Consumer Protection Policies for MNCs in China

How are Consumer Rights Protected by Law?

China has an extensive system of regulations for protecting consumer interests. The Product Quality Law (中华人民共和国产品质量法)(which governs quality control in respect of commodities and services) and the Protection of the Rights and Interests of Consumers Law ((中华人民共和国消费者权益保护法))(which governs the merchandising of commodities and services) form the framework for this system. There is also a series of related laws and regulations pertaining to specific commercial and industrial sectors. Enforcement, which mainly involves monitoring and controlling the quality of goods and services, is carried out by industry-specific supervisory bureaux at various State, regional, and municipal levels. At the State level, the Administration of Industry and Commerce (AIC) is the principal administrative body responsible for protecting consumer rights. The various supervisory bureaux have the power to administer applicable administrative penalties for non-compliance with relevant laws and regulations.

What are the Relevant Standards?

Generally, the relevant supervisory bureaux are responsible for setting relevant quality standards, and then monitoring and enforcing the implementation of these standards in the marketplace. Administrative systems for implementing standards, including application, licensing, permitting and inspection procedures, have also been set up. However, in many cases the substantive technical requirements of PRC quality standards are simpler and less stringent than those of the corresponding standards adopted in other important jurisdictions. In this regard, while complying with PRC quality standards may require extensive legal due diligence and careful administration, an MNC may find that the substantive technical requirements of the standards are, relatively speaking, not difficult to meet.

What Consumer Rights Should we be Aware of?

Under law, Chinese consumers are assured the right to personal safety and the safety of their property, the right to be informed about goods and services offered for sale, the right to free choice when selecting goods or services and the right to enjoy fair dealings, respect for their personal dignity and ethnic customs, and compensation for damages that they suffer. Enforcement of these consumer rights is based on claims for damages in tort, which is distinct from enforcement of the government regulatory regime also described above. This additional tortious liability means that if a consumer is harmed as a result of consumption or use of a merchandiser's product, the merchandiser may incur liability for damages even if the product or service satisfies all the relevant regulatory requirements.

How do Consumers Enforce Their Rights?

Consumers may pursue remedies either individually, collectively or through an institution. Procedurally, consumers may take a complaint directly to the culpable merchant, register a complaint with a consumer advocacy group or regulatory authority, or file a lawsuit with the People's Court. Since relevant government bureaux, consumer groups and the media are the main institutions through which information about harmful products and unfair merchandising practices is uncovered and publicized, individual consumers tend to rely to a significant degree on such institutions in order to achieve real enforcement of their personal rights. Under law, the mass media is encouraged to engage in "social stewardship through publicity" as a means to raise public awareness of activities detrimental to consumer rights and interests. Consumer interest groups and associations also have powers facilitating their protection of consumer interests at an institutional level. In addition, the People's Courts are obliged to particularly accommodate consumers wishing to file lawsuits.

Engaging the Market

MNCs have much to lose and little to gain from adopting a lax internal policy with respect to rules, regulations and legal requirements for consumer protection. As a matter of good practice, MNCs should adopt and maintain carefully considered regulatory compliance checks and pre-planned strategies for responding effectively to consumer complaints. MNCs would be wise to take a cautious approach when responding to consumer complaints, even if recalling a product from retail outlets or adopting other mitigating measures results in the loss of a certain amount of turnover in the short term.

Preemptively, an MNC may also seek to strengthen its relationships with Chinese consumers, the media and relevant authorities by working to bring quality standards for its operations in China on par with the standards it applies to its operations in other developed nations. The extent to which an MNC implements the above practices may correlate roughly to the degree to which it succeeds in preventing detrimental consumer relations crises. Looking ahead, cooperation with PRC authorities to develop better industry-wide standards may also be the next step for MNCs to strengthen their reputations among Chinese consumers.