China Issues Implementing Regulations of the Law on the Protection of Consumer Rights and Interests
On August 5, 2016, the State Administration of Industry & Commerce (“SAIC”), released a draft of the Regulations on the Implementation of the Law on the Protection of Consumer Rights and Interests (“the Regulations”) for public opinion solicitation. This article reviews the main issues raised.
The Regulations was drafted by the SAIC, on behalf of the State Council, as a means to complement the implementation of the latest amended Law on the Protection of Consumer Rights and Interests (“the Amended Law”). The said Law was amended in 2013, which was the first amendment in 20 years after its promulgation; and became effective on March 15, 2014. Upon one year after the implementation of the Amended Law, the Standing Committee of the National People’s Congress organized an inspection team and initiated a three-month enforcement inspection on how the Law had been implemented, and issued a report thereof.
According to the said report, the enforcement inspection conducted in multiple Provinces found that some important mechanism, such as burden of proof by operators, punitive compensation and so on provided in the Amended Law, had not been fully carried on. It also found that it lacks of effective regulation on new fields. For instance, complaint in service industries has grown rapidly in recent years. According to the AIC departments, complaints in service industries have taken account to 40% of total complaints. In some provinces, the complaint ratio between goods and service has changed to 3:7 from 7:3 in the past ten years, and most of those complaints happened in industries, such as education and training, home decoration, auto maintenance, as well as restaurant and traveling and so on.
Therefore, the said inspection team made several suggestions, including the issuance the regulation of the implementation of the said Law prior to the end of 2016, in order to complete and detail the current consumer protection legal system.
There are eight chapters and seventy articles in the drafted Regulations. According to the drafting statement, as a regulation that aims at matching the Amended Laws, the drafted Regulations is provided to complement the Amended Laws, for the purpose of enhancing the protection of consumers’ rights and interests. Despite the General Principles (Chapter 1) and the Supplementary Articles (Chapter 8), based on the contents, the drafted Regulations can be divided into following parts: the consumers’ rights and operator’s obligations, the protection of consumers’ rights and interests (Chapter 4 & 5), dispute resolution (Chapter 6) and liabilities (Chapter 7) .
Consumers’ rights and operator’s obligations (Chapter 2 & 3)
In order to resolve the issues reflected during the enforcement inspection mentioned above, the drafted Regulations provides the operator’s obligations in details. For instance, in the Chapter 3 “General Rules of the Consumers’ Rights and Operators’ Obligations”, there are several issues worth of noting:
⋅ Burden of proof of the operators (Article 8)
“… In case of dispute resulting from discovering flaws within 6 months after the effective of contract for durable goods or service, such as decoration, the operator thereof shall prove that such flaws are not resulted from the quality of the goods or service themselves. If the operator fails such burden of proof, it shall perform obligations, such as refunding, changing, mending etc., in accordance with laws and contracts with the concerned party …”.
By comparison with Article 23 of the Amended Law, the said article above specifies under what circumstances the operator shall bear the burden of proof as well as legal consequences when it fails to do so. Furthermore, the drafted Regulations defines “flaw” as “circumstances that goods or service have exterior appearance worn out or partial service performance missed; however, such circumstances do not constitute defect, nor affecting the realization of the function of such goods or service”. It also provides the definition of “durable goods” as “products with long-term use, high technology content, which general consumers lack full ability of cognizance, including but not limited to vehicles, computer, TV, refrigerator, air conditioner, washing machine, cell phone, tablet, camera, video recorder and so on”, which makes the scope of the “durable goods” wider and more flexible than the enumeration provided in the Amended Law.
⋅ Free refund (Article 10 - 14)
In Article 24 of the Amended Law, it provides the “free refund within 7 days”. So, in the drafted Regulations, it further stipulates when the 7-day period will start calculating, which starts at the date of delivery of goods or service to consumers by the operator. In case of goods that requires separate delivery and installation, it starts at the date of issuance of purchase certificates (e.g. delivery notice and invoice etc.) or delivery of goods to consumers. Furthermore, upon performing the obligation of changing goods or service, the liability for refunding, changing and mending will be recalculated since the date of changing.
It also provides exemption of free refunding within 7 days, on the ground that operator confirms with consumers when purchasing: 1) product that, after taking off its wrapping, will have its nature changed, or affect personal safety or health; 2) product that will have its value depreciate greatly after activation or trial use; 3) product that is explicitly displaying its closure to shelf life or flaws when it is sold.
In addition, the drafted Regulations lists several circumstances that will be deemed as delaying or refusing the refund request raised by consumers.
