China: China Issues Draft Rules On Consumer Protection

Last Updated: 21 June 2013
Article by Carrie Yang and Emma Yu

In April 2013, the People's Republic of China's General Office of the National People's Congress published a draft amendment to the Law on the Protection of Consumer Rights and Interests (the "Proposed Amendment") and solicited public comments on the Proposed Amendment until 31 May 2013. The Proposed Amendment greatly changes current consumer protection law. The main changes are as follows:

1. Consumer information protection

The Proposed Amendment adds provisions regarding consumer information protection. Consumers are entitled to the protection of their personal information, such as their name, image and privacy when purchasing goods or receiving services. Furthermore, when collecting and using a consumer's personal information, companies must inform the consumer of the purpose, method and scope of such collection and use, and obtain the prior consent of the consumer. Companies must also keep a consumer's personal information confidential, and cannot disclose, amend, destroy, sell or illegally provide it to others. Considering the large quantities of digital commercial information that consumers receive nowadays, the Proposed Amendment provides that companies are not permitted to send any information to consumers without their consent or request.

2. Three guarantees (repair, replacement or return of faulty products)

The Proposed Amendment strengthens the current "three guarantees" rule. If goods or services fail to comply with their quality requirements, a consumer may return them or require them to be repaired or replaced in accordance with laws or agreements. Where a law or agreement is lacking, the consumer may return the goods within 7 days of receiving them. If the 7 day period has expired, and the termination of the contractual relationship is allowed under PRC Contract Law, the consumer may still return the goods.

3. Enlarging the punishment of fraudulent activities

Previously, in relation to a company's fraudulent activities when providing goods or services, a consumer was only able to seek additional compensation totaling the original price of the goods or services. However, the compensation limit has now been increased to twice the original price of the goods or services. Furthermore, if a company knowingly carries out fraudulent activities and, by so doing, causes death or serious harm to a consumer, the company will be subject to criminal liabilities. In addition to this, the consumer may also claim civil compensation up to a limit of two times their losses.

4. Recall of defective goods or services

Previously, a company was only required to inform the consumers and relevant authority of any defective goods or services. The Proposed Amendment adds the requirement of measures including the cessation of operations and sales, the provision of warnings and, most importantly, the recall of the defective goods or services.

5. Burden of proof

The Proposed Amendment adds a new clause with regards to the burden of proof. For durable goods such as automobiles, computers, refrigerators etc. and services such as decoration, if the defects are spotted within 6 months of the consumer accepting the goods or services, then the burden of proof is on the company.

6. Advertiser's responsibility

In respect of false advertisement, the Proposed Amendment extends the responsibility from manufacturers and service providers to advertisers. If the advertiser designs, produces, or publishes false advertisement of goods or services which affect a consumer's life or health, such as food or drugs, and, by so doing, causes harm to a consumer, the advertiser shall be jointly liable for the provision of such goods or services together with the manufactures and service providers.

7. Online sales and purchases

The Proposed Amendment tries to regulate the new consumption model – online sales and purchases. First, a company must provide accurate and truthful information. Companies which sell products or provides services via the internet, television, telephone or post, and securities companies, insurance companies and banks, shall truthfully provide all necessary information to consumers, such as addresses, contact methods, the quantity and quality of goods, prices or fees, periods of performance, risk alerts, after-sales services, and civil responsibilities. Second, consumers may enjoy a unilateral termination right for goods or services obtained via the internet, television, telephone or post. Consumers may return the products within 7 days of receipt, except for those goods that, by nature, are unsuitable for return. Third, other than directly claim against the seller or service provider, consumers may also claim against the internet platform on which the goods are sold or services are provided.

8. Strengthening the obligation of consumer associations

The Proposed Amendment adds more functions to consumer associations. They are now able to: (a) provide consumption and consulting information to consumers; (b) participate in enacting laws and regulations regarding consumer rights; and (c) initiate lawsuits against companies that harm large numbers of consumers.

In summary, the Proposed Amendment largely enhances the current rules of consumer protection. The Proposed Amendment is still in a consultation period, and we look forward to seeing the final version.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Emma Yu
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