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A Comparative Analysis of Policing Consumer Contracts in China and the EU

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Abstract

Since 2013, the famous Dutch dairy brand Nutrilon has used an online shop on the digital marketplace Tmall, which is a part of the e-commerce giant Alibaba, to retail its dairy products to Chinese consumers. Due to the good reputation of Dutch dairy products, Nutrilon outsells many indigenous producers in China and makes up a sizeable share of the market. As more and more commodities are put on shelve for selling, Chinese consumers will obtain a more direct way to purchase dairy products from Dutch producers.

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Notes

  1. 1.

    The website of this online store is available at: <https://nutrilon.tmall.com/index.htm?spm=a1z10.3-b-s.w5001-14968957225.2.113b1853HImpV4&scene=taobao_shop>, last visited: 2018/7/15. Nutrilon also operates an online store on another big digital marketplace Jingdong, the website of which is available at: <https://mall.jd.com/index-1000002688.html>, last visited: 2018/7/15.

  2. 2.

    After the ‘2008 milk scandal’, Chinese consumers do not tend to trust the local dairy producers. Consumer confidence decreased significantly. See, for example, Liu, Ye and Yuan (刘建丽、叶树光、原磊), 2010. If affordable, foreign dairy products are much preferable to domestic ones. In terms of ‘2008 Chinese milk scandal’, see Wikipedia, ‘2008 Chinese milk scandal’, available at: <https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal>, last visited: 2015/9/21.

  3. 3.

    See China Industries Information (中国产业信息网), ‘Statistics of Alibaba: Dairy Products Sales Volume 2017’ (《2017年全年奶粉母婴在阿里系电商上的销售情况统计》), available at: <http://www.chyxx.com/industry/201803/619274.html>, last visited: 2018/7/15.

  4. 4.

    Owing to the character of ‘internationalisation’, the behaviour of consumers in one country may have a profound influence on the producer or seller in another country. It becomes even possible that consumers can help with reducing instances of labour exploitation in the global supply chain. For further information, see Kawakami 2017.

  5. 5.

    See Durovic and Micklitz 2017, pp. 1–2.

  6. 6.

    For example, it may be explained from a cultural perspective: people in the West usually ‘championed a dominion of things that privileged private pleasure and comfort’ and ‘invested in being a master over things, rather than over other people’, while in China, consumption not only satisfies people’s daily use but has a much closer link with the possessor’s social identity and network. See Trentmann 2016, p. 399.

  7. 7.

    According to Mankiw, ‘a market’ refers to ‘a group of buyers and sellers of a particular good or service’. See Mankiw 2014, p. 66. Some scholars suggest that law may not matter for economic growth and market development. But these comments to a large extent are based on the idea of ‘law-then-growth’. It should be noticed that for young markets it could be a ‘crash-then-law’ mode which shows that the legal change will always follow the economic crashes or problems. See Chen 2003, p. 471.

  8. 8.

    This is in particular the case in some jurisdictions. For example, since EU consumer law exists to a large extent for the purpose of promoting the establishment of the internal market (for details, see Sect. 2.3.4, Chap. 2 of this study), it is even much more market biased than national contract law. See Micklitz 2005, p. 553.

  9. 9.

    For a good example that discusses the correlation and interplay between the market and its consumers, see Reisch and Micklitz 2006.

  10. 10.

    For example, some markets are more organised and some are less. See Mankiw 2014, p. 66.

  11. 11.

    See Gao (高鸿业) 2014, pp. 154–155.

  12. 12.

    See Gao (高鸿业) 2014, p. 154.

  13. 13.

    See Mankiw 2014, p. 280.

  14. 14.

    See Gao (高鸿业) 2014, p. 186.

  15. 15.

    See Gao (高鸿业) 2014, p. 187.

  16. 16.

    See Gao (高鸿业) 2014, p. 195.

  17. 17.

    See Mankiw 2014, p. 66.

  18. 18.

    ‘Public utilities’ are usually seen as a form of ‘natural monopoly’, which refers to ‘a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms’. Mankiw 2014, p. 302

  19. 19.

    See Koske et al. 2015, p. 7.

  20. 20.

    This can be observed from the methodology adopted by the OECD. For example, ‘The coded information is normalised over a 0 to 6 scale, where a lower value reflects a more competition-friendly regulatory stance’. See Koske et al. 2015, pp. 7–8.

  21. 21.

    See Koske et al. 2015, p. 9.

  22. 22.

    See Koske et al. 2015, pp. 9–10. For the whole methodology of the PMR, see Koske et al. 2015, pp. 7–15.

