China 2019
Legal director | Autohome
Yuan Li
Legal director | Autohome
Autohome invested US$100m in TTP Car, a company operating an online auction platform for used automobiles, in the form of an 8% convertible bond. In addition, within three years after the closing, Autohome has the right to purchase, from time to time, an additional 8% convertible bond in total in the principal amount of US$65m to be issued by TTP upon Autohome’s request. My team led the due diligence and negotiation process of the investment, and finalised the investment documents with the company’s US and PRC counsel. After the transaction was completed, we provided legal advice on the construction of the C2B2C business model, which has become increasingly important with the headwinds in the automobile industry.
When China’s Interim Measures for the Administration of Internet Advertising were first introduced in the summer of 2016, websites were required to mark out all advertisements. This requirement affected the way every internet company managed its advertising resources. It was more than a matter of workload, we also needed to talk to our customers to accept the new approach we were going to adopt. The challenge for us was to devise the internal guideline on what could be kept and what had to be changed – without enforcement cases as a reference by that time, and to explain to our colleagues the necessity of each change. After the Interim Measures took effect in September, we from time to time invite officials from the Administration of Market Regulation over for a lecture, who share their perspectives on advertisement law enforcement. It is a dynamic process for us to make sure our business practice does not cross the line.
We value cooperation a lot. As much as we try to manage the schedule when we need certain jobs done by external counsel, it is hard to avoid pressing issues that must be dealt with as soon as possible in the deadlines we set for our external counsel sometimes, because Internet companies are supposed to respond and react faster. Besides we value the firms who have accumulated enough experience to share peer’s practice with us, or in other words, provide practical advice. As an in-house counsel, I need to take into consideration the costs and resources to stay compliant with all relevant laws to the extent that we are above peer’s average. This is why we need our lawyers to be familiar with not only the laws, but also how the laws are applied in practice.
Lastly, ownership is also very important for us. It is always appreciated if lawyers can relate to the context instead of answering question by question. And if too many parties are involved in one project, it would be very helpful if our external counsel knows when to push the other parties and when to defend the best interest of the company.
We must remain sensitive to the changes in the industry and have a forward-looking attitude towards compliance risks. Our work needs to keep up with the times and reflect the changes in the industry, and we always need to break through and innovate. In-house lawyers should be well aware of resources available in the company and stay innovative. One example at Autohome is IP protection. We generate a lot of automobile related OGC (occupationally-generated content) and PGC (professionally-generated content) on our platform and are equipped with superb capabilities of data analytics. In order to protect our intellectual property rights more effectively, we came up with the idea of combining automatic monitoring and IP protection, and reached out to our data experts. We brainstormed a system which allowed us to detect articles, videos, and photos which were used by third parties without proper authorisation from us. Then our IT colleagues assisted us in finding the right vendors and setting up monitoring instructions. So far we have successfully detected hundreds of misappropriation and initiated legal proceedings against relevant parties.
First of all, upholding a high degree of knowledge of both legislations and the business in specific fields is highly valued. It is especially true among Internet companies as technologies and business models are evolving, which actually allows more room for an in-house lawyer to grow from a legal expert to an expert in certain fields. In-house counsel could be more forward thinking and proactive. Potential risks could be detected and avoided earlier and probably more thoroughly, with innovation and emerging technologies such as artificial intelligence, data analytics and blockchain.
The automobile industry in China is going through a difficult time, as the growth rate dropped significantly in 2018 and is not looking up in 2019. Therefore, the company is exploring new potentials, such as overseas expansion into the US, European and Southeast Asian markets and developing new business models for Chinese operations. So there might be merger and acquisitions on the way in new jurisdictions, and there would be new business models that need to be designed. With the expansion of Autohome’s business, the legal team will assist on investment projects. Investment is a long-term, systematic project that requires not only a clear understanding of current industry conditions and regulatory requirements, but also a sense of how the policies and risks will evolve in the future. We have been doing a lot of research lately, both on our own and with the help from our external counsel, covering information technology, commercial transactions, mergers and acquisitions and general corporate practice.