product Woes

By Zhou Xiaoyan

Consumers have little in the way of recourse when their rights are violated. What needs to be done?

CRACKDOWN ON SUBSTANDARD PRODUCTS: Police in Jingdezhen, Jiangxi Province, put substandard milk powder on display in August 2012. Local police there held major crackdowns on gutter oil,substandard milk powder and illegally used food additives

The direct shift gearbox (DSG) transmission technology and its smooth shifting between gears has long been a bragging point for Volkswagon.

What Volkswagen didn’t anticipate in its highly touted technology was a defect, one that could be fatal.

A Shanghai native surnamed Li said he will never forget the day when his Volkswagen Octavia lost control.

“I bought the car in May 2011,” Li told a China Central Television (CCTV) investigative program. “One time, I was driving at 80 km per hour when I stepped on the accelerator to surpass the car ahead of me. The car suddenly lost engine power and slowed down. It scared the hell out of me. Luckily, there was no accident.”

The CCTV program, which falls on March 15 each year in conjunction with World Consumer Rights Day, exposed malfunctions of the DSG transmission in some Volkswagen models that could cause sudden loss or gain of engine power, posing a great safety hazard.

Li is just one of the many Chinese consumers who have encountered the defect. In June 2010, some car owners set up several live chat rooms online to share their experiences and come together to fight for their rights against the company. Within two years, there were thousands of people in the groups.

At the beginning of 2012, Volkswagen offered a free software upgrade to cars equipped with its DSG system. But car owners soon learned the defect remained even after the upgrade. Last May, the company extended its DSG quality guarantee period in China to 10 years.

Still, consumers are not happy. Defects do not always unearth themselves during inspection, and there’s no way to guarantee the defect won’t wreck havoc again once the problem has been purportedly fixed.

After the CCTV exposure, Volkswagen said it would recall a total of 384,181 DSG-equipped cars in China.

Another exposed carmaker was JAC Motors,one of China’s largest domestic automakers.CCTV reported that many drivers have been complaining about rust problems with the company’s Turin car model.

JAC Motors announced it will recall 117,072 units of its Turin model over the concerns. The Anhui-based automaker says it will repair those vehicles with rust problems for free and improve the coating of the metal plates for those that have not rusted.

Other exposed corporate malpractices in the CCTV program included the leaking and selling of personal information by companies,Apple Inc.’s post-sales policies in China, an advertisement plug-in secretly installed by Internet access providers and false drug advertisements.

Chinese have become more aware of protecting their rights as consumers, as indicated by the number of growing consumer complaints each year.

China Consumers’ Association (CCA), a nationwide organization that gathers consumer complaints and works to protect consumer rights, has received 543,338 complaints in 2012, ranging from quality and price issues to contracts and safety. No industry, it appears,was spared of complaints, including financial services, automotive and food. Among the total,505,304 were addressed. Complaints on the quality of products accounted for 51.6 percent of all complaints, according to the CCA.

(Source: China Consumers’ Association)

More supervision from the government is called for to improve the less-than-satisfying consumer environment, including increasing compensation levels and introducing class-action lawsuits into the legal system, says experts.

Beefing up supervision

While consumers need to take action and remain vigilant, the government should do more to protect consumer rights, says experts.

Food safety is a major concern for the country, with regular news reports of scandals, such as tainted milk, gutter oil used to cook foods, toxic capsules, exploding watermelons and the illegal use of banned additives and antibiotics.

Oversight in the food sector has long been criticized for being too scattered, too overlapped and too riddled with finger pointing.

For instance, from the time a chicken is raised on a farm to the time it reaches a dinner table, no less than five government departments are involved in the process, including the Ministry of Agriculture (MOA), the Ministry of Transport, the Ministry of Commerce, the Ministry of Health and the State Food and Drug Administration (SFDA).

A CCTV investigative report found that several Shandong-based farms fed excessive amounts of growth-boosting drugs to their chickens, but no ministry at the time stepped up to tackle the issue.

