legal analysis in my cautious nature.

I.  What’s the legal status of Tencent for WeChat LiCaiTong?

Based my user experience, the essence of WeChat LiCaiTong is as follows. Users utilize the WeChat apps to purchase WMP via WeChat LiCaiTong from the money placed on a bank card. WeChat LiCaiTong is a financial value-added service jointly developed by Tenpay, Tencent and several fund companies, according to a statement of WeChat.

There are several subjects in the transaction of WeChat LiCaiTong:

a)      Purchaser: WeChat users

b)      Fund manager: Fund companies

c)       Money-transfer party: Banks

d)     Third-party payment service provider: Tencent (Tenpay)

e)      Fund-promoted Platform: Tencent (WeChat)

During the transaction of WeChat LiCaiTong, Tencent will, on one hand, and unlike a traditional security company or bank, not be a legal fund distributor and, on the other hand perform two roles: that of a fund promoter and a third-party payment service provider.

II.    What are the exemption clauses in Tencent’s User Agreement?

An analysisof Tencent’s user agreements discovered that Tencent will not, whether acting as the fund promoter or the third-party payment service provider, assume liability for losses of users who purchase WMP via WeChat LiCaiTong, in accordance with the terms of Tencent.

1.   The clause of liability for acting as a fund promoter of Tencent

Paragraph 5, Article 16 of the WeChat E-Commerce Service Agreement states that, in this e-commerce service, Tencent is a platform to provide users with information display and a means to make a transaction… if users suffer from losses due to the use of this e-commerce service, or purchase of any products published on this service platform, Tencent will not assume the liability of compensation or indemnification.

2. The clause of liability for acting as a third-party payment service provider of Tencent

Paragraph 2, Article 7 of the WeChat Payment Users Service Agreement states that Tenpay only provides WeChat payment services and is not concerned with specific transaction of goods or services and that all disputes or liabilities arising from the transaction of goods or services in utilizing WeChat payment service shall be resolved and/or assumed by yourself.

To further clarify the liability of Tencent, I scrutinized at the website of Tencent and found that the Tenpay Fund Transaction Payment Settlement Agreement seems not appear in the WeChat mobile application. Article 9 of the Tenpay Fund Transaction Payment Settlement Agreement states its scope and restriction of liability as follows: (1) Tencent shall assume liability listed in this agreement; (2) any risks arising from the transaction between the parties in the marketplace shall be undertaken by the parties, but have nothing to do with Tencent.

To be continued

 Lawyer Contacts

You Yunting：86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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