McDermott Will & Emery has a strategic alliance with MWE China Law Offices, a separate law firm based in Shanghai. This China Law Alert was authored by MWE China Law Offices lawyers Jared Nelson and Samon Sun.
The Standing Committee of the National People’s Congress recently issued a draft amendment that would update China’s 20-year-old Consumer Protection Law and reinforce the protection of personal information in the country.
The current People’s Republic of China law on the protection of consumer rights and interests (the Consumer Protection Law) was promulgated in 1993 and came into effect at the beginning of 1994. After serving for nearly 20 years, some provisions of the Consumer Protection Law have become outdated due to the significant changes in the Chinese consumer market and the economy overall.
Updates to the Consumer Protection Law
In order to inject new vitality into the Consumer Protection Law, the Standing Committee of the National People’s Congress has begun taking steps to revise and improve it. On 28 April 2013, the draft amendment to the Consumer Protection Law (Draft Amendment) was published and made open for public comments until 31 May 2013. The Draft Amendment would alter the Consumer Protection Law in the following five key areas:
- Enrich the rules for protecting consumers’ rights and interests
- Strengthen the obligations and liabilities of business operators
- Regulate internet shopping and other new consumption patterns
- Expand the functions of consumer associations
- Further clarify the regulatory responsibility of administrative agencies
However, one key piece of the law that remains missing is a clear definition of “consumers”. The closest thing in the current version of the Consumer Protection Law is a stipulation in Article 2 that “The rights and interests of consumers in purchasing and using commodities or receiving services for daily consumption shall be under the protection of the present law, or under the protection of other relevant laws and regulations in the absence of stipulations in this law.” From this provision, it would be reasonable to define consumers as those who purchase and use commodities or receive services for daily consumption. However, while both the intent of the law and this definition clearly include individuals, it is still not clear whether companies or organisations would also receive protection.
Protection of Personal Information
The Draft Amendment provides revisions to the Consumer Protection Law that will have an impact on daily lives and everyday transactions in China. One area that receives significant attention in the Draft Amendment is the protection of consumers’ personal information. The Draft Amendment includes four key points that will increase these rights and protections:
- Consumers’ personal information, including their names, images and other private data will be protected when buying and using a commodity or receiving a service.
- When collecting and using consumers’ personal information, business operators must (1) abide by the principles of legitimacy, fairness and necessity; (2) expressly inform the consumer of the purpose, method and scope of the collection and use; (3) publish the business operator’s policy on collection and use; and (4) not violate any laws, regulations or mutual agreements between the company and the consumers.
- Business operators must keep information collected from consumers confidential, and must not disclose, modify, destroy, sell or illegally provide such information to others. Business operators must take technical and other necessary measures to secure consumers’ personal information and to prevent the divulgence, damage or loss of that information. If the personal information has been or might be divulged, damaged or lost, then the business operator must immediately take remedial measures.
- Business operators must not send digital commercial messages to a consumer without that consumer’s consent or request, and must cease sending messages to consumers who expressly reject receiving such messages. One exciting application of this point would be the prohibition of unsolicited text message advertisements or phone calls offering goods and services, which remain a constant and unwelcome interruption for many residents of China. However, any excitement about removing this nuisance must be tempered by the reality that, while the Draft Amendment would seemingly prohibit these messages, there are no corresponding legal liabilities on this point that would ensure enforcement.
These four stipulations are consistent with the Decision on Strengthening Protection of Online Information (Decision on Online Information), which came into effect on 28 December 2012, and has analogous protections for personal information. However, there are important differences between these two laws. The Decision on Online Information primarily focuses on the protection of citizens’ digital personal information, while the provisions in the Draft Amendment concentrate on the protection of consumers’ personal information. Therefore, the Draft Amendment seems to offer some broader protections by not limiting the scope of the content to digital information and not limiting the scope of the protected persons to PRC citizens.
The Draft Amendment also stipulates some corresponding legal liabilities for infringing consumers’ rights involving personal information, which can be divided into civil and administrative liabilities.
- Civil Liabilities
Business operators that infringe consumers’ rights regarding their names, images, privacy or other rights involving personal information will be ordered to cease the infringement, restore any damages to the consumers' reputation, eliminate the bad effects of the violation, make apologies and compensate the victims.
- Administrative Liabilities
Business operators that infringe consumers’ rights regarding their names, images, privacy or other rights involving personal information may receive a variety of punishments. Business operators may be subject to a warning, confiscation of unlawful earnings, the imposition of a fine up to RMB 500,000 or up to 10 times the value of the unlawful earnings, or may even have their business licence suspended or revoked.
The PRC government has begun to gradually make progress towards addressing the importance and urgency of protecting personal information, and similar provisions should be expected in future laws and regulations. These regulations are essential for increasing trust and accountability in the broader retail market and, in the long run, are likely to help contribute to an increase in China’s consumption. However, the Draft Amendment would impose serious duties and responsibilities for companies operating in China that would require significant efforts and planning in order to avoid violations.