  23. 23.

    For example, based on the PMR indicator, it is pointed out that product market regulations are significantly more competition-friendly than in the average OECD country in the Netherlands and the United Kingdom, while in Poland, Greece, Korea, Mexico, Israel and Turkey, they are significantly less competition-friendly than in the average OECD country. See Koske et al. 2015, p. 19.

  24. 24.

    The concept of ‘regulated market’ may be used in many different ways. For example, Hans-W. Micklitz refers ‘regulated markets’ to ‘telecommunication, energy and transport, insurance, capital markets and company law’. See Micklitz 2015, p. 496.

  25. 25.

    It should be noted that it is difficult to identify a market as a competitive/regulated one without comparison and further elaboration. Thus, the application of this distinction to certain economies is dependent on its score compared with other economies and the substantive analysis given by this study.

  26. 26.

    See Koske et al. 2015, pp. 9–10.

  27. 27.

    See the indicators of ‘scope of state-owned enterprises’, ‘government involvement in network sectors’, ‘direct control over business enterprises’, ‘governance of state-owned enterprises’, etc. See Koske et al. 2015, p. 9.

  28. 28.

    See the indicators ‘licences and permits system’, ‘administrative burdens for corporations’, ‘administrative burdens for sole proprietor firms’, ‘barriers in services sectors’, ‘legal barriers to entry’, ‘barriers in network sectors’, etc., See Koske et al. 2015, pp. 9–10.

  29. 29.

    For example, the government may take actions to provide consumers with more information. The rationale behind this is that the information asymmetry may undermine sufficient competition. Without obtaining enough information, consumers would be sceptical about whether they have made the right decision, so they might be afraid of investing their money in purchasing commodities of good quality. As a result, these good products might be eliminated, and the producers would lose the incentive of improving the quality of their goods and services. This is well-explained by Akerlof’s ‘Lemon Theory’: in a second-hand car market, because the buyers cannot obtain all necessary information for assessing the quality of the cars, they would only pay the average price. In this case, the sellers who sell good cars cannot gain enough profit, so they would withdraw their cars from the market. In this case, the average quality of the cars in the market would be lower and lower. See Akerlof 1970.

  30. 30.

    See the indicator ‘command and control regulation’, etc. See Koske et al. 2015, p. 9.

  31. 31.

    For a brief introduction, see Wikipedia, ‘Chinese economic reform’, available at: <https://en.wikipedia.org/wiki/Chinese_economic_reform>, last visited: 2016/10/17.

  32. 32.

    On the basis of the PMR results of 2008, it is suggested that although the elements of a competitive market-based economy are becoming increasingly well established, the transition is far from complete and the reduction in the extent of government intervention lags behind China’s impressive economic development. See Conway et al. 2010, p. 5.

  33. 33.

    This is computed without the data of Lithuania, Malta, Romania, Bulgaria, Croatia and Cyprus.

  34. 34.

    For comparison, the OECD countries on average scored 1.48 in 2008 and 1.60 in 2013. Japan scored 1.43 in 2008 and 1.41 in 2013. The United States scored 1.59 in 2008. The complete index can be seen at Koske et al. 2015, p. 29.

  35. 35.

    The first paragraph of Article 15 of the Chinese Constitution.

  36. 36.

    World Trade Organization, ‘China’s WTO Accession Protocol’, 11 December 2001, WT/L/432.

  37. 37.

    Section 15(a) of the China’s WTO Accession Protocol.

  38. 38.

    The whole paragraph reads: ‘Once China has established, under the national law of the importing WTO Member, that it is a market economy, the provisions of subparagraph (a) shall be terminated provided that the importing Member’s national law contains market economy criteria as of the date of accession. In any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the date of accession. In addition, should China establish, pursuant to the national law of the importing WTO Member, that market economy conditions prevail in a particular industry or sector, the non-market economy provisions of subparagraph (a) shall no longer apply to that industry or sector’.

  39. 39.

    See Puccio 2015.

  40. 40.

    Christian Oliver and Michael Pooler, ‘Europe split over whether to grant China market economy status’, Financial Times, 28 December 2015, available at: <http://www.ft.com/cms/s/0/2f581276-a716-11e5-955c-1e1d6de94879.html#axzz40QA5bqxe>, last visited: 2016/2/17.

  41. 41.

