China Introduces New Consumer Protection Law

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SHANGHAI – Among the many days of international observances recognized globally – Earth Day, Women’s Day, World Health Day, and so on – World Consumer Rights Day is not as commonly known in the West. But in China, the March 15 celebration is a much promoted event, known as san yao wu (Three-One-Five).

Every year, in a public airing of consumer grief, the illegal business practices of foreign and domestic companies are paraded and condemned in a CCTV special. The threat of this to one’s reputation is so great that companies targeted in previous years, including Apple, Volkswagen and Nikon, have issued public apologies and initiated recalls in direct response to their inclusion in the event.

This year’s observance was marked as particularly significant, however, as it was accompanied by the activation of new consumer protection laws.

The new law introduces a number of important reforms to the Chinese retail environment:

  • In allegations of counterfeiting, the onus of proof is now on the retailer to prove their innocence for the first 6 months after the sale, rather than the consumer to prove wrongdoing all the time, as previously;
  • Penalties for fraud and false advertising have been increased;
  • Class-action lawsuits against retailer malfeasance have been made easier to file (though limited to state Consumer Associations and their local branches);
  • Retailers are now required to accept goods for return within 7 days of purchase unless agreed otherwise;
  • For online and other types of delivery purchases, consumers are not required to provide a reason for returns; and
  • Greater restrictions now apply to retailers’ collection and use of consumer data.

Necessitating these reforms is China’s ongoing state of rampant consumer fraud. According to the State Administration of Industry and Commerce (SAIC), which oversees consumer protection, RMB 3.8 billion of poor quality goods were sold between 2010 and 2012.

This month’s reforms are the first major overhaul to China’s consumer protection law in two decades. As with many recent legislative reforms, this was in part motivated by China’s long-term goal of boosting domestic consumption. It is thought that measures such as these will help to repair consumer trust in Chinese companies, especially in light of a string of product safety scandals in recent years.

RELATED: China Steps Up Efforts to Protect Personal Information

The reforms also come in the wake of explosive growth in China’s online shopping and automobile sectors, where poor aftersales service (e.g. repair, replacement, and returns) has resulted in a wealth of complaints.

The new law, however, is not without its critics, some of whom have pointed out its gaps, such as the specifics of how consumer data may be used and the measures retailers must take to ensure the accuracy of product information.

Additionally, because lawsuits may only be initiated by state-controlled Consumer Associations, there are concerns over the possibility of governmental interference in the process.

Lastly, some have expressed fears that the new regulations may be disproportionately enforced against foreign businesses, much as in the annual CCTV specials.

One unexpected outcome of the reforms has been the emergence of a cottage-industry of profiteering on consumer protection violations. Under the new law, businesses caught selling counterfeit goods must compensate consumers threefold, up from twofold under its predecessor. This has motivated a number of individuals, sometimes contracted by the product’s original manufacturer, to investigate and purposefully buy counterfeit goods, expecting to cash in on them later following a successful lawsuit.

For foreign investors eager to learn how the new law will impact their business, a compliance review of one’s aftersales services with the updated regulations is recommended, especially for businesses involved in the online sales and automotive sectors. Other factors, such as how consumer protection lawsuits against foreign companies will unfold, will require time for the establishment of precedent.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam in addition to alliances in Indonesia, Malaysia, Philippines and Thailand as well as liaison offices in Italy and the United States.

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10 responses to “China Introduces New Consumer Protection Law”

  1. Hana says:

    Dear Person In Charge,

    I would like to know, how can I lodge a report towards online business scam, I brought a ring from a website http://www.gaudinessjewelry.com/ but I never knew the website was doing scam and cheating.
    The person was using Tiffany & Co.’s brand name and Logo.

    I paid for a ring that I choose but i received a cheap ring that is not worth for the money. When I demand for a change they ask me to add on almost $40 for the return shipping cost and extra MYR83 to get the ring that I have choose.

    I just can’t accept that they cheat and lie towards we consumer who paid them .

    Please do advise me what I can do.

