Connected Car Related Legal Issues December 2016 · multinational company. Areas of expertise ... (Tencent Lubao Box) and other hardware 5 Our topic . PwC Regulatory Licensing Issues

PwC China Autofacts Seminar 2016

Connected Car Related Legal Issues December 2016

www.pwc.com

PwC

Speaker : Catherine Shen, Partner, PwC Legal China

Contact Details Short Profile

Contact: Shanghai Xinbai Law Firm (PwC Legal China) 37/F Office Tower A Beijing Fortune Plaza 7 Dongsanhuan Zhong Road Chaoyang District, Beijing, PRC Tel.: +86 (10) 6533-2786 Fax.: +86 (10) 6533-3000 Mobile: +86 1360 128 3820 Email: [email protected]

Background

Catherine is a founding partner of PwC Legal China. She is a qualified PRC lawyer having close to 15 years’ experience in legal practice. She received her LL.B. in Economic Law from the East China University of Politics and Law, and her LL.M. in International Economic Law from the University of Warwick. Before joining PwC Legal China, Catherine was a partner of a Chinese law firm, and has extensive practice experience with both international and local law firms and also got solid in-house experience with a multinational company. Areas of expertise

• Corporate restructurings and business reorganizations • Cross-border M&As and joint ventures • Legal due diligence • General corporate and commercial legal services

Relevant experience

Catherine’s recent representative matters in the auto industry include:

• A premium German automotive company on the acquisition of a Chinese on-highway and off-highway engine production company and the establishment of a joint venture;

• A premium German automotive company on a driving school contractual cooperation project;

• A premium German automotive company on the structuring and implementation of a car sharing project;

• A global fortune 500 automotive company on the structuring and implementation of a car leasing project;

• A premium German automotive parts company on its restructuring and sale of PRC automobile multi-media components original equipment manufacturing business.

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PwC

Agenda

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December 2016 PwC China Autofacts Seminar 2016

Overview of Connected Car Eco System

Regulatory Licensing Issues for Certain Connected Car Services

Data Protection and Transfer

PwC

Overview of Connected Car Eco System

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Which role (s) will be played by you in the connected car eco system?

Connected car eco system comprises five types of participants with a focus on the needs of car owners

Car Owner

Platform Provider Vehicle Manufacturer

Basic Telecom Operators

• Volkswagen, BMW, SAIC… • Tesla

• Yun OS for Cars, Android auto，Carplay, OnStar…

Content/Service Providers (online/offline) Hardware Manufacturer

• Online service: mapping service, entertainment service, security service…

• Basic telecommunication service provider: China Mobile, China Union, China Telecom

• Connected car related hardware: Intelligent auto parts (such as sensors, ), OBDs (Tencent Lubao Box) and other hardware

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Our topic

PwC

Regulatory Licensing Issues for Certain Connected Car Services

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PwC

Platform Providers: Business Model Analysis

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Cars or OBDs serve as the physical infrastructure for connected car services

Operating systems embedded in the cars or OBDs as the electronic platform for connected car service

Software applications are deployed in local physical hardware

Data collected from cars and software applications deployed on the cars are stored locally in the physical hardware

Software applications can be deployed in the cloud

Data collected from cars and software applications can be deployed and stored in the cloud

Provide software development environment to software application developers

Traditional business

model

New business model

Provide distribution platform for third parties to upload and download applications developed by them


PwC

Regulatory Requirements on Platform Providers

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Operating systems embedded in automobile or OBD as the electronic platform for connected car service

Traditional business

model

New business model

Software service

Cloud service IDC license

Normally not subject to

special license

Application distribution

platform

ICP (app store) License

and / or


PwC

Restrictions on Foreign Investment Regarding IDC

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IDC License

For qualified service providers under

CEPA

Foreign investment allowed

Foreign shareholding ratio ≤ 50%

Foreign shareholder must have relevant experience and good

credential in running such IDC business overseas

For other foreign investors

Foreign investment not allowed

Ministry of Industry and Information

Technology


PwC

Restrictions on Foreign Investment Regarding ICP licenses (App Store)

