The European Chamber is planning to create a new industry desk focussed on advocating for the fashion and leather industry. Recent advocacy efforts taken on behalf of member companies in this sector have been a great success, and the Chamber is looking to build on this momentum, further improve operating conditions and level the playing field that little bit more.

A number of Chamber members in the fashion and leather industry have for some time been facing problems with professional whistle-blowers – consumers that knowingly purchase products that are non-compliant in order to exploit the Consumer Protection Law (CPL) to claim punitive compensation. Article 55 of the CPL stipulates that compensation in these cases can be up to three times the cost of the goods. Enforced at the district level by the local Administration of Industry and Commerce (AIC), this legal technicality has been costing European companies millions of RMB in fines.

It would be one thing if the products being exploited in such a way were damaged and/or potentially harmful to consumers, but unscrupulous whistle-blowers have been cashing in on the CPL by looking for products whose ingredients/components or labelling do not fully comply with domestic Chinese standards. Although the authorities are aware of the situation with professional whistle-blowers, local AICs are impelled to make administrative decisions that are based on the letter of the law. With Chinese courts then making rulings without distinguishing between genuine consumers and professional whistle-blowers—and seemingly not taking companies’ interests into consideration—this is a situation that has the potential to continue to severely damage European companies’ interests in China.

The luxury goods sector is particularly hard hit, with their high-value products being targeted in particular, and frequent discrepancies between the standards in the country of origin and those in China.

In an attempt to resolve this problem, the Chamber met with the Beijing AIC on 8^th April, 2016. Outlining the issue from their perspective, AIC officials explained that dealing with whistle-blower complaints had placed an immense administrative burden on them, particularly in recent years as their numbers increased. As a body that exists to protect both consumers and industry, the AIC stated that they are duty-bound to remain impartial when receiving complaints, regardless of whether the complainant is legitimate or otherwise: the only action they can take is to follow the CPL.

Although recognising that the Beijing AIC is primarily an administrative body that implements policies, the Chamber suggested setting an appropriate scale for dealing with different types of complaints, particularly when dealing with complaints against products that pose no safety risk and where it is clear that producers have not deliberately contravened Chinese standards. With respect to their concern for industry, AIC officials said that they would look into the possibility of investigating cases to ascertain whether companies had actually fulfilled consumer protection duties, before meting out appropriate resolution measures.

Sometime later, a Chamber member company was following up with a local AIC on a whistle-blower issue, as they were facing fines due to a discrepancy with the product’s labelling. Later on, the local AIC discussed the case with an official who had been present in the 8^th April meeting between the Chamber and the Beijing AIC. The official confirmed that they had met the company in question during the meeting, and suggested there should be alternative solutions to deal with such non-serious cases. As a result, the local AIC resolved the issue by agreeing to rescind the fine, and provided some administrative instruction to the company instead. In addition, they assisted the company and the whistle-blower to resolve the case together. 

The Chamber appreciates the efforts taken by the Beijing AIC, and looks forward to continuing to cooperate with them in the future.

If you are interested in becoming a member of the Europeans Chamber’s Fashion and Leather Industry Desk, please contact Cocoa Liu at cliu@europeanchamber.com.cn or on (010) 6462 2066 ext. 86.