    Thank You

  2. Hello my name is Rafael Cortina I live in new York city. I purchased a 10 inch self balancing board off of alibaba.com,the person I bought it from is may Wang from Shenzhen rose technology LTD.SHENZHEN ,guangdong China (mainland ).I paid $360 US and the board doesn’t work. I spoke to them and they told me the board wasn’t from them which is a not true. Please help me,my # is 1646-878-8344.Thank you

  3. braam says:

    Hi I bought a massage chair and the seller took my money and when I enquired when my chair will be shipped all his goods from his store was removed as advertised and now I am being told this was a fraudulent seller, how do I get my chair that I have ordered and paid for, in my country if you advertise something you have to honor your advertised selling price and goods, please advise what leagal steps I can follow

  4. Vladimir says:

    Hello, I made payment by a bank transfer for goods in the Chinese online store, but the seller took away my money and the goods didn’t send. How I can receive goods or to return my money?

  5. Igor says:

    I would like to know how and to whom I open a dispute. I have bought smartphone Xiomi MI3w, through platform http://www.aliexpress.com.

    Upon few months of usage of device, I have detected some problems regarding display, showing strange vertical lines that comes from folders on desktop of the device. When I restarted the phone, it has been disappeared, but as time go out, it come back again. I have been in my nearest service shop, where I have been told the device is not an original. Using internet official website, I have checked based on my imei, that my phone is fraudelent, I mean, it is not original. By the way, I did not hear my speaker, so I must to reboot device in order to solve it.

    Device are still under guarantee.

    I have contacted the seller, but they have told me there is no need to open dispute, explaining me that is the problem for which I have to report on day I have received the phone in my hands.

    I have prooved them pictures and videos showing facts I am right.

    According to rules for dispute, seller have to bring me 3x money back in case phone is fraudelent.

    I am from Podgorica, Montenegro and I have no way to claim request except this way.

    I am not a legal expert.

  6. Vladimir says:

    Hello, I have paid phone in one Chinese online store, but the seller hasn’t sent goods, has taken away my money in the sum of 400 dollars and doesn’t respond to my messages. All bank data and the receipt on payment and the address of online store are. What should I do in this situation how to return my money?

  7. Vladimir says:

    Hello, I have paid phone in one Chinese online store, but the seller hasn’t sent goods, has taken away my money in the sum of 400 dollars and doesn’t respond to my messages. All bank data and the receipt on payment and the address of online store are. What should I do in this situation how to return my money? bratehkov@mail.ru

  8. Ioana Andrei says:

    I have ordered a dress which looked gorgeous on the website and I have received a hideous, cheap replica, and now I’m arguing with them because they have the nerve to say that they don’t see anything wrong with the dress, when the faults are so obvious! I have sent them photos but they said they suggest I keep the dress and they will give me a discount on my next order, as if I will ever order from them again! The nerve on this people is outrageous!!!!

  9. Kiersta says:

    Hi, I have a question regarding false advertising and breaking service contracts under the Consumer Protection Law. I signed up for a workout class subscription in Shanghai, China that promised me the rate of RMB488/month for my first year. I have used it for several months now and they just sent me an email saying that my rate from now on will increase to RMB1028 despite the year not being up. I have told them they are breaching our agreement but they will not honour it. Is there any more formal action I can alert them of so they can reconsider breaking the agreement to service me for 1 year at the same rate?

  10. Like Ioana above I’ve had a very similar experience just this week. I ordered a dress from Magbridal.com in China. The dress looked gorgeous in the picture online but what I received was nothing like it. The colour was completely different to the picture and the beading too! I emailed them and they responded saying they could not refund full price of the dress and if I return it it would cost me a lot on shipping and they would have to pay tax to receive it so they would not accept it and send it back to me. They offered me a $30 refund on my dress and I paid 164 for it. I’m really upset and disgusted as I purchased the dress for my brothers wedding next month and now I’ve no dress and don’t know what to do!

    Please can you advise me

    Regards
    Claire

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