E-commerce Platform Operators’ Liabilities in China on Food Safety: SPC Interpretation

On October 19, 2020, with the purpose of correctly hearing civil disputes related to food safety, and protecting the health and safety of the public, the 1813^th meeting of the Judicial Committee of the Supreme People’s Court (“SPC”) discussed and passed the Interpretation on Several Issues Concerning the Application of Laws in the Trial of Civil Cases Involving Disputes over Food Safety (“Interpretation”) that will be implemented on January 1, 2021.

The Interpretation is made of 14 articles where the SPC mainly indicates who is deemed to be legally responsible for food safety violations, clarifies some aspects concerning the assumption of liability for compensation, and provides more details on the relevant litigation procedures.

More specifically, by means of the Interpretation, the SPC explains when the Chinese courts shall support consumers’ claims related to food safety and clarifies that not only should food producers and business operators be held legally responsible for food safety, but e-commerce operators shall also be held liable for food safety issues related to products purchased on their platforms.

Furthermore, the SPC provides guidelines regarding the responsibilities of imported food business operators as well as compensation and punitive damages to be paid to consumers in case of food safety-related violations.

Main provisions of the SPC Interpretation

1. Responsible subjects and consumer rights protection

The Interpretation indicates the cases under which food producers, traders, e-commerce operators, public transportation carriers, and any other entity or individual who provide sub-standard food, are to be deemed legally responsible for the damages caused to the consumers, and remarks that the courts will have to support consumers’ claims.

The Interpretation, to protect the consumers’ rights and guarantee a prompt judicial response against any violation related to food safety, states that consumers who suffer damages from the sub-standard food have the right to sue, both, the food-producer and the business operator, in claiming for compensation.

By means of this provision, the SPC remarks on what is stated by the Food Safety Law – specifying that where the producer paid the amount due to the consumer for the damages suffered when the business operator is the one liable for the said damages, the producer shall have the right to recover from the business operator the amount paid to the consumer and vice-versa.

The value added by the SPC is that it clarifies that when dealing with these types of cases, the courts shall accept the claim for compensation and dismiss any request raised either by the producer or the business operator on the ground that they were not responsible for the damage caused to the consumer, thus, slowing down the process and preventing the consumer from getting the due compensation.

Thanks to this clarification, the SPC highlights that lower courts should accept the consumer’s claim leaving the matter of ascertaining the responsible subject (either the business operator or the producer) at another step of the litigation process. In this way, consumers’ rights and interests are protected and satisfied.

In addition, with specific reference to the sub-standard food provided by a carrier to a passenger, the SPC also clarifies that the first is responsible for any damage caused to the latter, regardless of the fact that the food was given for free.

With such provision, the SPC intends to address the importance of guaranteeing the health of the consumers and ensure that they receive the due compensation. Hence the courts will have to dismiss arguments related to the price of the food that will lead only to procrastination in granting the amount due to the consumer.

2. E-commerce operators’ liability

Considering the significant increase in trials of civil cases related to food purchased online, the SPC intervened to clarify that e-commerce operators shall be deemed liable for the food products sold on their platforms and that they will be required to comply with specific obligations to guarantee the safety of such products.

More specifically, the e-commerce operators will have to:

• Ensure that vendors provide their authentic name and contact information when registering on the platform;
• Review vendors’ business licenses; and
• Notify and stop providing services on online trading platforms when this may lead to the infringement of the consumers’ legitimate rights.

If platform operators fail to comply with the above-mentioned obligations and consumers suffer damages due to the operators’ failure, then the operator of the e-commerce platform will be deemed jointly and severally responsible for the damages caused, together with the food operators on the platform.

In addition, the SPC makes a distinction between the platform operators who provide platform services to others and those who run a self-operated business. In this regard, the SPC explains that when the platform operator provides services to others that sell their products on the platform but affix its own logo on the products, it shall be considered as a food operator running a self-operated business.

The reason behind this is that the logo is deemed to be sufficient to mislead consumers and induce them to believe that the product belongs to a business directly operated by the e-commerce platform operator. Hence, when the food product sold on the platform does not meet the safety standards, the consumer will have the right to sue the platform operator as a food operator and claim compensation.

