Foreign companies face greater scrutiny over consumer protection
May 16, 2013 | BY
clpstaff &clp articles &A Bill to amend the law on consumer protection emphasizes data protection, advertising and recall policies. But ultimately the new Bill gives greater power to the authorities; something foreign companies need to watch out for
The Bill for Amendments to the PRC Law on the Protection of the Rights and Interests of Consumers (Draft) (中华人民共和国消费者权益保护法修正案 (草案)), from the National People's Congress (NPC) on April 28, follows a move by the Standing Committee of the NPC to pass a Decision creating the first nationwide legal framework for data protection.
The Decision on Strengthening the Protection of Online Information (关于加强网络信息保护的决定) was not a typical law, but it does have similar attributes given that it was issued by China's top legislator. The Decision calls for greater protection of private information online.
“The few general principles under the Bill are incredibly similar to the Decision,” said Michael Tan of Taylor Wessing in Shanghai. “The difference is that the Bill focuses on consumer protection, covering personal information both in the cyber world and in the real world, so it is broader in scope, but the same legal framework and philosophy is there,” he added.
The Bill states that collecting and using personal information must be for specific, clear and reasonable purposes. In addition, this information can only be collected with the individual's consent. Businesses must also keep this information confidential by employing adequate internal measures.
|Advertising and marketing
Advertisers and marketers face an increased level of responsibility as the producers of any materials that are deceptive are subject to joint liability with the producers or the business operators. This is addressed in the PRC Advertising Law (中华人民共和国广告法), but under the Bill liability is stricter.
“Under the Bill, false advertisements concerning consumer life and health will attract liabilities not only for the product promoter, but also for the advertisement producer and distributor. The latter's legal position is now more vulnerable than under the existing Advertising Law, since the awareness factor is no longer mentioned and required under the Bill” said Tan.
The Bill also explicitly states food safety as one of the areas where deceptive advertisements will be liable, something the government has been pushing in recent months due to various scandals over tainted milk formula.
|Recalls
While there are specific measures over recalls in the automotive industry, the Bill expands recalls to cover any products that are defective and cause harm to people's health or property.
“The authorities are empowered to take measures under the Bill, especially as the concept of recalls is clearly specified. It is anticipated that the authorities will also set up more product-specific rules on how business operators should facilitate recalls,” said Tan.
The concept of recalls is not new to the automotive industry in China or around the world. In March, Volkswagen recalled 384,181 vehicles in China. However, the expansion means companies will need to ensure they have policies in place and are familiar with procedures.
|Are your practices up to scratch?
Business operators need to run a thorough review of company policies and rules, especially in the areas that are specifically addressed in the Bill.
“Not all companies pay attention to data protection and operators who engage heavily in advertising should also be careful, as they may become vulnerable. Company mechanisms on recalls need to be addressed and prepared for – as only automotive companies have had to deal with this in the past,” said Tan.
The Bill also pushes for the strengthening of consumer protection associations. This could empower associations to launch class litigations. There are few class litigation cases in China, but the Bill could change this as there is support for such actions.
“In the end, the Bill opens the door for the authorities to play a bigger role in consumer protection,” said Tan. He also warns this is something foreign companies need to pay attention to, especially given the recent dispute over Apple's warranty policy.
While foreign companies often have better consumer protection than their domestic counterparts – they are much more likely to be a target given recent initiatives.
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