Chinese Government Deliberates Consumer Rights Amid E-Commerce Boom

The draft amendments, which were open for public comment until May 31, 2013, aim to reform China’s 20-year-old consumer protection law, with almost half of the clauses in the current law being amended to cover e-commerce. With increasing internet penetration throughout the country, the e-commerce industry, like other industries in China, is growing at a swift pace. In addition, consumption patterns and purchasing power of Chinese consumers has significantly changed over the past two decades, and in turn so has consumers’ awareness of their rights and the protection against fraud.

During a bi-monthly, three-day meeting starting on April 23, the Standing Committee settled on the draft amendments that would reform the consumer protection law in four primary ways:

(1) Strengthening consumer rights and the responsibilities of business owners with respect to the information they collect and the services they provide, such as by:

• Forcing business owners to obtain consumers’ consent and explain the purpose, form, and scope of information collected before collection.

• Requiring online sellers to provide truthful and pertinent details about their products or services.

• Subjecting deceptive advertisements concerning food, drugs, and other goods related to consumers’ health to joint liability with manufacturers.

• Giving consumers “unconditional termination rights” under certain circumstances.

(2) Ensuring online shoppers’ right of choice by granting them the right to unilaterally terminate contracts, forcing businesses to honor a seven-day return period, and requiring e-trade platforms to facilitate the payment of refunds from sellers to consumers.

(3) Instituting fines for commercial fraud equivalent to twice the value of goods or services, with a minimum fine of RMB 500 (approximately US $82), and allowing for increased fines on businesses that leak the personal data of consumers up to RMB 500,000 (approximately US $82,000).

(4) Providing new rules for settling legal disputes, including:

• Requiring business owners to bear the burden of proof if defects are found within six months of the purchase date.

• Allowing public interest litigation through the China Consumer Rights Association.

• Permitting national and local associations above the provincial level to file class actions in cases involving infringement on the rights of a group of consumers.

• Creating criminal liabilities for sellers whose defective products damage consumers’ health or result in death.

The draft amendments cover business-to-customer interactions—including sales that take place on e-trade platforms such as Amazon and Taobao Mall (TMall), as well as television- and telephone-based sales—and have won overwhelming support from online shoppers. On the other hand, critics do not consider that the draft amendments will truly strike a balance between the rights of consumers and vendors and worry that profit seeking actors will take advantage of new consumer-centric laws. The revamp of China’s 1993 Law of Consumer Rights and Interests, which follows the National People’s Congress’ recent Decision on Strengthening Protection of Online Information, is another milestone in the development of China’s online privacy and consumer protection laws. The legislative push has been matched by activity from China’s Internet regulator, the Ministry of Industry and Information Technology (MIIT), which implemented Several Provisions on Regulation of the Order of Internet Information Service Market last year, in addition to two draft rules in April 2013.

The Chinese government has been actively strengthening the country’s online privacy and consumer protection rubrics to encourage consumer engagement of China’s e-commerce market, which has been experiencing a year-on-year increase of 64.7 percent and is targeted to hit RMB 18 trillion (US $1.8T) by 2015.

Authored by Roy Zou