3. Punitive damages

With reference to punitive damages, it is worth noting that the Food Safety Law – which is expressively recalled by the Interpretation – states that, in addition to claiming damages, a consumer may require a food producer failing to meet the food safety standards, or a trader knowingly dealing with sub-standard food, to pay an indemnity of 10 times the price paid or three times the loss.

In this regard, the Interpretation underlines that consumers may claim punitive damages in the following cases:

• When the producer or operator against whom the claim is raised, is deemed to commit fraud by manufacturing and dealing of sub-standard food;
• When the food sold does not meet the safety standards – in this case, the court shall dismiss any rebuttal raised by the producer or operator based on the ground that “no personal injury was inflicted on the consumer”;
• When pre-packaged foods do not indicate the name, address, ingredients, or do not clearly indicate the date of production and shelf life, unless the food safety law and other applicable regulation provide otherwise – in such cases, both, producers and operators shall be deemed as responsible for punitive compensation. With specific reference to when the pre-packaged food does not indicate the name and address of the producer, the joint responsibility of producers and operators is provided with the purpose of tackling the problem of “black workshops”. Indeed, the aim is to interrupt the “black workshop” food business chain by stating the operators’ liability for compensation, thus discouraging them from engaging in such illegal activities.

In addition, based on the most common cases in the judicial practice, the Interpretation clarifies that in the following cases the food operator shall be deemed as knowingly selling, or offering for sale, sub-standard food:

• The food has passed the shelf life indicated on the food but is still sold;
• Failure to produce a legitimate source of the food being sold;
• Sale at an unreasonably low price;
• Failure to perform inspection obligations;
• False labeling or alteration of production date and batch number;
• Conceal or illegally destroy sales records or deliberately provide false information; and/or
• Other circumstances.

Thus, as mentioned above, in the said cases, the consumers are entitled not only to ask for compensation for losses but also for punitive compensation.

Interestingly, the SPC also underlines that when a business operator promises to a consumer compensation that is higher than the amount provided under the law, then the operator will have to pay the promised amount. The purpose of this provision is therefore to strengthen the sense of honesty of operators and prevent them from making random promises that interfere with consumers’ consumption choices.

4. Responsibilities of imported food business operators

The SPC also clarifies the responsibilities of imported food business operators specifying that to avoid legal liabilities, it is not sufficient for food producers and operators who import food into China to argue that the imported food meets the food safety standards of the exporting country or passed the entry-exit inspection and quarantine.

Therefore, pursuant to the Interpretation, sellers, importers, or other operators shall be liable for compensation by virtue of the Food Safety Law, if the imported food does not meet the national food safety standards of the exporting country or does not meet the safety standards that the health administrative department of the State Council decides to temporarily apply.

What is the impact of the Interpretation?

The SPC judicial interpretations have the purpose of guiding China lower’s courts in applying specific laws, therefore, the provisions contained under the Interpretation will be used by Chinese courts in dealing with cases related to food safety.

The Interpretation clarifies when the courts shall support consumers’ claims not only against food producers and traders but also against e-commerce platforms operators.

The reason behind this is that, especially during the COVID-19 pandemic, food deliveries and other online activities intensified, therefore, the safety of the food must be guaranteed also when this is bought online.

The necessity to clearly state the legal responsibility of e-commerce operators with reference to the food sold on their platform is confirmed by a report issued by the Information Technology Service Centre, (which is affiliated to China’s SPC), where is it written that, from 2017 to the first half of 2020, 45 percent of the 49,000 e-commerce disputes handled by Chinese courts were related to food products.

In addition, the volume of online businesses related to food is expected to increase even more in the near future. Indeed, considering the continuously growing demand for food products, some e-commerce giants, like Meituan, have decided to improve their logistics infrastructure to offer to consumers, both, pre-packaged products and fresh groceries.

Hence, from the beginning of 2021, we expect to see an intensified monitoring of e-commerce operators’ behavior (and punishments in case of violations of the applicable laws) by the competent authorities as it is evident that the digital market is becoming more and more important for the Chinese economy, raising new potential risks for consumers’ rights and interests.

In this context, the SPC Interpretation will function as a guideline to ensure the correct application of the laws regulating food safety issues, thus leading to uniform decisions by the courts in matters of e-commerce operators’ liabilities and, hopefully, to ensure increased protection of consumers on, both, online and offline markets.

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