⋅ Personal information protection (Article 22 - 23)
According to the enforcement inspection report mentioned above, it is commonly reported that the provisions concerning the collection and use of personal information by operator is too general, and it is hard for consumers, supervision departments and consumer’s organizations to prove such violation. Thus, subsequent to publishing the collection and use of consumers’ personal information provided in Article 29 of the Amended Law, the drafted Regulations further requires that evidence proving operator has performed its express obligation and acquired consumer’s consent when collecting and using such personal information, must be kept at least 5 years. Moreover, the drafted Regulations provides that operator must establish information confidentiality and management system to ensure the safety of personal information.
The drafted Regulations also stipulates that, without consumers’ expressed consent or request, operator shall not send consumers commercial electronic information or make commercial promotion call. In case consumers give their consent thereof, unless it is agreed otherwise, operator shall not request the consumers to bear such expense.
In case operator forces consumers to provide personal information that is irrelevant with the purchase, or disclose the personal information to third party without consent, or send commercial information/make commercial call to consumers and charge for it without consumers’ consent, such operator may be given warning, confiscated of illegal gains, fined separately or simultaneously; in the most serious scenario, such operator may be ordered to suspension and rectification, or even have its business license cancelled.
In accordance with the Regulations, consumers’ personal information refers to information collected during providence of goods or service that, separately or combining with other information, can identify consumers’ name, sex, career, date of birth, ID number, address, contact, income and asset status, health, consumption level, biological identification characters and so on.
Apart from the general rules of the consumers’ rights and operators’ obligations provided in Chapter 3, in the Chapter 4 of the drafted Regulations, it specifies some special rules that must be obeyed by operators in certain industries, including but not limited to, utility services (e.g. water, electricity, gas, heat, telecommunication, cable TV), passengers transportation, financial services, home decoration, express delivery, food and beverage, property service, beauty service, maintenance for vehicle and home appliance, training service, agency service, franchising and so on (Article 24 - 39).
Protection of Consumers’ Rights and Interests
The drafted Regulations provides protection for consumers’ rights and interests from two aspects: administrative protection (Chapter 4) and social protection (Chapter 5):
It provides that people’s government at each level shall establish a department coordinating mechanism, which may involve multiple departments, such as AIC, AQSIQ, FDA, Commerce Bureau, Price Bureau, Public Safety Bureau and so on, to protect consumers’ rights and interests. It further specifies that it shall establish a discreditable operator punishment mechanism, which is to record administrative punishment information arising from infringement of consumers’ rights and interests into credit files and publish such record through Credit China and the Credit Information Disclosure System for Enterprises Nationwide.
In terms of social protection, the drafted Regulations defines that consumers’ organizations include consumers association, consumer committee, consumer council and so on, which are established in accordance with laws and conduct social supervision to goods or service provided by operator. It also provides responsibilities of such organizations.
In accordance with the drafted Regulations, operator shall establish convenient and fast complaint mechanism to resolve disputes with consumers. In case of one of following circumstances, operator shall deal with the complaint in time and shall not make excuses or refuse:
⋅ Consumers or other victims claim compensation to sellers or manufacturers, when they suffer personal/property damages from product defect;
⋅ Consumers claim compensation to Internet trade platform which could not provide real name, address and contact of the sellers or service providers, when they suffer damages arising from purchase of goods or service through such platform;
⋅ Upon termination of an exhibition or expiration of leased account/site, consumers claim compensation to exhibition holder or account/site lessor, when they suffer damages arising from purchase of goods or service at exhibition, leased account/sites;
⋅ Consumers who suffer damages of legal rights and interests, claim compensation to illegal operator who uses other’s business license or holder of the said business license;
⋅ Consumers claim compensation to sellers, when goods or service do not meet quality requirement and such goods or service are still within the effective period for refunding, changing and mending in accordance with laws or agreement between the concerned parties;
⋅ Consumers claim compensation to advertisement operators or publishers who could not provide real name, address and contact of operators, when they suffer damages arising from purchase of goods or service due to false advertisement or other false promotion.
Consumers may also resort to organizations (consumers association, consumer committee etc.) as well as relevant administrative departments for complaint and dispute resolution.
In addition, the Chapter 7 Liabilities of the drafted Regulations specifies civil, administrative and even criminal liabilities for operator who violates general and special rules of consumers’ rights and operator’s obligations.
It can be seen that the drafted Regulations aims at some outstanding issues reflected in practice, such as free refund, burden of proof of operators etc.; and stipulates operator’s obligations in details accordingly, in order to enhance efficiency of consumers’ rights protection. The drafted Regulations is still in the process for public opinion soliciting until September 5, 2016. It is estimated that the finalized Regulations will be issued by the end of this year.
ABOUT THE AUTHOR: Fei Dang
Fei Dang is an Associate in the MMLC Group.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.