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Trending to the positive: New draft regulations for consumer protection in China

China’s State Administration for Industry and Commerce (SAIC) recently released its draft Implementing Regulations on the Protection of the Rights and Interests of Consumers (Draft Regulations) for comments.  The Draft Regulations seek to further strengthen consumer rights in China. Proposed changes include setting mandatory returns and exchange arrangements, tackling aggressive selling behaviour and expressly prohibiting cold calls. In this article we will look at some of these key proposed changes:

1. Who are the consumers?

The Consumer Law provides that consumers who purchased or used goods or accepted services are protected under the law. With the exception of consumers of financial products, the Draft Regulations specifically excludes from the scope of protection natural persons, legal entities and other organisations that purchased or used goods or accepted services with the aim of making profits.

2. Defects and quality. Returns, exchanges and repairs

  • The Draft Regulations introduces a suite of provisions governing defects in products and services and their quality, including those given to consumers as gifts or rewards. Where there are relevant national or industry standards, products/services will be deemed as defective if those standards are not met.
  • There are proposed detailed deadlines and requirements relating to returns, exchanges and repairs. For example, where goods are exchanged, the period for returns, exchanges and repairs is reset from the date the goods were exchanged.
  • In addition to the requirements under the Consumer Law, business operators who are required to recall products must formulate recall plans, release recall information and keep records of the recall.
  • Where defects are found in “durable goods” and home decorations within 6 months of purchase, business operators are required to refund, exchange or repair the goods or show that the defects were not due to problems within the goods themselves. The Draft Regulations also expand the definition of “durable goods” and include specific consumer electronics such as phones, tablets and cameras.

3. Aggressive and misleading commercial behaviour

There is a new article prohibiting aggressive behaviour to force consumers to purchase or accept a service. Further, the Draft Regulations prohibit business operators from engaging in a list of misleading behaviour.  These include selling goods which are counterfeits or past their expiry date, with incorrect information on place of origin, and using fictitious sales or reviews to falsely attract sales.

4. E-commerce platforms

The Draft Regulations introduce various requirements relating e-commerce platforms:

  • Platform providers must verify and register the identity of individual and legal entities selling products/services on its platforms, and display certain identification information.
  • Platform providers must use various technologies (e.g. electronic signatures) to ensure trade data are complete and accurate.
  • Platform providers must monitor and report illegal activities on the platforms. Failure to do so will attract fines of up to RMB100,000 and correctional actions from the authorities.
  • Platform providers must establish a system of ‘compensate-first’ or consumer rights security deposits for compensating consumers using the platforms.
  • Where sellers infringe consumers’ rights on the platforms and platform providers are unable to provide the real identity, address and contact of the sellers, platform providers shall become liable to the consumers directly.

5. Personal data of consumers

  • Business operators must not collect or use unfair methods to collect personal data on consumers. Security systems must be established to ensure data collected are safe from leaks, damage etc.
  • The individuals concerned must have consented to the collection of the data. Business operators must keep for at least five years any supporting documentation showing performance of its obligations to inform and obtain the consent of consumers.
  • The definition of personal data is clarified and apart from the usual information such as name, sex, date of birth and ID number, it is expressly stated to include biometrics, health status and information on purchase.

6. Industry-specific requirements

  • Passenger transport operators must provide transport for consumers according to the time, location, route and schedule as agreed at the time tickets were sold. Operators must assist with and bear costs relating to changes and refunds if delays and cancellations were due to factors originating from the operator.
  • Finance service operators must comply with a list of requirements under the Draft Regulations. Finance service operators must respect consumers’ rights to information and to decide. They must not hide information on risks, exaggerate profits, conduct forced trades or proactively provide products/services with risks that cannot be tolerated by a consumer.
  • Food and beverage operators must list all prices clearly. Specifically, the Draft Regulations prohibit “minimum charges” and similar unreasonable restrictive terms.
  • Training providers must clearly inform consumers of the training aim, curriculum, status of staff, training address or website, pricing structure etc. Various behaviours are prohibited and these include requiring pre-payment of tuition fees exceeding one semester, six months or 100 hours, increase agreed tuition fees and force students to terminate or delay studies through unfair means.
  • The Draft Regulations also contain provisions specific to utilities, courier, interior decoration, property management, motor car and electronics repairs, beauty and agency businesses.The SAIC is accepting comments on the Draft Regulations until Monday 5 September 2016. We have been keeping a close eye on the legislative developments in this area (locally and globally) and are well positioned to assist businesses in submitting comments to help shape the law.

Whilst the Draft Regulations have brought clarification to certain areas and provide greater protection to consumers, there are also new compliance requirements on businesses. Businesses should keep themselves apprised and consider reviewing their business operations in China for compliance once the Draft Regulations are finalised.