China to Further Enhance Consumer Rights

crowncrownOn April 28, 2013, China released the “Draft Amendment to the Consumer Protection Law (hereinafter referred to as the ‘First Draft’),” which is the first revision to the country’s Consumer Protection Law.

The First Draft aims to further protect consumer rights and boost domestic demand in the country, and has made revisions to the current law in the following five areas:

  • Enhancing rules concerning consumer rights protection;
  • Strengthening the obligations and duties of business operators;
  • Regulating the e-commerce industry;
  • Clarifying the rules of consumer associations; and
  • Clarifying the regulatory responsibilities of administrative authorities.

On August 27, 2013, a further revision to the Consumer Protection Law (hereinafter referred to as the ‘Second Draft’) was submitted to the Standing Committee of the National People’s Congress for deliberation. The Second Draft has further enhanced consumer rights protection in the following areas:

  • Strengthening the joint liabilities of false advertisement publishers;
  • Improving the “return of goods without reason” system;
  • Raising punitive damages;
  • Emphasizing the “public benefit function” of consumer associations; and
  • Establishing a credit file system to record illegal acts.

Detailed information can be found below.

Strengthening the joint liabilities of false advertisement publishers

The Second Draft provides that the advertising agents and those designing, producing and publicizing false advertisement of products or services should bear joint liability if such products and services have caused harm to consumers.

Moreover, the Second Draft introduces a new paragraph, providing that social groups, organizations and individuals that endorse goods or services to consumers through false advertising shall bear joint and several liabilities. This means celebrities could be held liable for false advertising if they endorse a product that causes harm to consumers.

Improving the “return of goods without reason” system

The First Draft allows a seven-day period for shoppers to unconditionally return the products they bought for refunds. Specifically, for goods sold via the Internet, television, telephone, or mail order, consumers have the right to return the goods within seven days from the date of receipt of the goods, and the amount paid by consumers shall be paid back within seven days upon the receipt of the returned goods by the seller.

However, such regulation has caused widespread concern as e-shoppers may abuse their rights and unilaterally terminate contracts without proper reasons. Therefore, the Second Draft has put forward the following types of goods to which the unconditional return shall not apply:

  • Custom-tailored items;
  • Fresh, alive and perishable goods;
  • Unpacked audiovisual products and computer software;
  • Delivered newspapers and periodicals; and
  • Other products that are unsuitable to be returned.

Moreover, the Second Draft specifies that the return freight fees shall be borne by the consumer.

Raising punitive damages

Compared with the current Consumer Protection Law, the First Draft has imposed harsher penalties on business operators who defraud consumers, and additional compensation for commercial fraud could be equivalent to twice the value of goods or services, with a minimum fine of RMB500.

However, many legislators believe such fines are still too low and cannot serve as a sufficient deterrent. Therefore, the Second Draft raises the punitive damages paid by the business operators who defraud consumers to three times the price of the products or the service charges paid by consumers.

Emphasizing the “public benefit function” of consumer associations

The First Draft requires consumer associations to provide consumption information and consultation services to consumers and participate in the legislation of laws, regulations and relevant standards concerning consumer rights and interests. The Second Draft further emphasizes the “public benefit function” of consumer associations and calls for support from government at all levels to provide assistance and funds to such associations.

Establishing a credit file to record illegal acts

The Second Draft requires business operators to abide by State laws and regulations, and run businesses based on good faith. Moreover, regarding illegal acts – such as false advertising, passing a defective product off as a high-quality one, or passing a substandard product off as a standard one – these acts will be recorded into a credit file system and be announced to the public.

For professional assistance in South China contact Fabian Knopf at Fabian.knopf@dezshira.com or visit www.dezshira.com


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