China Amends Consumer Protection Law after 20 Years
Nov. 8 – With the aim to better protect the legitimate interests and rights of consumers, China’s National People’s Congress passed the “Decision on Revising the Consumer Protection Law (Order No.7 of the President, hereinafter referred to as the ‘Decision’)” on October 25, which is the first revision to the country’s Consumer Protection Law since its adoption in 1993. The Decision is scheduled to take effect on March 15, 2014 and has improved the current Consumer Protection Law in the following areas:
- Regulating the e-commerce industry;
- Strengthening the joint liabilities of false advertisement publishers and e-trade platforms;
- Placing the burden of proof on service providers in the event of a dispute;
- Imposing higher compensation;
- Banning unauthorized disclosures of consumers’ personal information;
- Clarifying the role of consumer associations; and
- Establishing a credit file to record illegal acts.
Detailed information can be found below.
Regulating the e-commerce industry
The current Consumer Protection Law has no rules regulating online shopping. In order to close such loopholes, the Decision provides that 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, to prevent e-shoppers from abusing their rights and unilaterally terminating contracts without proper reasons, the Decision has put forward the following types of goods to which the seven-day unconditional return shall not apply:
- Custom-tailored items;
- Fresh, alive and perishable goods;
- Downloaded or unpacked audiovisual products and computer software;
- Delivered newspapers and periodicals; and
- Other products that are unsuitable to be returned.
Moreover, the Decision specifies that the return freight fees shall be borne by the consumer.
The Decision also requires online sellers to provide authentic and complete details relating to their products and/or services to online shoppers. Moreover, online shoppers can demand compensation from the e-trade platform if:
- Their rights and interests have been infringed upon when purchasing commodities or receiving services through the platform; and
- The platform cannot provide valid contact details of vendors using its network.
The platform can then claim compensation from the seller after compensation has been paid out to online shoppers.
Strengthening the joint liabilities of false advertisement publishers and e-trade platforms
The Decision provides that advertising agents and those designing, producing and publicizing false advertisements of products or services should bear joint liability if such products and services have caused harm to consumers.
Moreover, social groups, organizations and individuals that endorse goods or services to consumers through false advertising shall bear joint liabilities. This means celebrities could be held liable for false advertising if they endorse a product that causes harm to consumers.
In addition, providers of e-trade platforms who know that the seller or service provider is infringing on consumers’ rights and interests through their platforms and fail to take necessary measures against it will be held jointly liable for the damage caused.
Imposing higher compensation
Compared with the current Consumer Protection Law, the Decision has imposed harsher penalties on business operators who defraud consumers, and additional compensation for commercial fraud could be equivalent to three times the price of the products or the service charges paid by consumers, with a minimum fine of RMB500.
Where defective products have damaged people’s health or have resulted in death, business operators shall not only compensate consumers for economic and psychological losses but also pay punitive damages up to twice the amount of the losses. Criminal liabilities will be investigated under severe circumstances.
Banning unauthorized disclosures of consumers’ personal information
To address the growing concerns relating to the leaking of private information to third-parties, the Decision provides that collecting and processing personal information must be for specific, clear and reasonable purposes, and the collection of such information should be subject to the permission of the individual who has been well-informed.
Moreover, the personal information of consumers is strictly confidential and business operators shall adopt technical measures and other necessary measures to ensure the security of such information.
The Decision also provides that business operators are not allowed to send digital commercial information to consumers who have explicitly refused to receive such information or who have not agreed to receive such information.
Placing the burden of proof on vendors and service providers in the event of a dispute
To alleviate pressures on consumers, the Decision imposes the burden of proof on business operators in the case of a legal dispute, stipulating that “with regard to the durable goods, such as vehicles, micro-computers, televisions and refrigerators, the business operator shall bear the burden of proof if defects are found within six months since the purchase date of such products.
Clarifying the role of consumer associations
The Decision 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. Moreover, such organizations may file actions in cases where the rights of a large group of consumers have been infringed upon.
Establishing a credit file to record illegal acts
The Decision 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.
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 as well as liaison offices in Italy and the United States.
You can stay up to date with the latest business and investment trends across China by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
E-Commerce in China
In this issue of China Briefing Magazine, we cover the current laws pertinent to the e-commerce industry in China, as well as introduce the steps involved in setting up an online shop in the country in order to help provide foreign investors with an overview of the e-commerce landscape in China.
- Previous Article Opening China’s Capital Account – An Irresistible Force Meets an Immovable Object
- Next Article China to Ease Company Registration Rules for Foreign Companies