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China: Consumer Protection Law Revamped for First Time in 20 Years

(Jan. 29, 2014) On October 25, 2013, the Fifth Session of the Standing Committee of China’s National People’s Congress (NPC) passed the first amendment to the Consumers’ Rights and Interests Protection Law of the People’s Republic of China (PRC) (hereinafter the Consumer Protection Law) since its 1993 promulgation. (Decision to Amend the Consumers’ Rights and Interests Protection Law of the PRC [in Chinese] [hereinafter Decision], The Central People’s Government of the PRC website (Oct. 25, 2013); China Amends Consumer Rights Law, XINHUA (Oct. 25, 2013).)

The Decision, which will take effect on March 15, 2014, is aimed at boosting consumer confidence in business accountability. It will thereby ultimately assist in transitioning <!–?China from an investment-driven economy to a consumption-driven economy. (Jia Dongming, Press Conference of the General Office of the NPC Standing Committee as of October 25 [in Chinese], (Oct. 25, 2013), NPC website [scroll down to view Jia Dongming item]; Adam Jourdan, China Overhauls Consumer Protection Laws, REUTERS (Oct. 25, 2013).) Because the Law regulates all business operators, including commodity manufacturers, retailers, and service providers, the amendment will broadly influence suppliers in a range of areas. (Consumer Protection Law of PRC (2013 amended)[in Chinese], PEOPLE.COM (Oct. 28, 2013), art. 3; Law of the People’s Republic of China on Protection of Consumer Rights and Interests (1994) [unamended text of the Law in English translation], World Intellectual Property Organization (WIPO) website, WIPO Lex No. CN174 (last visited Dec. 23, 2013), art. 3.)

Privacy Rights Expanded

The Decision newly prohibits business operators from collecting, using, and disclosing the personal information of consumers without their informed consent. (Decision, arts. 2 & 12.) Although consumer information is currently protected under the Interim Measures for Internet Commerce, the Measures only apply to business operators on Internet-commerce platforms and the platform service. providers. (Interim Measures for Internet Commerce [in Chinese], State Administration for Industry and Commerce of the PRC (SAIC) website (promulgated May 31, 2010, in force on July 1, 2010), arts. 16 & 25.) However, the Decision does not define “personal information.” The legislative history of the Law indicates that personal information includes at least the customer’s name, residential address, and telephone number(s). (Jia, supra.)

Fines for violations of consumer privacy are high, up to ten times the amount of the illegal income, as compared to five times before amendment, with a cap of RMB500,000 (about US$83,000) or up to the same amount if no income was earned from the violation. Previously the cap on fines was RMB10,000 (about US$1,660). (Decision, art. 28.)

Oversight of e-Commerce Business Operators

The 2010 Interim Measures for Internet-Commerce state that providers of Internet-commerce platforms and business operators on the platforms must comply with the obligations imposed on business operators by the Consumer Protection Law and the Food Staff Safety Law. (Interim Measures for Internet-Commerce, art. 12.) In addition, the Measures oblige platform providers to check business operators’ information, oversee regular business activities conducted on the platforms, and take action to cooperate with government investigations of business activities on the platforms. (Id. arts. 20 & 23.) Based on the 2010 measures, the Decision imposes more rigorous obligations on all e-commerce business operators.

E-commerce business operators (jingyingzhe), which include those that operate via the Internet, phone, mail, and television, must disclose the following information to consumers: business address, contacts, the quantity and quality of the commodities or service, the price or cost, risks, post-sale services, and applicable civil liabilities. (Decision, art. 11; Consumers Feel More Secure Through e-Commerce [in Chinese], NPC website (Oct. 29, 2013).)

E-commerce business operators must accept product returns within seven days of receipt, even if the consumer does not give any reason for returning the item. However, the unconditional return obligation does not apply to products that, based on their nature, are not suitable for return, so long as the consumer so agreed at the time of purchase. (Decision, art. 9.) The Law does not state which products are not proper to return. Civil law professor Yang Lixin interprets the exception as including foods, pharmaceuticals, and purchases through agents who are overseas. (Three Questions on the New “Consumer Law [in Chinese], NPC website (Nov. 8, 2013).)

Providers of Internet-Commerce Platforms No Longer Immune from Business Operators’ Misconduct

Under the Decision, Internet-commerce platform providers will bear joint liability with infringers who operate on the platform if the provider: (1) cannot provide the real names, addresses, and valid contact information for the alleged infringer; or (2) does not take action to block the infringing activities that are known or should have been known to the platform provider. (Decision art. 17; Tort Law of the PRC [in Chinese], The Central People’s Government of the PRC website (Dec. 26, 2009), art. 36; Tort Law of the People’s Republic of China [in English translation], WIPO website, art. 36 (last visited Jan. 2, 2013).)

Stricter Safety and Quality Obligations

Perhaps in light of the fact that issues of product safety and quality control have frequently come under media scrutiny in recent years, the Decision strengthens the accountability of business operators for product quality and safety through various provisions. Thus, if a commodity or service is deemed by administrative agencies to be defective, the business operator must recall the defective commodity or service. Failure to comply with the order may result in fines as much as ten times the illegal income, or up to RMB500,000 if no illegal income was gained. (Decision, arts. 14 & 28; see section “Privacy Rights Expanded,” supra.)

If a consumer finds that a product designed to be long-lasting is defective within six months after having accepted it, the business operator has to prove that the defects do not exist. The same burden of proof applies to decorating service suppliers. (Id. art. 7.)

If false statements about human health or safety are made in promoting a product or service, the advertising agents, advertising publishers, and persons appearing in false promotional activities will be jointly liable with the business operator. (Id. art. 18.)

Providers of public facilities, including hotels, malls, restaurants, banks, airports, stations, ports, and theaters, are obligated to ensure the safety of consumers. (Id. art. 4; Tort Law of the People’s Republic of China, art. 37.)

Public Interest Litigation

The Decision confirms that
China’s national Consumers’ Association and provincial-level consumers’ associations may bring lawsuits on behalf of consumers. (Decision, art. 47.) This is a type of public interest litigation that allows a non-infringed organization to bring a lawsuit on behalf of an uncertain number of infringed parties pursuant to statutory delegation. (Civil Procedure Law of the People’s Republic of China[in Chinese] (as amended in 2012), art. 55, The Supreme People’s Court of the PRC website.)

Aggravated Punitive Damages and Other Punishments

The Decision provides for aggravated punitive damages and damages for mental distress in order to deter misconduct on the part of business operators. Punitive damages in cases involving fraud have been increased to the higher of RMB500 (about US$80) or three times the amount the consumer paid for the product or service, as compared to twice the amount of the consumer’s costs under the unrevised Law. (Decision, art. 27; Law of the People’s Republic of China on Protection of Consumer Rights and Interests (1994), art. 49.) Punitive damages in cases where product defects cause death or severe damage to health may be up to twice the amount of the consumer’s actual losses. (Decision, art. 27.)

Business operators may also be ordered to compensate consumers for mental distress resulting from insults, defamation, unlawful body searches, and intrusions of personal freedom. (Decision, art. 24.) A record of a violation of the Law may be inserted into a business operator’s credit record. (Id. art. 28.)

Unresolved Issues

During the legislative process, the Consumers’ Association proposed the addition of commercial houses, profit-driven educational services, and medical services into the law. Due to substantial disagreement among different groups, the Decision does not address these issues. (Consumption Escalates Calls for Escalated Legislation [in Chinese], NPC website (Nov. 6, 2013).)

Prepared by Bing Jia, Law Library Intern, under the supervision of Laney Zhang, Senior Foreign Law Specialist