During the past decade, the rapid advancements in technology have changed the way people purchase goods and interact with the marketing of products and services. Taken into consideration the demands to protect consumers’ rights and interests more effectively, the municipal government of Shanghai recently updated an important set of regulations.
Last July, Shanghai’s Congress made the latest revisions to the “Regulations of Shanghai Municipality on the Protection of Consumers’ Rights and Interests” (Revisions). This is the second amendment of the Regulations since its implementation in 2003.
The Revisions, which came into effect in August, add new provisions to protect consumers’ rights and interests according to current and new consumption patterns, and they enhance compliance in emerging consumer areas.
The document emphasizes the regulation of implicit marketing methods.
According to the Revisions, if an operator sells goods and services through Internet media in the form of advertisements such as bidding rankings, it shall prominently mark “advertisement” according to the law. This provision seeks to protect consumer’s rights to know and shield them from misleading information.
Test and assessment sites, as well as bloggers, may advertise under the guise of sharing and testing. Though the “advertisement” label is marked in some search engines, sometimes the font size is so small that consumers have a hard time recognizing it and can be deceived if they don’t pay attention.
These situations will be regulated by the Revisions. However, the penalties for operators suspected of committing the above-mentioned acts remain to be clarified.
The Regulations establish rules for when an operator provides goods or services to consumers by random selection: the operator shall prominently publicize the selection rules, distribution of goods or services, the quantity of goods and services offered, selection probability and other key information in accordance with the relevant regulation.
According to the document, violation may carry a fine of less than RMB30,000 or in serious cases, a fine of more than RMB30,000 and less than RMB100,000 by the relevant administrative management departments.
The goods and services offered by the operator must be consistent with the publicized information and the operator shall not tamper with the selection probability or change the selection results.
Penalties in this case include the issuance of a warning, confiscation of the illegal gains, imposition of a fine of between one and ten times the amount of the illegal gains, being ordered to cease business operation for rectification and have its business license revoked by the relevant administrative authorities.
The Revisions clarify that financial service operators shall mark and explain important information such as interest rates, fees, benefits, and risks in a manner enough to attract consumers’ attention and confirm that consumers have received complete information in an appropriate way.
Currently, electronic financial transactions are becoming more popular. While the paperless contracting process brings convenience to consumers, it also hides the risks of information asymmetry and negligence.
The Revisions strengthen financial operators’ disclosure obligations and require operators to bear the burden of proof that consumers have confirmed receipt of complete information.
Another important aspect of the Regulations is the protection of minors in online gaming. The document stipulates that online game operators should fulfill their obligations to protect minors, and comply with the requirements of laws on time, duration, consumption restrictions, content, etc.
Online game operators must use electronic identity authentication or other technologies to require minors to use their real identity information to register and log in to the online game, according to the Regulations.
In practice, it is easy for juveniles to register online game accounts without parental consent, using their parents ID numbers. Sometimes parents have no idea or find out too late to withdraw the kids’ consumption expenditures.
Livestreaming marketing platforms and livestreaming room operators have the obligation to protect the rights and interests of consumers. The Regulations state that a livestreaming marketing platform shall carry out identity authentication on room operators and marketers.
The platform shall assist consumers to safeguard their legitimate rights and interests, and provide the relevant records and other necessary information, otherwise it will be ordered to rectify the situation within a time limit, imposed a fine, or ordered to cease business operation.
A livestreaming room operator shall indicate the actual operator of the goods or services behind the links and QR codes. If a consumer’s legitimate rights and interests are affected due to the links or QR codes, the livestreaming room operator who fails to indicate the actual operator shall bear the corresponding responsibility.
If the livestreaming marketing platform fails to provide necessary data, a maximum fine of RMB500,000 could be imposed. However, whether the livestreaming operator should bear the same obligation to provide information and ensure data safety is not stipulated, leaving the relevant departments to further revise the specific laws and regulations for the operators.
The Revisions clarify, operators who use consumers’ personal information to make automated decision-making shall ensure the transparency of the process and the fairness and impartiality of the results and shall not impose unreasonable differential treatment on consumers in terms of transaction prices and other transaction conditions.
Previously, network operators have been criticized for different price treatment of users of different application systems, or that old users of the platform cannot enjoy the same treatment as new members. The price discrimination and differential treatment have caused numerous complaints from consumers.
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.