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Provisions on price marking and price fraud offer legal basis for fair market competition

With the objective of building a unified domestic market with a more efficient and fair competition, the Chinese State Administration for Market Regulation promulgated the Provisions on Clear Price Marking and Prohibition of Price Fraud ("Provisions"), which took effect July 1, 2022. This document further clarifies the rules on pricing and fraud, and it states the legal penalties for price violations.


The Provisions replace both the Regulations on Clear Marking of the Prices of Goods and Services and the Regulations on Prevention of Price Fraud.


The newly promulgated document states that the term “Clear Price Marking” refers to the act of a business operator of publicly marking the prices and other information according to Chinese law when selling or purchasing goods or providing services.


The term “Price Fraud” means the act of a business seducing consumers or other trading parties to conduct deals by using false or misleading price methods.


According to Article 4, the provider of a trading venue such as a store, shopping mall, market, or an online trading platform operator (hereinafter referred to as the “trading venue provider”) shall legally cooperate with the market regulatory department in conducting price supervision and administration over the businesses within the venue (on the platform).

Where a trading venue provider discovers that a business within the venue (on the platform) commits any violation of these Provisions, it shall take necessary measures in accordance with the law, keep the relevant information records, and assume the corresponding obligations and responsibilities.


The Provisions present a list of significant regulations on Clear Price Marking and prohibition of Price Fraud, such as the pricing principles to be followed by a business operator when selling goods or providing services.


Based on the characteristics of the goods or services, industries and regions, Clear Price Marking should be authentic and accurate, the labels of goods should be in place, and the marks should be significantly noticeable.


Another rule states that business operators shall mark prices in a significantly noticeable manner and clearly mark the corresponding goods or services. The marked price shall be adjusted in a timely manner, if there are any changes.


In case of selling goods, businesses shall state the name, price, and measurement unit of the goods. If different prices are adopted for the same brand or type of goods due to different characteristics such as color, shape, size, place of origin and grade, operators shall mark the names of the goods separately for these different prices.

A business providing services shall indicate the service items, service contents and prices or pricing methods.


A business may, considering actual operating conditions, indicate other information relating to prices, such as quality, service standards, and settlement methods.

The market regulatory department at or above the level of a districted city may add the contents that shall be indicated for specific goods and services as required for the clear marking of prices.

A business shall not sell goods or provide services at prices higher than the marked prices or charge fees that are not marked.

  

When selling goods and at the same time providing relevant supporting services, including, among others, distribution, moving, installation, or commissioning (collectively, “Supporting Services”), business operators shall publicly state the prices of the Supporting Services if they are not included. In case these services are not provided by the business which sells the products, a mark or statement shall be made in a significantly noticeable manner.


Business operators may publicly mark the prices in the form of price tags (including electronic price tags), price plates, price lists (booklets), display boards, electronic screens, display of goods or models, display of pictures or in any other effective form, unless otherwise indicated by law.

A business which provides online services or sales shall publicly mark the prices in the form of text or images, etc. on the webpages.


According to the Provisions, if a business makes a price comparison when selling products or providing services, the information on the price which is used as the compared price shall be authentic and accurate.


The marked price may not be significantly increased without reason on a temporary basis in order to use it as the calculation benchmark for purpose of discount or reduction in price.


Article 19 stipulates that business operators shall be prohibited from conducting price fraud activities, such as falsely claiming that the price of goods or services was determined by the State or set according to the guidance of the State; seducing consumers or other businesses with low prices but settling with high prices; or selling goods or services through false discounts and price reductions.


Selling goods or providing services by using deceptive or misleading language, text, figures, images, or videos to indicate prices and other price-related information is also prohibited, as well as refusing to implement price commitments in total or in part without justifiable reasons.


The Provisions establish a series of legal consequences for the violation of the rules on price marking and price fraud. Businesses responsible of such acts shall be subject to the supervision, investigation and/or punishments by the competent market supervision authority.


Depending on the situation, in case of violations of the rules, the Price Law, the Anti-Unfair Competition Law, the E-Commerce Law, and/or the Provisions on Administrative Sanctions Against Price-related Illegal Activities shall be applied.


If the act of a Provider of Trading Venues is in violation of the Provisions, unless otherwise stipulated under the law, the competent market supervision authority may impose a fine of up to RMB 30,000; or a fine of between RMB 30,000 up to RMB 100,000, depending on the severity of the circumstances.


The markets in China are growing and changing fast. The Provisions were developed in accordance with the price law to provide a legal basis to prevent fraud, maintain the market price order, and protect the lawful rights and interests of consumers and businesses.


To learn more about our services in China, contact our Head of Business Advisory - Ms. Kristina Koehler-Coluccia at kristina@woodburnglobal.com.



DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.

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