What the consumer protection law means for foreign businesses

In 1993, the Standing Committee of the National People's Congress promulgated the current PRC Law on the Protection of the Rights and Interests of Customers (中华人民共和国消费者权益保护法) (Consumer Protection Law). After serving for nearly 20 years, some provisions of the Consumer Protection Law have become outdated due to changes in the Chinese consumer market and the economy. In order to address the new issues that have emerged over the past two decades, on October 25 2013, the Standing Committee of the National People's Congress issued the Decision on Amending the PRC Law on the Protection of the Rights and Interests of Consumers (关于修改《中华人民共和国消费者权益保护法》的决定) (Decision). This Decision will come into effect on March 15 2014, which is Consumer Protection Day.

To provide better protection to customers, the Decision improves the current Consumer Protection Law in the followings areas:

1. Protecting consumer's personal information;

2. Specifying the policy of recall for defective products;

3. Adopting the reversal of burden of proof;

4. Stipulating the return of a commodity within seven days upon receipt;

5. Regulating internet shopping and other new consumption patterns;

6. Strengthening the obligations of advertising agents and advertisement publishers;

7. Increasing the penalties on business operators' fraudulent behaviours;

8. Recording violations in credit files.

Protecting personal information

Disclosure of personal information is a serious problem in China. It was recently reported that the employees of a certain courier went so far as to publicly sell courier receipts, which included customers' personal information, like mobile phone numbers and home addresses, at a fairly low price. The leakage of personal information through different channels has caused some people great losses due to the unlawful use of their personal information, and others have had to endure tiresome commercial messages, marketing calls and junk emails.

With the intention of improving this situation, the Decision added content for the protection of consumers' personal information. The Decision generally provides that consumers enjoy the protection of personal information in accordance with law. Then it further provides: 1) the rules for business operators to collect consumers' personal information; 2) business operators and their staffs' obligations to the keep the security of collected consumers' personal information; and 3) the restriction on sending commercial information.

We noted that these stipulations are consistent with the Standing Committee of the National People's Congress, Decision on Strengthening the Protection of Online Information (全国人民代表大会常务委员会关于加强网络信息保护的决定) (Online Information Decision), which came into effect on December 28 2012, and has parallel protections for personal information. This indicates that it is a trend in China to strengthen the protection of personal information, and enterprises in China should pay more attention to the protection of consumers' personal information.

Recalling defective products

So far, the defective product recall system has not fully matured in China. The current Consumer Protection Law and the PRC Product Quality Law (中华人民共和国产品质量法) do not provide specific provisions regarding the recall of defective products. Though there are some administrative rules establishing recall policies for specific commodities, like automobiles, food and toys for children, China is still in need of setting up a recall system at the national level.

The Decision, though not complete, provides preliminary provisions for the recall of defective products. It requires that once a defect is discovered in a commodity or service that may jeopardise personal safety and the safety of property, business operators should report relevant situations to the concerned administrative authorities and notify consumers. In the meantime, these business operators should take measures to stop sales, issue warnings and conduct recalls. Further, the Decision makes it clear that for any recalls, business operators should bear the necessary expenses of consumers caused by a product recall.