Chapter 17 Consumer Chapter 17 Consumer protection law protection law

1 1 Overview

2 2 Consumer's rights

3 3 Business operator’s obligations

4 4 Business operator’s liabilities

5 5 Dispute resolution

1 Overview

1.1 Sources of law

1.2 Concept of consumer Scope of consumer Scope of consumer

Daily consumption Capital goods

Buyer Non-buyer Prior to

purchase Farmer: agricultural

production means Others

Individuals √ √ √ √ ╳

Legal persons ╳ ╳ ╳ ╳ ╳

Other social entities ╳ ╳ ╳ ╳ ╳

1.2.1 Only individuals

1.2.2 Only consumer-business formula

1.2.3 Daily consumption

Illustration:Illustration: Wang Haidong and Zhang Hua’s consumer Wang Haidong and Zhang Hua’s consumer

protection denied protection denied In September 2001 Wang Haidong purchased the Kangfulai Lingzhi Yangshen capsules, Chongcaowang capsules and the pearl Yangshen tablets, with a total value of RMB 100000 at the Shanghai Hualian Supermarket. The pamphlets of such products claim such they possess such functions as ‘refreshing and awaking oneself’, ‘adjusting one’s mind and heart’, ‘strengthening one’s masculine’, and ‘nursing one’s skin’. The exterior package of the Kangfulai Lingzhi Yangshen capsules bears the function of ‘maintaining one’s youth’. After consulting various departments, Wang Haidong discovered that the approved functions of the foregoing products are confined to ‘standing against the fatigue, deferring the caducity and adjusting immunity’. According to Art.4 of the Measures regarding the Labeling on Health Protection Food issued by the MOH in 1996 the names, functions and validity of such foods should match the approval certificate of the health protection food. He believed that the foregoing manufacturers defrauded the consumers thus sued them in the Huangpu district court in Shanghai municipality. The final judgment made by the Shanghai intermediate court denied Wang Haidong’s consumer status on the basis that Wang Haidong’s purchase was obviously not for his personal consumption since he took greffiers with him so as to obtain evidence in the course of purchase. Consequently his claim for double compensation was rejected by the appellate court.

Similarly in 2001 Zhang Hua purchased 2400 bottles of Jinqiangyu oil of the Hengshoutang with a total value of RMB 196800 in the Shanghai Darunfa Supermarket. He believed the manufacturer boasted its functions and sued it to the Yangpu district court of Shanghai claiming for double compensation, i.e. RMB 393600. The trial court held that the 2400 bottles of Jinqiangyu oil were sufficient for him to use about 100 years, thus his purchase motive as consumer was doubtful. On 24 April 2001 the trial court denied his consumer status and rejected his claim for double compensation.

1.3 Consumer problem

(1) fake products (2) shoddy products e.g. prevalent substandard goods on t

he foods and daily consumption goods market(3) operator’s bully e.g. compulsory dealing and tie-in tran

saction(4) gauges and pricing e.g. giving short measures and askin

g an exorbitant price(5) service quality e.g. concocting various pretexts, and ext

orting and racketeering, which are prevalent in the sectors of tourism, communication, recreation, and restaurant

(6) violating consumer’s personal rights and dignity such as illegal search of the customer’s body and purse.

Illustration: Illustration: August 2001 in Zhuzhou city of Hunan province the fake “Meihua K” Huangbai capsules poisoned 63 persons, which resulted in prevalent discontent and complaint. They are completely against the supreme and final goal of human production.  