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ICP License

(App Store)

For qualified service provider

under CEPA


No foreign ownership restriction – WFOE allowed

Foreign shareholder must have relevant experience and good credential in

running app store business overseas

Within original Shanghai Free

Trade Zone

Same as qualified service provider under CEPA

Other foreign investors


Foreign shareholder must have relevant experience and good credential in

running app store business overseas


PwC

Internet Mapping Service (Navigation Service)

Internet Mapping Service

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Internet Map

Published on internet or accessible by its users via internet

Generated on the basis of the geographic data stored on the servers owned by the internet mapping service provider

Electronic map and

Internet Mapping Services

Location match service

Geographic information sharing and tagging service

Internet mapping database service

Identify the physical location of users and match such location with the internet map coordinates

Location search, route planning and other relevant services provided to users based on the internet map database developed by the service provider

Enable users to upload information to the internet map and share such information with other users


PwC

Regulatory Requirements on Internet Mapping Services

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Internet mapping license

ICP license (Non app

store)

Authority in charge

Categories

National Administration of Surveying, Mapping and Geo-information of PRC

Category A: qualified to provide all the 3 kinds of mapping services

Main requirements

Qualified personnel + internal security and quality control system + mapping software

Server must be located in China and mapping data must be stored within China

Category B: qualified to provide the first 2 mapping service

Authority in charge Ministry of Industry and Information Technology


PwC

Restrictions on Foreign Investment regarding Internet Mapping Services and ICP License

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ICP (non-APP store) license

For all foreign investors

Open


Foreign shareholder must have relevant experience

and good credential in running ICP business

overseas


For all foreign investors

Open



PwC

Entertainment Service

Internet Music

Entertainment Service

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Internet Audio

Other Entertainment Services

Internet Cultural Operation License

Internet Audio-Visual Operation License

Internet Publication Service License

Not open for foreign investment

To be analysed case by case

Ministry of Culture

State Administration of Press, Publication, Radio, Film and Television


PwC

E-commerce: Distribution of Connected Car Related Products via Internet

Website as a platform for the website operator to distribute its own products online

E-commerce

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Normally not subject to special license

ICP record filing

Website as a platform for third parties to distribute their products online

E-commerce service Online Transaction Processing License

Other business functions of such website

To be analyzed case by case


PwC

Foreign Investment Restrictions regarding ICP Record Filing and E-commerce License

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E-commerce For all foreign

investors


No foreign ownership restriction from July, 2015

Foreign shareholders must have relevant experience

and good credential in running e-commerce

business overseas

ICP Record Filing For all foreign

investors Open without restriction


PwC

Data Protection and Transfer

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PwC

Key Dimensions to Be Taken into Consideration regarding Data Protection

How to protect this new type of intangible assets has been a great challenge for Chinese regulators and PRC courts.

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Who is the owner of data?

• Owner/users of the cars, OBD or applications deployed on the car and OBD

• Service providers (such as platform providers and content service providers)

Rules for data collection, transfer, storage, processing and utilization

• Principle of lawfulness, reasonableness and necessity

• Consent of the data owner • Protection of privacy

Data security

• Infrastructure security • System security • Cyber security

Liabilities for data leakage and abuse

• Civil liabilities

• Administrative liabilities • Criminal liabilities

Data Protection

December 2016

PwC

Case Study: Data Protection from Perspective of an OEM

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December 2016

Data Collection

Telematics service

Internet service

Dealer

Data providing service etc.

Internal use

Co

llection

Pro

cessing

Sto

rag

e

Data Processing Center

Car equipped with intelligent device

Car Users

The OEM may collect (1) Probe/CAN data, (2) video/audio data, (3) navigation data from car owners or users.