    Viktoria Dendrinou, ‘Thousands to Protest in Brussels Against China Steel Trading: Calls to stop European Union granting market-economy status to world’s largest steel producer’, The Wall Street Journal, 14 February 2016, available at: <http://www.wsj.com/articles/thousands-to-protest-in-brussels-against-china-steel-trading-1455450843>, last visited: 2016/2/17.

  42. 42.

    In terms of this type of classification, see Zhu 2012, p. 110. Another definition of ‘state sector’ in China can be found in Szamosszegi and Kyle 2011, p. 1. The latter reads: ‘The state sector in China consists of three main components. First, there are enterprises fully owned by the state through the State-owned Assets and Supervision and Administration Commission (hereinafter ‘SASAC’) of the State Council and by SASACs of provincial, municipal, and county governments. Second, there are SOEs that are majority owners of enterprises that are not officially considered SOEs but are effectively controlled by their SOE owners. Finally, there is a group of entities, owned and controlled indirectly through SOE subsidiaries based inside and outside of China. The actual size of this third group is unknown. Urban collective enterprises and government-owned township and village enterprises (hereinafter ‘TVEs’) also belong to the state sector but are not considered SOEs’.

  43. 43.

    The first sentence of Article 6 of the Chinese Constitution reads: ‘The basis of the socialist economic system of the People’s Republic of China is socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’.

  44. 44.

    See Zhu 2012, p. 122.

  45. 45.

    See Szamosszegi and Kyle 2011, p. 1.

  46. 46.

    Szamosszegi and Kyle 2011, p. 1.

  47. 47.

    It is stated that SOEs constituted 50% of the 500 largest manufacturing companies in China and 61% of the top 500 service sector enterprises. See Geng et al. 2009, p. 155. Furthermore, it is suggested that there were 154,000 SOEs as of 2008, and while these accounted for only 3.1% of all enterprises in China, they held 30% of the value of corporate assets in the manufacturing and services sectors. See Gao Xu, ‘State-Owned Enterprises in China: How Big Are They’, 19 January 2010, available at: <http://blogs.worldbank.org/eastasiapacific/state-owned-enterprises-in-china-how-big-are-they>, last visited: 2016/7/21.

  48. 48.

    See Szamosszegi and Kyle, 2011, p. 3.

  49. 49.

    For example, the telecommunications industry in China is seen as being dominated by three state-run businesses: China Telecom, China Unicom and China Mobile. In November 2011, China’s National Development and Reform Commission initiated an investigation into China Telecom and China Unicom over suspected monopoly in the broadband internet market. It is suggested that the government’s unusual anti-monopoly probe into its state-owned enterprises may lead to support for bringing in more effective competition to the country’s telecommunications sector – one of the Chinese marketplaces still under tight government control. See Vivian Ni, ‘China Telecom, China Unicom Face Anti-Monopoly Probe’, available at: <http://www.china-briefing.com/news/2011/11/10/china-telecom-china-unicom-face-anti-monopoly-probe.html>, last visited: 2016/2/17.

  50. 50.

    It is argued that, in China, ‘Getting and spending were legitimized in relation to national strength and social solidarity’. Trentmann 2016, pp. 398–399.

  51. 51.

    Zhu 2012, p. 110.

  52. 52.

    See Resolutions of the CPC Central Committee on Major Issues regarding the Building of a Harmonious Socialist Society (《中共中央关于构建社会主义和谐社会若干重大问题的决定》), 11 October 2006. It is also recorded in the Communique of the 6th Plenum of the 16th CPC Central Committee (《中国共产党第十六届中央委员会第六次全体会议公报》). An English translation is available at: <http://www.cecc.gov/resources/legal-provisions/communique-of-the-sixth-plenum-of-the-16th-cpc-central-committee-chinese>, last visited: 2016/7/21.

  53. 53.

    For example, it is declared that ‘the Chinese government often disregards its own environmental laws in order to promote rapid economic growth’. See Morrison 2015, p. 11.

  54. 54.

    See The Research Group of the Comprehensive Department of the National Bureau of Statistics of the People’s Republic of China (国家统计局综合司课题组) 2014, p. 3.

  55. 55.

    Morrison 2015, p. 35.

  56. 56.

    Nevertheless, although in the near future the essence of export for Chinese economic growth should not be underestimated, along with the advance to the new stages of development and the change of global economic situation, the driving force of capital investment and export is receding, while the driving force of consumption is growing. See The Research Group of the Comprehensive Department of the National Bureau of Statistics of the People’s Republic of China (国家统计局综合司课题组) 2014, p. 4.

  57. 57.

    European Commission, ‘The European Single Market’, available at: <http://ec.europa.eu/growth/single-market/index_en.htm>, last visited: 2016/7/1.

