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China overhauls consumer protection laws

Customers are seen at an Apple store in Beijing August 24, 2012. REUTERS/Jason Lee
Customers are seen at an Apple store in Beijing August 24, 2012. REUTERS/Jason Lee

By Adam Jourdan

SHANGHAI (Reuters) - China's top legal body has strengthened consumer rights in the country after it revised the nation's Consumer Protection Law on Friday, the first major overhaul in two decades.

The revisions increase consumer powers, add rules for the booming Internet shopping sector and stiffen punishments for businesses that mislead shoppers.

Chinese regulators have been cracking down on real or perceived corporate wrongdoing, with domestic and international infant formula makers and drugmakers particularly coming under the spotlight this year.

Global firms like Apple Inc and Starbucks Corp have also been getting caught in the glare, while South Korea's Samsung Electronics Co Ltd <005930.KS>, the world's largest smartphone maker, had to apologize to Chinese customers on Thursday after a broadcast on China Central Television criticized company repair policies.

China is also trying to stimulate domestic consumer spending as it attempts to transition from an investment-led economy to a more consumption-driven model. But domestic consumers are often wary of product safety and quality, with 3.8 billion yuan ($624.79 million) worth of poor quality goods sold in China between 2010 and 2012, according to the State Administration for Industry and Commerce (SAIC).

"Strengthening consumer confidence will benefit the whole nation's economic development and boost domestic demand," Jia Dongming, director of the civil law working committee under China's Standing Committee, said at a press briefing to announce the changes to the law.

The amendments to the 1993 law include increasing compensation for consumers and raising fines for retailers who violate the law, including in cases where faulty products lead to consumers being harmed or killed. Compensation rose from equaling the amount of damages to three times the amount.

China will also strengthen the role of the China Consumers' Association, which will be able to represent groups of consumers in any wider class actions against retailers.

Officials also stressed the growing importance of protecting consumers in China's booming online shopping sector, which has expanded rapidly with the rise of market leader Alibaba's Taobao, Wal-Mart Stores Inc's Yihaodian and 360Buy.com.

Internet sales have risen almost 50-fold since 2006 to hit 1.3 trillion yuan ($213.75 billion) in 2012, according to Jia, while analysts predict e-commerce will account for a fifth of total retail sales in China within five years.

The law will make it easier for consumers to return goods bought online, while sellers will bear the burden of proof in any disputes. Online retailers will also have to meet strict privacy requirements, including requesting users' permission to use any personal data.

"The make-up and challenges of the consumer sector has completely changed and so the law has had to adapt for the times," said Jia.

($1 = 6.0820 Chinese yuan)

(Additional reporting by Shanghai newsroom; Editing by Matt Driskill)

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