CHINA Law and Practice Contributed by: Yue Dai, Zhenghao Li and Xiaokun Yuan, King & Wood
e-commerce platforms as well as the platform opera - tors. According to the notice, merchants operating on e-commerce platforms are obliged to set up mecha - nisms for collection and analysis of product defect information, suspend sales upon receiving recall orders, and put up notices on their webpages when found to be selling defective products. On the other hand, the e-commerce platform operators must also take the necessary measures to ensure that defective products are no longer being sold on their platform once informed of the notices on product recall, and must co-operate with regulators to conduct the recall. Clarification on Scope of Compensable Property Damage Covered by Product Liability Claims The SPC released a new judicial interpretation on the tort liability section of China’s Civil Code on 25 September 2024, which became effective on 27 Sep - tember 2024. Importantly, this interpretation clarifies that the “property damage” claimed by the buyer in product liability tort claims includes not just damage caused to “other property” but also damage caused to the “defective product itself”. This understanding, which aligns with the legal spirit of the new Civil Code, takes precedence over the old Product Quality Law, under which property damage caused by product defects in tort claims only covers properties “other than” the defective product itself. Originally, consumers were required to file a contrac - tual claim to recover damage to the defective product itself, and a separate tort claim to seek compensation for damage to other properties. By adopting the new interpretation, legislators intend to simplify the filing of lawsuits by consumers and save judicial resources. Under the new approach, for disputes involving prod - uct defects, consumers may simply file one tort claim to cover damages to both the defective product itself and any other property damaged by the product. Elaboration of Punitive Damages Rules in Food and Drugs Cases On 22 August 2024, the SPC officially adopted an interpretation on punitive damages in foods and drug disputes. Key highlights include the following.
• Courts shall support punitive damages claims by ordinary consumers purchasing food for personal or family needs. The amount of punitive damages is calculated based on the actual payment made for the product. • Non-professional purchasing agents (daigou) do not bear punitive damages liability. Professional purchasing agents who unintentionally sell sub - standard products may seek compensation from the manufacturer after paying punitive damages to the buyer. • If the consumer brings a punitive damages claim based on violations of the Food Safety Law or Pharmaceutical Safety Law but the court finds no such violation other than consumer fraud, the consumer may change their claim to seek punitive damages for consumer fraud, as per the PCRI. • For buyers who knowingly purchase substandard food or repeatedly purchase the same product within a short period, courts may only support their punitive damages claim on the basis of the quantities necessary for household use. Moreover, business operators shall bear the burden of proof if they argue that the buyer knowingly purchased the substandard food. • Courts shall reject punitive damages claims by buyers who fabricate facts and threaten tip-offs or lawsuits. Such buyers shall also be held liable for acting in bad faith. • Further, the new interpretation also provides guide - lines on punitive damages claims resulting from errors in product labels or manuals. For example, courts may dismiss punitive damages claims due to clerical errors that do not cause misleading effects. Introduction of New Rules to Further Protect Consumer Rights On 15 March 2024, China introduced the Implementa - tion Rules on the Law on the Protection of Consumer Rights and Interests, which came into force on 1 July 2024. The new rules have elaborated on the following aspects concerning product quality. Duty to ensure product safety The new rules require business operators to ensure the safety of the products or services provided, includ - ing those offered free of charge in the form of prizes,
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