On 28 April 2013, the Standing Committee of the PRC National People's Congress released the Draft Amendments to the Law on the Protection of Consumer Rights and Interests (“CPL Amendments”) to solicit public comment. This will be the first revision to the Law on the Protection of Consumer Rights and Interests (“CPL”) since it was passed 20 years ago and took effect on 1 January 1994.
Although not yet effective, the most significant aspects of the CPL Amendments are summarised below.
- Obligation to recall defective products
The CPL Amendments propose to introduce a unified obligation to recall defective consumer products. Currently, obligations to recall defective products can be found in a variety of different laws and regulations. Most notably, Article 46 of the PRC Tort Law in force since 2010 establishes a general recall obligation leading to liability in tort. Additionally, administrative regulations stipulate recall obligations for specific groups of products, such as automotive products, children’s toys, food and drugs, as well as medical devices. Further, the PRC Food Safety Law released in 2009 includes an obligation to recall defective food products.
To impose such an obligation, Article 3 of the CPL Amendments states that if producers discover any defect within their products they are obliged to take the necessary measures to prevent damage, including suspending production and sales, issuing warnings and recalling the products. When products are recalled, the producers will be required to reimburse consumers for necessary expenses incurred as a result of the recall. Under Article 12, the authorities will be given the right to conduct random inspections of products and, if they discover defects, to publish the results and order measures to prevent any danger or harm to consumers, including recalls. Moreover, the fines for producers who refuse to take necessary measures or delay taking measures are to significantly increase. They will now range from one to ten times the amount of any unlawful earnings, where previously they ranged from one to five times the amount; if no unlawful earnings have been obtained, a maximum fine of RMB 500,000 – up from a previous maximum of RMB 10,000 – will be imposed.
- Statutory warranty for defective products
For certain consumer products a statutory warranty is stipulated in the Provisions on the Liability for the Repair, Replacement and Return of Certain Commodities, published in 1995. These provisions enumerate 18 types of products which are subject to a statutory warranty system that gives consumers rights to the return, replacement and repair of defective products. The CPL Amendments propose to widen the scope of such warranties to include all consumer purchases irrespective of the type of product bought.
Article 6 of the CPL Amendments allows consumers to return defective products within the first seven days of receiving them. Thereafter consumers may only return the goods if they do so promptly and in line with the PRC Contract Law. Otherwise they are limited to the right to replacement or repair of the products. The CPL Amendments stipulate that these rights exist additionally to any obligations of sellers and service providers under state laws or the parties’ agreements. Accordingly, the seven-day period does not exclude the statutory warranty rights of the buyer under Article 111 of the PRC Contract Law. These include the right to request remedies, such as the repair or replacement of defective products, within the applicable warranty periods. Article 5 of the CPL Amendments shifts the burden of proof in disputes about defective products from the consumer to the seller or service provider. This provision appears to be modelled on the European Union Consumer Sales Directive, stating that within the first six months of the consumer’s acceptance of the product’s receipt the seller or service provider has to prove the product’s conformity.
- Additional consumer rights in online and other long-distance sales
In order to strengthen the consumer’s position in long-distance sales, the CPL Amendments propose the introduction of an unconditional right to return goods in such sales. This provision is again modelled on the unconditional return rights provided to consumers in various European Union directives. Accordingly, Article 9 of the CPL Amendments entitles consumers to return products ordered online or through other means of long-distance selling within seven days of receipt and without giving reasons. This right is only excluded for products that are not suitable for return due to their nature, which appears to be aimed mainly at perishable goods. Sellers will be required to refund payments to consumers within seven days of receiving the returned products. Article 8 further obliges long-distance sellers to provide consumers with necessary and truthful information on the seller, the products offered and the sales conditions.
The current Article 38 of the CPL imposes a backup liability on the organisers of trade fairs and lessors of sales counters for the products sold through such channels. Article 16 of the CPL Amendments extends this backup liability to providers of online sales platforms. Hence, according to the proposed amendments, consumers could gain compensation for infringement of their rights and interests not only from the seller but also from the organiser of the trade fair, the lessor of a counter or the internet service provider, respectively.
- Minimum punitive damages for fraud
According to the current Article 49 of the CPL, consumers may claim punitive damages of double the price paid for the goods or services received if the seller or service provider engages in fraud. Article 25 of the CPL Amendments proposes to add a minimum punitive damage charge of RMB 500 to this provision. Thus, if double the amount paid by the consumer is less then RMB 500, the punitive damage will be set at this minimum value.
- Organisations eligible to file public interest litigation
With the amended PRC Civil Procedure Law, which came into force on 1 January 2013, public interest litigation is now possible in China (link to our respective newsletter). According to Article 55 of the PRC Civil Procedure Law, authorities and organisations prescribed by law may commence lawsuits against acts that infringe consumers’ rights and interests. Article 19 of the CPL Amendments states that the China Consumers’ Association (CCA) and the provincial consumer associations are the competent organisations to bring such lawsuits where claims under the CPL are concerned. The China Consumers’ Association and the provincial consumer associations are partly state-funded interest groups established by the Chinese government to promote consumer interests and protection.
The draft of the CPL Amendments aims for strengthening consumers’ rights in various respects. The next months will tell if the draft will be adopted in its current form or if substantial changes will be made. Whatever form it will take, the final CPL Amendments will require adjustment of the B-to-C contract practice also of foreign and foreign-invested enterprises operating in China.