Illustration:Illustration: OK glasses rendered Zhang Ling blind OK glasses rendered Zhang Ling blind

In July 1999 Zhao Ling was attracted by the advertisement of the invisible hard glasses claiming to be able to effectively cure the short sight in merely seven (7) days and purchased one pair of such glasses in the Machinery Hospital. Two months later Miss Zhao found that her right eye couldn’t see anything. The appraisal identified that it was infected by the virus of wearing such glasses. The hospital tried its best to save her, but unfortunately her right eye’s eyesight is almost zero. Miss Zhao dreamed of becoming a student of the police university, and such accident ruined her and rendered it impossible. In the whole country the victim of the OK glasses amounted to 19, and most were youngsters. The process of seeking compensation from the seller was a nightmare to such victims. After rejection of her claim her family had to go to Beijing to make complaints for numerous trips. Till 15 July 2001 they traveled seven times to Beijing so as to file such complaints to more than twenty (20) government departments. In such process the poor family had spent another RMB 100000. After media report on the CCTV Legal Report Column, the China Consumers Association reminded the consumers: “OK glasses were OK.”

2 Consumer's rights

2.1 Right to safety

Illustration:Illustration: Injury by the restaurant gas jar Injury by the restaurant gas jar

In the evening of 8 March 1995 Jia Guoyu, a senior middle school students going to take part in the national university entrance exam, had a meal at the Chunhai Restaurant. In the course the meal the gas jar exploded, his face and hands were severely burned. The hospital tried its best save him, but unfortunately his face was severely disfigured. After the accident his father sued the two manufacturers and the Chunhai Restaurant in the Haidian district court for compensation. The media widely covered the accident and strongly condemned the acts of violating consumer’s rights and interests. The trial court held that the two manufacturers infringed upon Jia Guoyu’s personal safety and ordered them to compensate Jia Guoyu’s damages RMB 273257.83, among which the disability compensation was RMB 100000.

2.2 Right to information

Illustration:Illustration: Silver necklace cannot pose as gold necklace Silver necklace cannot pose as gold necklace

9 August 1995 was the birthday of Mr. Wang’s wife, when he wanted to present her a valuable birthday gift. In the jewelry counters of a department store he spent RMB 1000 to purchase the gold necklace of “18K”. The sales persons claimed that the product was directly from the manufacturer. Worrying about the quality Mr. Wang asked the designated inspector to test its quality, which identified that it was silver necklace rather than gold necklace. He was very angry about this thus complained it to the provincial consumer association. After accepting the case the provincial consumers association along with the provincial TV station carried out investigation and found that such gold necklace was fake product indeed. Through the consumer association’s mediation the operator refunded Mr. Wang the price of the necklace RMB 1000 and compensated another RMB 1000.

2.3 Right to choice Illustration:Illustration: Mr. Li may refuse the tie-in deal Mr. Li may refuse the tie-in deal In May 1995 Mr. Li applied to the telecommunications company for installing residence telephone. The responsible person told him that he should pay an installation fee of RMB 3000 and an additional RMB 3000 for the telephone set. Mr. Li found that he had already bought the telephone set and was unwilling to buy another one. The responsible person told him that if he would not buy the designated telephone set, the telecommunications company wouldn’t install his residence phone. Therefore Mr. Li had to pay an additional RMB 300 for the telephone set unwillingly. The telecommunications company is wrong and liable for both the violation of consumer’s right of free choice and the tie-in unfair competition.

2.4 Right to fair trade 2.5 Right to compensation 2.6 Right to supervision 2.7 Right to consumption education

2.8 Right to personal dignity

Illustration:Illustration: Miss Li’s dignity is inviolable Miss Li’s dignity is inviolable

In July 1998 Miss Liu, a university undergraduate went to the supermarket for shopping. Just when she wanted to leave, the personnel suspected her of stealing the goods from the supermarket and did not let her go away. Subsequently the security personnel interrogated her and searched her body but in vain. Feeling insulted and humiliated Miss Liu was very angry with this, thus sued the supermarket in the court claiming for public apology, eliminating adverse effects and compensating her losses. The trial court held that the supermarket war liable for infringing on Miss Liu’s dignity and awarded her the damages of RMB 200000. The supermarket disagreed and appealed it to the appellate court. The appellate court also held that the supermarket was liable, but the damages of RMB 200000 were excessive, thus reduced them to RMB 10000 as compensation to Miss Liu.

