Consumers, the ultimate buyers and users of products and services, make purchase decisions based on whatever information is available. If manufacturers, wholesalers, or retailers commit fraud or misrepresentation, consumers will not be able to make rational choices, which will affect the normal functioning of market forces. Similarly, if unscrupulous manufacturers distribute defective or unsafe products, consumers may sustain financial losses and/or physical injuries a result of using such products. Hence, consumer protection is of paramount importance in market-driven economies.
To protect Chinese consumers and to ensure the normal functioning of market forces, China has enacted various statutes to shield consumers from dishonest and unscrupulous business practices. With China's accession to the WTO, an increasing number of products and services will be at the disposal of Chinese consumers, who, in turn, will be exposed to more financial and health risks. To safeguard product quality, China has recently implemented a compulsory system of certification for such types of products as home appliances, automobiles, and medical equipment, and local AICs periodically conduct random inspection of products. To facilitate the reporting of violation of consumer rights, the State Administration for Industry and Commerce has set up the hotline 12315 for consumers to file complaints nationwide. Considering the importance of consumer protection, this chapter aims to provide a basic legal framework of product liability, advertising, direct/pyramid selling, and Internet sales in China.
In China, a number of statutes contain provisions on product liability. For instance, article 122 of the General Principles of Civil Law provides that if a substandard-quality product causes property damage or physical injury to a person, the manufacturer or seller will be civilly liable, but that if a carrier or warehouse operator causes the defect, the manufacturer or seller may seek indemnification. The two major laws on product liability are the Product Quality Law 1 and the Law on the Protection of the Rights and