Abstract: Since its amendment in March, 2014, Law of the People’s Republic of China on Protection of Consumers' Rights and Interests(hereinafter referred to as Consumer Law) has spawn controversies on its application to cases of professional claimants. The focus of controversies is the identification of consumer identity and the application of Article 55 in Consumer Law. The protection of consumers’ right to information is also a big controversy. The three aspects of controversy are elaborated with case studies, deficiencies in the law and further improvements are stated. Justice as the core of laws and legal settings are needed to protect the trading order of consumer goods.

Keywords: Consumers’ Right; Fraud; Professional Claimant; Consumers’ Right to Information; Punitive Damage

Introduction

To follow through advice in Report on the Implementation of Consumer Law by Law-enforcement Inspection Group of Standing Committee of the NPC proposed at the 4th Meeting of the 12th NPC held on November 3rd, 2015, China’s State Administration for Industry and Commerce, on behalf of the State Council, drafted Enforcement Regulations on Law on Protection of Consumers’ Rights and Interests (Exposure Draft). The draft doesn’t apply to lucrative shopping, which means that anti-counterfeit professionals (people who make a living by cracking down on fake or shoddy products) may not be protected by laws, sparking widespread attention by relevant companies and legal practitioners. Article 2 of the exposure draft defines consumers as people who buy, use products or receive services for life needs, who are protected by the draft. Natural persons, legal persons and other organizations, beyond the realm of financial consumers, who buy, use products or receive services for life needs are not protected by the draft. Article 17 of the draft enumerates 14 fraudulent consumer actions. These are interpreted to send out the message that anti-counterfeit professionals are not longer protected by Consumer Law.

On September 21st, 2016, Deputy Secretary-general Chu Dong of China Chain0 Store & Franchise Association (CCFA) issued a group of incomplete survey data at the forum co-organized by CCFA and China Food Industry Association. The data shows that there are altogether 6,022 cases of compensation claim by anti-counterfeit professionals in 17 large supermarket companies and 1 catering company from July, 2014 to June, 2016, with a claim amount of 26.1 million yuan. 55.78% of them involve problematic packaging labels, 19.51%  for expired goods, 12.92% for foreign items and 11.79% for quality issues. Apart from civil compensationliability, a traditional result of infringements on consumers’ right, operators are under tremendous pressure due to problematic labeling. There hasn’t been consensus about whether problematic labeling falls in the scope of fraud and punitive damage should be meted out; moreover, there’s no unanimous canon for legal practice. Given such background, the paper elaborates on the dispute case of sales contract betweenLafayette Department Store (Beijing) Co., Ltd. and Li Yunhua with detailed analysis.

1. A Run-down of Dispute Case of Sales Contract Between Lafayette Department Store (Beijing) Co., Ltd. and Li Yunhua

(1) Case Detail

On October 20th, 2014, Li Yunhua bought a GIVENCHY lady’s bag at Lafayette Department Store (hereinafter referred to as the Store) at RMB 15,900. The product was identified as low-quality by National Fur Quality Supervision & Examination Center and National Leather Products Quality Supervision & Examination Center, according to the test standards of QB/T1333-2010 Backbag. The main cause of low quality is that split leather, as the material of the lady’s bag, is not labeled. Instead, the label says Cow Leather. The evidence is the receipt, invoice, the lady’s bag, the tag, the examination report and invoice. The Store claimed no intention of fraud, and stressed the good quality of the lady’s bag. Inconsistent labeling doesn’t equal fraud. Moreover, the examination report is invalid, the material label is correct and relevant evidence is provided. The relevant evidence is label of import, Italian criteria and the Chinese translation, import entry, China Customs Declaration Manual, Details of Examination Institute, Examination Report.

(2) ThePoint of Dispute

There are three points of dispute in this case: first, whether the labeling is wrong; second, whether the labeling is considered fraud and leads to refund and a compensation fee three times the price; third, whether Li Yunhua is a consumer protected by Consumer Law.

As the first point of dispute isn’t generic, and should be analyzed in brief here. The rest points of dispute will be discussed in other parts of this paper.

Industrial standards can be divided into compulsory and recommended ones. The case involves compulsory industrial standard code, as recommended ones have “/T” following the code. The recommended industrial standard code of State Bureau of Light Industry is QB/T, which is an optional standard for companies to use and has the standard efficacy of reference and judgment.

According to Part 3.1 of QB/T1333-2010 Backbag, if a certain material accounts for 20% of the surface  material in one single product, the material should be labeled; if over 90% of the surface material is top-grain leather (excluding top-grain transfer leather), “Authentic Leather” can appear on the label. “Split Leather” should appear on the label if split leather is used. In the case of multiple composite materials, if the thickness of leather matrix is no more than 60% of the total thickness, “Leather” can’t appear on the label. However, QB/T1333-2010 Backbag can’t be used to identify leather. QB/T1333-2010 Backbagis issued by China’s Ministry of Industry and Information Technology, which doesn’t include articles for identifying materials of leather or specify the standards for identifying low quality.

According to Article 3.2.10 of QB/T2262-1996 Terminology for Leather Industry, Split Leather is a generic term, including Top-grain Leather, Second-grain Leather, Third-grain Leather and Split Leather. Therefore, cow’s split leather is cow leather.

Back to the first point of dispute, the current dispute lies in the manifest indication of Split Leather stipulated by QB/T1333-2010 Backbag. Yet, China has no national compulsory or industry-recommended criteria for identifying leather.

(3) The Result and Reason of Judgments

According to the first-instance judgment, the Store is demanded to give a full refund of RMB 15,900 and offer a compensation of RMB 47,700 to Li Yunhua. Moreover, the Store is demanded to pay Li an appraisal fee of RMB 500. After the passing of the judgment, Lafayette Department Store (Beijing) Co., Ltd. lodges an appeal. The appeal is rejected by second-instance trial, and the original judgment is upheld.

The court’s effective judgment believes, “Li Yunhua falls in the scope of Consumers defined in Consumer Law, not affecting his or her identity as a consumer to buy products at the Store.”Li buys products at the Store as a consumer, and should therefore be protected by Consumer Law. “If a sold product fails to conform to the executive standard known to the consumer, it shall be deemed to be an infringement on consumers’ right to information and constitutes an intention to hide the truth of products. The consumer may therefore form false knowledge of the product according to the listed executive criteria at the Store. Evidence provided by the Store isn’t enough to prove that Li Yunhua buys the product with a sound knowledge of the product’s defect.” The Store is judged as a perpetrator of fraud.