2.9 Right to association Functions of consumer association: (1) Providing consumers with consumer information and consultation

services

(2) Assisting relevant administrative organs in supervising and checking products and services

(3) Informing relevant administrative organs of problems pertaining to consumer’s legitimate rights and interests, inquiring them and making suggestions to them about such problems

(4) Accepting consumer’s complaints and conducting investigations and mediation in connection with the complaints

(5) If the complaints involve the quality of goods and services, the verification department may be retained to provide the verification conclusion

(6) Supporting victimized consumers in taking legal actions against acts of harming consumer’s legitimate rights and interests

(7) Exposing and criticizing the acts of harming consumer’s legitimate rights and interests through mass media.

3 Business operator’s obligations

3.1 Duty to ensure personal and property safety (1) guarantee that the products or service provided by them are in confor

mity with the personal and property safety requirements. In case they may be hazardous to personal and property safety, they shall make truthful presentation and give clear warnings to consumers and explain and label the method of using products or accepting the service, as well as the directions for preventing the occurrence of such hazards

(2) upon discovering that the products or service provided are seriously defective and may cause harm to personal and property safety even under normal use of such products or service, business operators shall forthwith report to the relevant administrative organs and inform the consumer to adopt measures to prevent the occurrence of the harm.  

Illustration:Illustration: Godley v Perry (1960) Godley v Perry (1960) A child bought a catapult snapping in use and causing the boy to lose an eye. He sued the retailer and won. The retailer sued the wholesaler under section 15 because before buying them, he had tested sample by pulling back the elastic and it hadn’t snapped. Court:Court: Wholesaler was liable.

3.2 Duty to provide information

(1) They shall provide truthful information related to products and service to consumers, and make no misleading or false propaganda

(2) They shall truthfully, clearly respond to inquiries made by consumers regarding the quality of their products or service and the method of use

(3) Shops shall clearly mark the prices of their products(4) They shall give their true names and signs and mark the

m accordingly(5) In case of leasing other’s counters or space they shall giv

e their own true names and signs and mark them accordingly.

3.3 Duty to issue receipts

3.4 Quality warranty

(1) under normal use such products or service provided by them possess the expected quality, capability and usefulness prior to the expiration date, except that such defects are known to consumers at the time of purchasing the products or accepting such service

(2) actual quality of such products and services are compatible with what they indicate in the advertisement, product literature, samples or other forms of presentation.

Illustration:Illustration: Kendall v Lillico (1969) Kendall v Lillico (1969)

A game farm owner bought groundnut extract used for making food for birds. The extract is normally used as cattle food, and he didn’t tell the seller of his intention to feed it to birds. It contained a mould poisonous to birds, but not harmful to cattle. He sued for damages.

House of Lords: It was of merchantable quality.  

Illustration:Illustration: Shine v general Ltd (1988) Shine v general Ltd (1988)

A motorist bought a second-hand sports car giving him problems. After he found the car had been involved in car crash and totally submerged in water, he sought to reject it.

Court of appeal: Not of merchantable quality.

Illustration:Illustration: Rogers v Parish Ltd (1987) Rogers v Parish Ltd (1987) A motorist bought a new Range Rover for $16000. It had minor problems, but was drivable and defects could have been put right. He rejected it.

Court of appeal: Not merchantable due to high price for very high expectations.  

Illustration:Illustration: Griffiths v Peter Ltd (1939) Griffiths v Peter Ltd (1939) Griffiths with abnormally sensitive skin contracted dematitis (skin disease) from a tweed coat bought from a shop. Such coat wouldn’t have affected most people.

Court: Fitness, seller was not liable. 

Illustration:Illustration: Grant v Knitting Ltd (1936) Grant v Knitting Ltd (1936)Grant buying a pair of underpants from a shop contracted dermatitis due to chemical used in its manufacture not rinsed properly. He sued under sections 14(2) & (3).

Privy Council: Not fitness, seller was liable.

