3. The Application of Punitive damage and the Identification of Fraud

In comparison with Contract Law, Consumer Law is a jus singulare. According to rules of law application, jus singulare precedes general laws. Therefore, apart from initiative refunding, when it comes to label issues that are not helpful to consumers and that do not involve fundamentals like product performance and use, prosecutors will propose punitive damage according to Article 55 of Consumer Law. 

According to general principles of Civil Law and Procedural Law, when liability for breach and liability for tort coincide, the court shall decide which of the two as the foundation for judgment based on the prosecutor’s request. However, given that Contract Law has no clear distinction between liability for contract breach and liability for assault, Article 55 of Consumer Law is logically applicable for the undertaking of liability for breach and liability for tort, though devoid of more descriptions on legal explanation and application. Therefore, this article may be deemed to be applicable to both liabilities. 

Based on legal rationality, the two liabilities are intrinsically different. The major differences should be considered in the application of Article 55, Consumer Law. Liability for breach is generally no-fault liability, while liability for tort is fault liability. In the application of Article 55, the definition of fraud in Consume Law and how to identify pitfalls have no official judicial interpretation. The bearing of liability is also different in both cases. For liability for breach, the bearing is property liability, like compulsory performance, payment of liquidated damage, compensation fee, sanctions on price fixing, only contract dissolution is a non-asset liability. For liability of tort, the bearing includes property liability, like compensation fee, and non-asset liability, like restoring reputation and making apologies. The bearing of both liabilities is summarized by Article 55 as “triple the price of the commodity that consumers buy or the services that customers enjoy”, which differs from how both are borne in Civil Law. When the court resorts to Article 55, it should differentiate between behaviors not helpful to consumers and those detrimental to consumers, and between liability for tort and liability for breach. Otherwise, the court would apply the article indiscriminately to different cases, which causes huge burden and obligations on operators, and the actual guarantee of powers for real consumers may not be the best. 

Consumers advocating for rights is both an expression of emotion that arises from the breach of basic rights. The undertaking of liabilities defined by Contract Law, like restoring reputation and apologizing, isn’t swayed by monetary compensation. The indiscriminate use of punitive damage in all cases, without considering actual conditions and severity, will push operators to exhaust all legal remedies. In the lengthy seesaw battle, consumer rights remain harmed and it’s hard to strike a balance between the consumer and the operator in what either wants. The huge amount of time, energy and money for consumer rights protection in turn stifles the true pursuits and claim for rights of consumers, disenabling Consumer Law and reducing Consumer Law to a mere instrument for those with ulterior motives and a mere show unable to resolve consumers’ needs. 

Article 55 of Consumer Law is expressly stipulated to be applicable to acts of fraud in commodities or services provided. But in legal practice, the court won’t go into great details when it comes to label issues. Instead, the court uses this article due to its applicability and finds an operator guilty of fraud. According to legislative interpretation, fraud is the intentional withholding of truths or disclosure of false information to trick the consumer into wrong decisions and sign contracts. Fraud has two types: first, to withhold information to trick a consumer into false decision; second, to disclose false information to a consumer. The judgment of a fraudulent conduct has four requirements: first, the operator has the subjective intention to commit fraud; second, the operator has committed fraud; third, the operator’s fraudulence has lead to consumers’ wrong decision; fourth, the consumer makes purchase based on the false information disclosed by the operator. The consumer is required to prove the operator’s subjective intention, which is quite challenging as it’s hard to find direct evidence for others’ subjective intention. Therefore, the operator needs to undertake the burden of proof, whose demonstration degree relies on the yardstick of a natural person with full capacity for civil conduct. For instance, whether the operator has provided training sessions for salespeople, or whether product-related questions can be easily identified. As for the definition of fraudulent conducts, apart from the aforesaid two types, one may refer to the clear definition of the type, scope and form of fraudulent conducts in existing laws and regulations based on Article 5 and Article 16 of Measures for PunishingViolations of Consumers’ Rights and Interests. Moreover, Measures for Punishing Fraudulent Conducts for Consumers, promulgated in line with Consumer Law by the State Administration of  Industry and Commerce in 1996, enumerated the types of fraud. In cases where there is no specific regulation to follow, the forms of fraudulent conducts specified in existing ones should be the yardstick to tell whether there is breach. The third and fourth requirements for identifying fraud involve a subject’s judgment, which will be discussed later.