Manage the data and provide the data inside/outside of a country

Convert to transferable

format Mo

delin

g


PwC

Case Study: Who is the Owner of Data?

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Probe/CAN data

Video/Audio data

Navigation data

Other data

Personal data

Non personal data

Information which is recorded in electronic or other form and can be used to identify a natural person.

Contractual arrangement

Where there is no contractual arrangement

Compulsory obligations

A person normally will be deemed as the owner of

his personal information

Principles of lawfulness, reasonableness and necessity

Explicit consent by from such person

Where there is no contractual arrangement

Contractual arrangement

No clear compulsory obligations specified by law

Owners of the automobile, OBD or users of content service will normally be deemed as the owner of certain non-personal information.

PwC 21 December 2016

Case Study: Data Collection, Transfer, Storage, Processing and Utilization (1/2)

• Collection Who: OEM What:

vehicle-related data, such as Probe/CAN data; latitude and longitude information; video/audio data together; other data

Contractual Arrangement: Service Agreement

• Transfer

Explicit consent from data owner for transferring personal data except for irreversibly anonymized information

Protection of privacy Contractual Arrangement:

Confidentiality Agreement Service Agreement

Car equipped with intelligent device

Car Owner/Users

Data Collection


PwC 22 December 2016

Case Study: Data Collection, Transfer, Storage, Processing and Utilization (2/2)

• Storage • Infrastructure •System security •Location of storage

Data Collection

Telematics service

Internet service

Dealer


Internal use

Co

llection

Pro

cessing

Sto

rag

e Data Processing Center

Convert to transferable

format Mo

delin

g

• Processing •Contractual

arrangement •System security

• Utilization •Contractual arrangement •Consent of data owner •Protection of privacy


PwC

Case Study: Cyber Security (1/2)

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December 2016

Platform operators

Network operators of key information infrastructure?

Personal data and critical data collected during its daily operations shall be stored within China

Needs to go through security assessment before transferring such data out of China

If its procurement of network products and services may impact national security, such procurement is subject to a national security review by relevant Chinese authorities

Content service providers

and

If yes

To be further clarified by State Council

PwC

2016 PwC Autofacts

24 December 2016

Case Study: Cyber Security (2/2)

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Key Information

Infrastructure?

• Cross-border transfer

• National security review

Data Collection

Telematics service

Internet service

Dealer


Internal use

Colle

ctio

n

Pro

cessin

g

Sto

rag

e

Data Processing Center

Car equipped with intelligent

device

Car Users

Modelin

g

PwC

Legal Responsibility for Breaching Personal Information Protection Obligations

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• Infringement of privacy or reputation • Compensation for losses • Apology • Mitigation of negative influence

• Order to rectify by a certain time • Warning • Fine • Confiscation of illegal gains • Withdraw certificate • Cancel filing • Shut down website • Ban relevant responsible person from engaging in network service business

• Where any staff of an entity in the area of finance, telecommunications, transportation, education or medical treatment, in violation

of PRC law, sells or illegally provides to others personal information; or • Where any individual steals or illegally obtains the personal information • Company and the person in charge shall bear criminal liabilities for engaging in the above illegal acts, which includes fixed-

term imprisonment of no more than three years • Restriction on industry may be lifted • Three years may be increased to seven years

Civil

Administrative

Criminal

Thank you.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional

advisors.

© [2015] PwC Legal China. All rights reserved. PwC refers to the China or Hong Kong member firm, and may sometimes refer

to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Shanghai Office

12/F, 3 Corporate Avenue 168 Hu Bin Road Huangpu District,

Shanghai 200021, PRC

Tel: +86 (21) 2323 8888

Fax: +86 (21) 2323 8800

Contact Info:

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Tel：+86 (10) 6533 2908

Fax: +86 (10) 6533 3000

Documents

Connected Car Related Legal Issues December 2016 · multinational company. Areas of expertise ... (Tencent Lubao Box) and other hardware 5 Our topic . PwC Regulatory Licensing Issues