3.5 Availability of products or services

3.6 Duty of post-sale service Illustration:Illustration: Seller liable for replacing defective motorcycle Seller liable for replacing defective motorcycleIn the end of 1995 Mr. Feng spent RMB 8700 to buy one motorcycle. After less than 10 days’ driving the rear tyre broke down. He sent it back to seller for disposition. Unfortunately the seller was short of spare parts, the new tyre was not installed until February 1996. In the course of testing it, new problems were discovered, e.g. the abnormal functioning electric start-up, un-working brakes, strong shaking of the rear tyre in the course of turn, and insufficient power in the course of driving. Upon discovering so many defects he requested the seller to replace it with a new one, which was rejected by the seller. On 15 March 1996 he complained it to the local consumer association. After acceptance the consumer association discussed with the seller for a few rounds and requested the seller to honor its replacement obligation. The seller eventually agreed to replace a brand new motorcycle with the defective one for the consumer, i.e. Mr. Feng.

3.7 No unfair trade 3.8 Duty to respect consumer’s personal dignity Illustration:Illustration: Kempinski Hotel accused of violating consumer’s dignity Kempinski Hotel accused of violating consumer’s dignity

The plaintiff, Xu Gao is constitutional law professor working with a Beijing based university. In the afternoon of 1 July 1999, he went to Kempinski Hotel at about 5 PM with a few friends and prepared to have a dinner there. They went to the eastern garden of this hotel so as to take a rest before dinner. However the security personnel rejected their entrance and requested them to leave because they were not resident guest. They had to leave, watched by these security personnel. He came to this hotel to complain the next day, and was guided to the south gate of the eastern garden so as to see the small wooden indicator, which merely shows in Chinese that “only resident guests may have access to this garden”. However all other indicators are all in both Chinese and English. He believes the small wooden indicator only targets at Chinese, strongly hurting his personal dignity. After several rounds of unsuccessful discussion with this hotel, he took the hotel to the court claiming public apology and economic losses of RMB 50000. Both the trial court and appellate courts ordered the hotel to make apology to the plaintiff, but rejected his other claims, whose decisions were made respectively on 10 November 2000 and 14 March 2001.

3.9 Duty to accept consumer’s supervision

4 Business operator’s liabilities

4.1 Overview Generally operator’s liability for infringement upon consumer’srights are based on fault

Operators and other liable persons jointly and severally liable:

(1) Consumers may demand compensation from sellers if their legitimate rights and interests are injured as a result of buying or using seller’s products. If responsibility falls upon producers or other sellers providing them to such sellers, such sellers may seek compensation from them after making their own indemnities.

 

(2) In the event of division or mergers of the original firms, consumers whose legitimate rights and interests are injured as a result of buying or using products or receiving services may seek compensation from the enterprises taking over the rights and obligations of the original enterprises following such reorganization

(3) In the case of operators using the business licenses of other people in violation of the law and injuring the legitimate rights and interests of consumers, the consumers may demand compensation from them or from the holders of the business licenses  

(4) Consumers may seek compensation from the sellers or service providers if their legitimate rights and interests are injured as a result of buying products or receiving services at trade fairs and leased sales counters. If the trade fairs have ended or the leases on the counters have expired, consumers may demand compensation from the sponsors of the trade fairs or the lessors of the counters, who in turn may seek compensation from the sellers or service providers after making their own indemnities 

(5) Consumers may seek compensation from operators if their legitimate rights and interests are injured since they use false advertisements to provide products or services. The advertising agents shall be responsible for making compensation if they cannot provide the operator’s true names and addresses.

4.2 Civil liabilities

4.2.1 Causes

(1) products are defective

(2) products cannot function as expected and are presented without any explanation at the time of their sale

(3) product standards do not match those specified on the products or their packages

(4) quality does not match that stated in product descriptions, on samples, or through other means

(5) products are produced although their elimination has been clearly mandated by the State, or they are sold though they have lost their validity or have deteriorated

(6) products sold are insufficient in quantity

(7) service items and charges violate the agreements

(8) consumer’s requests for repairing, reworking, replacing, or returning the products, for supplying shortfalls, for refunding the product prices or service charges, or for compensating for losses are deliberately shelved or unjustifiably rejected

