The People’s Republic of China (“PRC”) Consumer Rights and Interests Protection Law was first enacted in 1993 and experienced two rounds of amendments in 2009 and 2013 respectively. In recent years, the rapid growth of e-commerce and platform-based commerce in China has brought about a number of challenges against consumer rights, such as false advertising, price disparities, refusal to accept returns, and the automatic renewal of subscription services.
On 19 March 2024, the State Council of the People’s Republic of China (“PRC”) unveiled the Implementing Regulation on the PRC Consumer Rights and Interests Protection Law (the “Regulation”). The Regulation, effective from 1 July 2024, aims to enhance and clarify the principal provisions of the current legislation while also strengthening the regulatory framework to safeguard the rights and interests of consumers from omni-channel.
The Regulation made detailed provisions on:
- The sellers’ and business operators' obligations, including protection of consumers’ personal and property safety, the protection of rights and interest of the elderly and minors as consumers
- The handling of defective products, avoiding fraudulent practices and advertisement, quality guarantees
- Price transparency and payment terms
- Protection of consumers' personal information
- Consumer complaints procedures, litigations and settlement of disputes
To help retailers and business operators engaged in both e-commerce platforms and physical stores effectively meet the requirements introduced by the Regulation, we provide our interpretations on the key regulations and list out the practical guidance and suggestions as follows.
Sellers’ and business operators’ obligations on venues and identity
To ensure that their business premises and facilities comply with the relevant requirements for the protection of personal and property safety, retailers shall:
- Set up corresponding warning signs
- Ensure quick response and assistance against dangers and damages to consumers
- Clearly indicate their name and logo in a prominent place of their business location even when leasing from third parties or by visual or auditive content when selling online
- Indicate in writing with a 30-day notice their intention to close down or relocate
It is imperative that business operators refrain from disseminating false or misleading information. This includes the fabrication of the competence, qualifications or awards obtained by the operator, the alteration of past transactions and business data, the falsification, fabrication or concealment of user' evaluations, and any other actions that may mislead consumers regarding the reliability of the business.
The regulator has identified several common fraudulent practices employed by online retailers, including the creation of fictitious positive reviews and the manipulation of transaction data to artificially inflate reliability and satisfaction statistics.
Quality guarantees, return policies and defective items
Defective products can pose a significant safety risk to the public and also result in sudden financial distress and reputational damage to the companies involved. It is essential for sellers to implement preventive measures, such as making necessary plans, publishing relevant information and associated fees for comprehensive recall campaigns to ensure a lawful and effective response to faulty output.
For those products that are not applicable for no-hassle and free return policies, sellers of any marketplace, form and platform must provide clear written indications of similar exclusions. It is the responsibility of sellers to explicitly mention the absence of no-hassle and free returns when customers settle the final payment and users’ checkout after shopping online.
In order to balance the rights of business operators with their duties, the recent guidelines include a dedicated paragraph on some platform’s refund-without-return policy, allowing buyers to easily request refunds for defective products without even having to return them after filing an online form. The implementation guidelines also serve to prevent collective actions like “store-bombing” and boycotts that could alter overall trust and lead to unfair competition between marketplaces.
Pricing transparency and payment terms
The consumer market, especially for online sales has been significantly affected by the big data algorithm and customer loyalty measures, which has resulted in goods being accessible or priced differently depending on which user or which device is finalising the purchase. While sellers and platforms offer discounts to secure memberships and advance payments or deposits, users and customers are sometimes required to meet product quotas to access the special or limited editions, including jewellery, luxury watches and accessories. The implementation rules require that business operators clearly distinguish charges and costs for each item, with information typically found on the tag and this information must be authentic, complete, and accurate.
While seeking to foster customer loyalty and encourage progressive spending, sellers shall refrain from setting different prices or fee rates for the same commodity or service if they are subject to the same trading conditions with terms made available to the public.
In a similar manner to goods that are not applicable to hassle-free and free return policy, goods and services provided under collocation or combination shall be marked explicitly and distinctly from the rest of the offering. When requesting or obtaining prepayments and deposits from consumers, businesses must ensure that transactions are conducted via a written contract that clearly indicates:
- The contents/features of the commodities or services
- The price or fee agreed
- The refund method and process
- The liabilities for breach of contract (if any)
Consumer personal information protection
As confidentiality on personal information has been a term and condition of business transactions since June 2023, the implementation rules further develop those warranties against:
- The excessive collection of consumers' individual information, whether directly or in a disguised manner (such as through single perpetual and universal authorisations, or acceptance by default)
- The targeted spread of commercial information or telemarketing practice to consumers
In both cases, users and clients must give their explicit consent and the latter is subject to immediate cancellation and opt-out at any time, should the customer so require.
Handling of complaints, disputes and settlements
With the superior intent to reduce the high number of cases handled by governmental hotlines and court proceedings over offline and online transactions between merchants and consumers, the implementation rules introduce clear guidelines on the obligations and the rights of each party.
It is the duty of the relevant authorities to accept and channel complaints from consumers who have been affected by unfair market practices and sales policies. They must also take steps to encourage employees and other informed third parties to report illegal transactions that they become aware of. Complainants are granted a seven-day period for the explicit receipt of the appeal, while relevant public officers are allowed up to 60 days for their mediation with the seller.
The new guidelines also address the role and involvement of consumer rights associations and recognised bodies in optimising the handling of complaints and maximising consumer satisfaction with fair and equitable results.
Conclusions
The new Implementation Rules of the Consumer Rights Law set more rigorous standards and requirements for trading and commercial entities engaged in business-to-customer activities in China. Due to the local market segmentation and spending habits, sectors such as food and beverage, fast-moving consumer goods, apparel, accessories, luxury and fashion are subject to the greatest scrutiny by the authorities in charge of applying these guidelines and informed consumers standing up for their rights.
How we can help
Hawksford has over ten years of experience supporting retail businesses with operational management in China. We can conduct onsite visits at your physical stores or quality checks on your online commercial platforms (e.g. mobile application) to detect any non-compliance risks against the latest regulations. In the meantime, we suggest that you mobilise your in-house teams or we can facilitate a review of general terms and conditions as well as the communications and privacy policies in relation to sales, pricing and returns. We can provide comprehensive training on the regulation to ensure your staff can properly deal with consumer behaviour.
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