CHINA Law and Practice Contributed by: Yue Dai, Zhenghao Li and Xiaokun Yuan, King & Wood Mallesons
out investigations on infringement of consumer rights and require the business operators to sub - mit statements and evidentiary materials. Determination of consumer fraud While the new rules reiterate the compensation for consumer fraud, it is also clarified that such fraud does not cover the circumstance in which the flaws in markings or labels, manuals or pro - motional materials will not impact the quality of products or services nor mislead consumers. Further, the new rules stipulate that punitive damages for fraud do not apply to those intend - ing to obtain compensation through fraudulent acts. In this respect, administrative and criminal penalties (if any) shall be imposed on such bad- faith entities. Ongoing Amendment to the Product Quality Law On 18 October 2023, the SAMR released a revised version of the Product Quality Law for public comments. To date, the draft amendment has yet to be officially promulgated. Major fea - tures of this new draft are illustrated as follows. • The term “business operator” is specifically defined in the new draft, covering, among others, manufacturers, sellers, product stor - age and transport operators, online sellers, e-commerce platforms, operators of cen - tralised trading markets, counter renters, organisers of trade fairs, and service industry operators. Accordingly, a separate chapter is dedicated to setting out product quality responsibilities of business operators other than manufacturers and sellers. • The new draft aims to implement more strin - gent supervision of the quality of “special consumer products” which include products for children, pregnant and breastfeeding women, the elderly and the disabled. Such
products are subject to stricter standards, shall pass safety assessment and third-party inspection before being put into circulation and shall implement special labels. • A new chapter of the draft targets the meas - ures for quality innovation and the building of quality infrastructure. For example, the new draft intends to introduce the regulatory sandbox so as to encourage innovation while mitigating risks and preserving consumer safety. • The new draft proposes to unify the concept of “defect” , which is defined as “products having unreasonable danger compromising physical safety and/or security of other prop- erties” . • The new draft also plans to establish the product quality credit system under which product quality credit information shall be dis - closed to the public in the national enterprise credit system. Entities severely violating prod - uct quality regulations shall be included in the list of dishonest enterprises committing grave illegalities, which are subject to further restric - tions on access to government procurement and obtaining government support. 3.2 Future Policy in Product Liability and Product Safety The general tendency in product liability, as out - lined in 3.1 Trends in Product Liability and Prod- uct Safety Policy , is to extend the level of pro - tection to consumers while maintaining a more balanced approach in protecting the legitimate interests of business operators. Based on the latest legislative and judicial practice discussed in the previous section, future policy directions in product liability and product safety are expected to focus on the following aspects: • unifying the standards for determining prod - uct defects;
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