(9) other situations where consumer’s rights and interests are injured as provided for in laws and administrative regulations

4.2.2 Forms

4.2.2.1 Forms of liabilities for infringing upon personal rights

Scope of compensation for personal injuries and death Scope of compensation for personal injuries and death

Ordinary injuries Disability Death

Medical fees √ √

Nursing charges during treatment √ √

Loss of incomes for absence from work √ √

Expenses for acquiring aiding apparatus √

Living subsidies √

Disability compensations √

Living expenses of victim’s dependents √ √

Funeral expenses √

Death compensation √

4.2.2.2 Forms of liabilities for infringing upon property rights (1) Operators whose products or services causing damage to the consu

mer’s properties shall take such civil liabilities as repair, rebuild, change, return of goods, full supply of short items, refund of payments for goods or services and compensations for losses, upon request by the consumers. If there is an agreement between the business operators and consumers, such agreement prevails.

 

(2) With respect of the product sales with warranty requirements on repair, change, or return of goods either under State regulations or an agreement between the business operators and the consumers, they are responsible for the change or return of such goods when the consumers find them not in normal working conditions after two repairs during the warranty period. When the consumers demand a repair, change, or return of large products under the warranty clause, they are responsible for the transportation charges reasonably incurred.

(3) When they supply goods through mail service, they should do so according to the prior agreement. If they fail to honor such agreement, they should perform it or refund payments and reimburse the consumers with costs reasonably incurred upon consumer’s request.

 

(4) When they supply goods or services on the prepayment basis, they should do so according to prior agreement. If they fail to fulfill it, they should perform it or refund prepayments, pay interest derived and reimburse the consumers with costs reasonably incurred upon the consumer’s demand.

 

(5) If certified as substandard products by the relevant departments according to law, they must accept return of such products as demanded by the consumers.

 

(6) If they are involved in fraud in providing goods or services, they shall compensate the consumer with a sum doubling what the consumers have paid for such goods or services as demanded by the consumers. This is the punitive damages imposed on the business operators.

4.3 Administrative liabilities

(1) Producing or selling products inconformity with the personal and property safety requirements

(2) Putting impure or fake materials in the products, selling fake and inferior goods as genuine and quality goods, or posing substandard products as qualified ones

(3) Producing products officially eliminated by the State, or selling products that have expired and deteriorated in quality

(4) Falsifying place of production, falsifying or using other's factory name and address; or falsifying or using certification, brand name, and other quality marks

4.3.1 Causes

(5) Selling products failing to go through necessary inspection and vaccination or falsifying the result of inspection and vaccination

(6) Making misleading, false propaganda on products or service

(7) Deliberately procrastinate or unreasonably reject consumer’s request for repair, reprocessing, replacing, returning, replenishing the products, their request for refund, and their request for compensation

(8) Infringing on consumer’s personal dignity or encroaching on their personal freedom

(9) Other acts infringing on consumer’s rights and interests punishable under the provisions of laws and regulations

4.3.2 Forms

• Rectification, warning, fines, confiscation of illegal incomes, suspension of business and cancellation of business license depending on the severity of the case

• If they disagree with administrative penalties, may within 15 days of receiving penalty decision, petition to next higher level of organs for reconsideration.

 

• If they disagree with reconsideration decision, may within 15 days of the receiving decision bring suits at the court

• They may also go directly to the people's court to file suits.

4.4 Criminal liabilities

(1) personal injuries or death resulting from their provision of products or services sufficient to constitute the crime

(2) obstruction by acts or threats of violence the performance of duties by functionaries of relevant administrative organs in accordance with law sufficient to constitute the crime

(3) State functionaries guilty of dereliction of duty or sheltering business operators to infringe on the legitimate rights and interests of consumers sufficient to constitute the crime

5.1 Negotiation and discussion

5.2 Mediation Major functions of the consumer association 

5.3 Complaints to administrative organs

5.4 Arbitration

5.5 Litigation

5 Dispute resolution