Chinese public wait for consumer protection to catch up with e-commerce

False advertising, unlicensed workers and non-refundable advance payments are rife. Digital economy accounts for growing share of GDP but the law has not been updated at the same pace. — SCMP

Ma Yuting has been in a tussle with an education company for three months. She prepaid more than 15,000 yuan (US$2,300 or RM9,462) in 2019 for her then eight-year-old daughter to have 360 sessions online to practise English with teachers in the Philippines. But at the end of last year, with half of the classes still to come, the company’s Beijing office was shut down and its service hotline disconnected.

“I contacted the salesperson,” Ma said. “At the beginning, she explained that the business was hit by Covid-19, with many teachers in the Philippines unable to work in lockdown, and asked me to be patient. Then later calls went unanswered.

“I found the company’s address on its website and went to its office. It was empty and the office building manager told me they had moved out quietly without paying their rent. My heart sank.”

Ma was one of the consumers who found they were poorly protected when millions of small companies in China collapsed during the country’s initial coronavirus outbreak last year. Those who had paid for online services were left particularly exposed.

Since then, Ma has been busy calling the market regulator, the local consumer rights protection association and the police.

“All the efforts to get my money back failed because I don’t have a contract – the only contract I was provided with was an e-contract on the company’s website, which I did not download,” she said. “The website does not exist any more.

“The Internet has made it so easy to offer deals and take payments. It’s all to companies’ benefit. Consumers are weaker.”

Xue Jun, a law professor at Peking University, said regulators should set up a database for customers to check teachers’ qualifications, and introduce a third-party means of taking payments.

“Chinese parents put great emphasis on their children’s education,” Xue said. “They live frugally to fund it. The collapse of education companies is likely to cause unrest.”

Beijing attaches great importance to consumption to drive growth. But consumer protection has not matched the country’s rapid economic advance, despite the 2013 revision of its 1994 Consumer Protection Law, and passing 2018’s Electronic Commerce Law, said Janet Hui Xue, a researcher with Oxford University’s Consumer Rights Beyond Boundaries programme.

“China has shown remarkable improvement [in consumer rights protection] over the past decade,” she said. “However, successful law enforcement in day-to-day business requires a robust support system which is absent in Chinese e-commerce – for example, sector-focused operational guidelines.”

In a recent survey of more than 12,000 people by the China Consumers Association, a governmental organisation, 70 per cent of respondents said they spent more money online than offline last year, a trend no doubt accelerated by Covid-19 social distancing measures.

Nearly half the respondents said they had a dispute with a goods or service provider last year, and 38% of those were dissatisfied with the outcome after lodging a complaint.

Consumer rights protection in mainland China used to be uniformly poor as the country largely tolerated counterfeit and substandard goods during its economic catch-up of past decades.

Legal protection has begun to improve, and China has even broadcast an annual gala since 1991 to mark World Consumer Rights Day on March 15. But there have continued to be product safety scandals, from tainted milk powder that sickened thousands of babies in 2008 to multiple fraudulent vaccine scandals in 2016 and 2018.

If those scandals shed light on flawed regulatory oversight and collusion between businesspeople and officials, the rise of online consumption has brought yet more challenges.

China’s digital economy grew at three times the rate traditional manufacturing did in 2019, according to official data, and accounted for over a third of its GDP. By 2027, a third is expected to become half.

In sectors such as online education, practices including false advertising, unlicensed staff and collecting non-refundable advance payments are rampant.

“While old problems like businessmen’s low integrity and insufficient industry supervision are still prominent, consumer rights infringement happens even more frequently [in the internet era],” Wang Yuying, a judge with the Supreme People’s Court, wrote in the court’s newspaper last year.

“Law revision and legal explanation have not followed the new developments, making it difficult for us to handle consumer rights cases.” – South China Morning Post

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