Ten China Commercial Highlights 2016 series:
Better business regulations, better consumption environment
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Fung Business Intel l igence Centre
Industry and Commerce (SAIC) handled 77,800 complaints
concerning online purchasing, up 356.6% year-on-year
(yoy). Moreover, of the total 20,135 complaints regarding
remote shopping handled by the China Consumers’
Association, 92.3% of cases were related to online
purchasing. According to data from the Supreme People’s
Court of China, consumer complaints about online
shopping filed with the People’s Court of Chaoyang District
in Beijing increased more than threefold since the
introduction of the new Consumer Protection Law in March
2014.
Online marketplaces become a breeding ground for shoddy and counterfeit products Along with the surge of consumer complaints over online
purchasing, issues regarding shoddy and counterfeit
products sold on online marketplaces are also among the
chief concerns. In 2014, the General Administration of
Quality Supervision, Inspection and Quarantine of China
(AQSIQ) carried out random quality inspections on 14
types of consumer products traded online. Almost a third
of these products failed the quality tests. A random
inspection conducted by SAIC in 2014 also found that over
40% of products sold online were counterfeit.
Clamping down on undesirable advertising activities with tougher advertising law False, misleading and deceptive advertising claims have
been rampant in China. Over recent years, the government
has stepped up efforts to better regulate the market. For
instance, the National People’s Congress passed
amendments to the Advertising Law of the People’s
Republic of China, with effect from 1 September, 2015. The
new Advertising Law clarifies what constitutes a
misleading advertisement. Advertisements that provide
incorrect information in relation to the performance,
function, origin, uses, quality, size, composition, prices,
manufacture and expiration dates of products will be
considered misleading. The use of superlatives including
“best”, “highest”, “national level” and other terms to tout
the quality of products are banned on all offline and online
advertising. The new law also imposes tougher
punishments and penalties, signifying the government’s
determination to combat false advertising that deceives
and misleads consumers.
Better business regulations, better consumption environment
With a growing capacity for innovation and
creativity, China’s commercial sector has
witnessed extraordinary progress over recent
years: it has become a major growth driver for the country’s
economic growth and domestic consumption.
Nevertheless, business malpractices remain a major
problem for the market. In particular, food safety and
product quality issues, concerns over online purchasing
and misleading and deceptive advertising have drawn
extensive attention. This has seriously affected consumer
confidence and undermined public trust.
Product quality ranks top among all consumer complaints According to the China Consumers’ Association, a total of
292,561 consumer complaints were received in 1H15, of
which 44.6% of cases were related to product quality
issues, while 20.5% concerned after-sales services and
13.7% focused on contracts. The cases concerning
product and service quality issues accounted for over 70%
of complaints, suggesting the quality of products and
fulfillment of service pledges are the chief concerns within
the consumer goods market. Meanwhile, an increasing
number of consumer complaints were related to expiration
dates on food items. Some food producers were reportedly
changing “best before” dates on food items so that these
could be sold after the original expiration dates.
Product quality44.6%
False advertising2.0%
Others 13.8%Counterfeits 0.9%
Safety 1.0%
Pricing 3.5%
Contracts 13.7%
After-sales services 20.5%
Source: China Consumers’ Association; compiled by Fung Business Intelligence Centre
Chart 1: Types of complaints received by China
Consumers’ Association, 1H15
Complaints against online purchasing on the rise With the growing popularity of e-commerce, complaints
against online purchases have increased sharply in China
over recent years. In 2014, China’s State Administration for
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Ten Highl ights of China’s Commercial Sector 2016
What the experts sayGreater integrity and self-discipline among market participants are key to the orderly and healthy development of the
commercial sector. For business operators, the new Advertising Law and Consumer Protection Law send out a clear message
that rather than exploit consumer rights they should enhance their core competences to promote the quality of their products
and services, and foster corporate social responsibility. As a case in point, Alibaba’s online shopping platform Tmall
introduced insurance to guarantee the authenticity and quality of its products on 10 November, 2015, a day before the start of
the annual Singles’ Day online shopping festival. Such a move enables consumers who receive counterfeit products to enjoy
unconditional returns and refunds, with compensation set at four times the price paid.
A sound legal and well regulated business environment are also imperative for the growth of the commercial sector. In recent
years, the government has been working closely with local industry associations to strengthen supervision and regulation of
the consumer goods market, especially the online shopping sector. Our experts welcome the government’s action and hope
that it will further step up its effort in this area.
Our experts also believe that a regulatory mechanism needs to be launched to blacklist enterprises that have been involved in
corporate misconduct. Business operators that are blacklisted would receive appropriate punishment, or in more serious
cases even be prohibited from operating their businesses. At the same time, an incentive system could be introduced to
reward exemplary performances by business operators.
Greater integrity and self-discipline among market participants are key to the orderly and healthy development of the commercial sector.
Chart 2: Key provisions of the new Advertising Law
Key provisions Details
Prohibition of false/
misleading advertising
• Advertisements failed to provide correct information pertaining to the performance, function,
origin, uses, quality, size, composition, prices, manufacture and expiration dates of products will
be considered false or misleading
Ban on the use of
superlatives
• The use of superlatives such as “best” and “highest” as well as reference to the State such as
“state-level” or use of the national flag are prohibited on offline and online advertising
Joint liability for false/
misleading advertising
• Advertising spokespersons, advertisers, advertising agents and publishers may be jointly liable
for false or misleading advertisements
• Advertising agents or publishers risk civil liability if they fail to provide true contact information for
the advertiser(s)
• Advertising spokespersons must have used the product or service themselves before making
endorsements
Restrictions on
advertisement
communication
• Prior consent is required for electronic direct marketing or advertisements sent to home
addresses
• An unsubscribing facility as well as true and correct identities and contact details must be
indicated in electronic advertisements
Tougher controls on
advertisements for
specific products
Source: www.gov.cn; compiled by Fung Business Intelligence Centre
• Medical treatment, pharmaceutical and
medical devices
• Healthcare products
• Infant food
• Agricultural pesticides, veterinary medicines,
fodder and feed additives
• Seeds, planting and breeding
• Tobacco
• Alcoholic beverages
• Education and training
• Products or services with an expected
investment return
• Real estate
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Fung Business Intelligence Centre, Member of the Fung Group
Authors
Teresa Lam and Lucia Leung (Asia Distribution and Retail, Fung Business Intelligence Centre)
Contributors
Christy Li and Tracy Chan (Asia Distribution and Retail, Fung Business Intelligence Centre)
Administrator
Yu Di (Secretariat of the Expert Committee of the China General Chamber of Commerce)
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