The SFDA said that an excessive use of antibiotics is a matter for the MOA. The MOA,on the other hand, claims that its responsibility lies only in the production process, and said the onus is on other ministries to deal with traces of antibiotics.

Analysts say it is imperative that the responsibilities of each department are clearly de fined when it comes to ensuring food safety.

In response, China has decided to elevate the role of the SFDA. The proposed ministry-level General Administration of Food and Drug will be responsible for unified supervision on food and drug safety and quality during production, circulation and consumption. It will combine the functions of the existing State Council’s Food Safety Office, the SFDA as well as the food supervision duties from the General Administration of Quality Supervision, Inspection and Quarantine and the State Administration for Industry and Commerce.

Another move is offering financial awards to citizens who inform the government of the malpractices of food companies. The State Council’s Food Safety Commission established a system that earmarks financial rewards to whistle blowers, and last year 141,037 complaints on food safety were received. A total of 6,922 whistle blowers were financially rewarded, and the highest reward was 200,000 yuan ($32,200),according to the commission.

“As the next step, we will improve the incentive system, better protect whistle blowers and implement a national hotline,” said Wang Xiaoyan, director of the coordination and guidance office under the commission.

A better legal system

Some consumers file lawsuits to protect their rights against less than savory products, but high costs deter many from taking legal action.

“Right now, the CCA receives about 500,000 cases every year, but that number can hardly compare to the total number of consumers whose rights have been infringed upon,” says Qiu Jianguo, director of the complaints department at the CCA. “Statistics show that only 1 out of 20 people will file a complaint to the CCA or file a lawsuit when their rights are infringed upon. Why so? It’s because of the high financial costs.”

Some consumers spend years pursuing legal action. Even if they win in the end, the whole process was likely costly, and some have even lost their jobs for devoting so much time to their cases, Qiu says.

In sharp contrast with the hefty cost of legal action, compensation levels are too low.According to the CCA, almost 568.43 million yuan ($91.52 million) in losses was recovered last year. The average consumer compensation was about 1,125 yuan ($181).

Raising punitive compensation in China’s legal system has been in demand for years.

“Consumers suffer from high costs when fighting for their rights and compensation levels should be enhanced to better protect them.According to China’s Law on the Protection of Consumer Rights and Interests, consumers can only get double the original price of the product or service,” says Chen Shu, an NPC deputy and Honorary President of the Guangzhou Lawyers’Association. “Compensation is too low. That’s why most companies don’t take the regulation seriously.”

Zhang Luming, Director of the Publicity Department of the Anhui Consumers’ Association,echoed Chen’s view, adding that a minimum compensation standard should be set.

“Doubling the original price as compensation is far from enough to meet people’s expectations. For instance, if a bag of milk is 2 yuan ($0.32), consumers can get 4 yuan ($0.64)for punitive compensation at most. That’s way too little. So there should be a minimum punitive penalty,” said Zhang.

Consumers in China are also without the option of a class-action lawsuit, a practice common in the United States and other nations.“In the United States, class-action lawsuits can result in damage compensation and punitive compensation, which are often of large sums of money. This can pose a big deterrent for lawbreaking companies.” notes a report in the 21st Century Business Herald.

Countless cases show that when confronted with large companies, Chinese consumers are often left to their own devices, which is too time-consuming, daunting and costly.

The lack of a class-action lawsuit system will lead companies to ignore consumer rights,Wang Zongyu, an associate professor in economic law at Renmin University of China told Beijing Review.

Wang said that although China’s legal system has terms similar to a class-action lawsuit,the courts are unlikely to support them in practice for fear that the number of cases could spiral out of control.

“China should learn from the United States and introduce a class-action lawsuit system so as to better protect consumers. The system will enable consumers, who are usually in a weak position, to fight against powerful companies,especially mega-sized multinationals.” ■