Recall and Public Interest Litigation - Two New Regulations Protect Consumers’ Rights

In order to better protect consumers’ rights and interests, two regulations have been issued recently. One of them concerns recall of defective consumer products. The other provides details on public interest lawsuits concerning consumer rights and interests. Below we will summarise the main content of the two regulations and how they will affect businesses

Part I - New Measures on Recal

In recent years, the number of recalls of defective consumer products in China has been increasing rapidly. However, compared with developed countries such as the United States, European Union and Japan, recall of defective consumer products in China lags far behind. Particularly, there were no governing regulations in this area. This has changed as of 1 January 2016 when the Measures for the Administration of the Recall of Defective Consumer Goods (the “Measures”) issued by the General Administration of Quality Supervision, Inspection and Quarantine (the “AQSIQ”) came into force. This is the first regulation that provides a general legal basis for the recall of defective consumer goods.

1. What kind of products must be recalled?

In the past, a fragmented regulatory framework prevailed in China, only governing recalls of certain products such as motor vehicles, food, toys, appliances, pharmaceuticals and cosmetics. Regulations concerning these special products continue to be effective. The Measures expressly stipulate that they do not apply to the recall of the above mentioned special products.

However, now for the first time all other products are also subject to a statutory recall obligation. The defective products stipulated in the Measures are “consumer goods”, namely the products purchased and used by consumers for the need of living consumption. In addition, the AQSIQ develops and adjusts a catalogue according to the degree of risks that damage or danger could happen in consumer goods, which determines the scope of consumer goods that can be recalled in accordance with the Measures. The catalogue has been attached as appendix to and published together with these Measures. The current catalogue only covers electrical appliances and children’s products. It is expected that the AQSIQ will extend the catalogue in the future. Before it comes to such extension, Article 5 stipulates that if there is a necessity to recall any kind of consumer products, which have not been listed in the catalogue, the Measures may be taken as reference.

2. Who is obliged to recall?

The Measures provide clearly that manufacturers shall be obliged to recall defective consumer goods. “Manufacturers” under the Measures do not only refer to domestic manufacturers legally established within the territory of China, who produce consumer goods and to whom a certificate of product qualification is issued. Also, importers and authorised institutions of overseas enterprises are regarded as “Manufacturers” under the Measures and shall therefore take responsibility to recall defective consumer goods. In addition, the Measures also address the so-called “Operators”, including sellers, lessees, repairers, parts and components suppliers as well as entrusted manufacturers. However, Operators are not obliged to carry out a recall under the Measures. Instead, they shall immediately inform the manufacturers and report to the provincial quality inspection departments if they are made aware of potential defects of consumer goods.

3. How does recall of defective consumer products work?

The Measures establish a system of supervision and provide specific steps of recall. Everyone is entitled to report information of potential defects of products to the inspection department. The provincial quality inspection department and the AQSIQ may enter into the premises of manufacturers and operators to carry out investigation. Upon confirmation of defects, manufacturers shall make a recall plan and implement their recalls according to the plan. Manufacturers shall recall defective products by publishing information of existing defects, emergency methods for avoiding damages and measures for eliminating defects through media that are easily available by the public, such as newspapers, websites, radio, television etc. As soon as the consumer goods are recalled, manufacturers shall immediately revise or add logos, repair, replace or return the goods. The cost of eliminating defects shall be borne by manufacturers. Furthermore, in order to ensure better functioning of recall, a database of experts will be built by the AQSIQ to provide technical support for administration of recall. In addition, an information system for recall of defective consumer goods shall be established by the AQSIQ and the provincial quality inspection department for collecting, analyzing and processing information on relevant defective consumer goods.

Part II – Public Interest Litigation

Another regulation issued recently for better protection of consumers’ interest are the Interpretations on Several Issues Concerning the Application of Law in the Trial of Civil Public Interest Actions Concerning Consumer Rights and Interests (the “Interpretations”). The Interpretations were published by the PRC Supreme People’s Court (the “SPC”) with effect from 1 May 2016. They clarified uncertain pending issues and aim at playing a significant role in improving the legal system of public interest actions concerning consumer rights and interests.

1. Enlarged Scope of Plaintiffs

According to the PRC Consumer Protection Law, the plaintiff of public interest actions concerning consumer rights and interests shall be the China Consumers’ Association or the consumer associations established in provinces, autonomous regions and municipalities. According to the Interpretations, not only the aforesaid entities, but also organs and social organizations prescribed by law or authorised by National People’s Congress and its Standing Committee may file such lawsuits. For example, the procuratorates have been authorised to file public interest actions in some pilot provinces in such fields as environmental protection and food safety. For the time being, no organization has been expressly authorised to lodge public interest litigations concerning consumer interests and rights, but this may change in the future.

2. Expanded Scope of Actions

The Interpretations specify that a public interest action may not only be filed against a conduct that causes actual damages but also that has the potential to cause damages. This means, regardless of whether an actual damage occurs, as long as the products or services provided by operators have the potential to endanger public interests, or have defects that may cause damages for personal or property of consumers, a public interest lawsuit can be filed. This means that under the Interpretations, preemptive lawsuits are possible.

3. Public and Private Interests Actions Separated

As to the coordination between public interest actions lodged by qualified plaintiffs and private interest actions lodged by consumers whose rights have been infringed, the Interpretations established principles of separating these two kinds of actions. After the court’s acceptance of a public interest lawsuit concerning consumer’s rights and interests, if consumers damaged by the same infringement request to join the lawsuit, the court shall inform them to file separately. Meanwhile, due to the close relationship between the public interest actions and private interest actions caused by the same infringement, the facts which have been confirmed by the final verdict of the former may be directly adopted in the latter without being proved by the consumer. This means private plaintiffs and public interest plaintiffs may sue concurrently but in separate lawsuits.

The Measures and Interpretations are another step forward on China’s path towards protection of consumer rights and interests. Business operators should thoroughly consider the Measures when reviewing their liability risk management system and drafting consumer contracts as well as general terms and conditions.