  58. 58.

    For ‘establishing a Common Market’, see Article 2 TEC.

  59. 59.

    See Commission of the European Communities, White Paper from the Commission to the European Council, COM(85) 310 final.

  60. 60.

    In the Single Market Act II, it is pointed out that a lot has been achieved when the year marks the 20th anniversary of the Single Market: ‘From 1992 to 2008 the Single Market has generated an extra 2.77 million jobs in the EU and an additional 2.13% in GDP. For European consumers the Single Market means more choice at lower prices – a 70% reduction in mobile phone costs is but one example. For citizens, the Single Market has given them the capacity to travel freely, to settle and work where they wish. For young people it has opened up the opportunity to study abroad – more than 2.5 million students have seized this opportunity in the last 25 years. For the 23 million companies in the EU the Single Market has opened access to 500 million consumers. The message is clear, the evidence is there: a strong, deep and integrated Single Market creates growth, generates jobs and offers opportunities for European citizens which were not there 20 years ago’. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Single Market Act II Together for new growth, COM(2012) 0573 final.

  61. 61.

    European Commission, the European Single Market, available at: http://ec.europa.eu/growth/single-market/index_en.htm, last visited: 2016/7/1.

  62. 62.

    European Commission, the European Single Market, available at: http://ec.europa.eu/growth/single-market/index_en.htm, last visited: 2016/7/1.

  63. 63.

    Article 26(2) of the Treaty on the Functioning of the European Union (hereinafter ‘TFEU’) states: ‘The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties’.

  64. 64.

    Austria: 1.19; Belgium: 1.39; Bulgaria: 1.57; Croatia: 2.08; Cyprus: 1.65; Czech Republic: 1.41; Denmark: 1.21; Estonia: 1.29; Finland: 1.29; France: 1.47; Germany: 1.28; Greece: 1.74; Hungary: 1.33; Ireland: 1.45; Italy: 1.29; Latvia: 1.61; Lithuania: 1.52; Luxembourg: 1.46; Malta: 1.57; Netherlands: 0.92; Poland: 1.65; Portugal: 1.29; Romania: 1.69; Slovak Republic: 1.29; Slovenia: 1.70; Spain: 1.44; Sweden: 1.52; United Kingdom: 1.08. See Koske et al. 2015, p. 29.

  65. 65.

    See Li and Xu (李昌麒、许明月) 2012, p. 22.

  66. 66.

    See OECD 2008, p. 8. This OECD document discusses the interplay between competition and consumer policies, the latter including consumer lawmaking.

  67. 67.

    See OECD 2007, p. 4.

  68. 68.

    Market failure refers to ‘a situation in which the market on its own fails to produce an efficient allocation of resources’. Mankiw 2014, p. 12.

  69. 69.

    In a market pursuing sufficient competition, consumer protection legislation is seen as an appropriate response to ‘market failure’. See Howell and Wilson 2016, p. 150.

  70. 70.

    See Faure and Luth 2011, p. 338. It was also pointed out that ‘Mandatory disclosure is an important instrument in many markets, but policy makers should explore its outcome based on the direct and indirect consequences of consumer behaviour and other factors’. See OECD 2007, p. 5.

  71. 71.

    See Faure and Luth 2011, pp. 352–354. Nevertheless, this study is not paying much attention to behavioural insights. This is further elaborated in Sect. 1.6 of this chapter.

  72. 72.

    See Micklitz 2005, p. 567.

  73. 73.

    See OECD 2008, p. 8.

  74. 74.

    This also can be seen from the low interest of a competitive market’s government in price control in general.

  75. 75.

    See Howell and Wilson 2016, p. 150.

  76. 76.

    See OECD 2008, p. 9.

  77. 77.

    See OECD 2008, p. 8.

  78. 78.

    When the legislator in a specific jurisdiction wants to open up markets or enhance competition, it is possible to adopt a ‘protective-instrumental’ approach, which is different from the traditional direction of consumer protection at the national level. See Micklitz 2005, pp. 561–562.

  79. 79.

    Ho 2001, p. 66. For the distinction among consumer education, consumer information and consumer protection, see Swann 1979, p. 267.

  80. 80.

    Ho 2001, p. 66.

  81. 81.

    See Micklitz 2005, pp. 577–578.

  82. 82.

    See OECD 2008, p. 9.

  83. 83.

    See Swann 1979, pp. 266–267.

  84. 84.

    Cseres 2008, p. 87.

  85. 85.

    For a comparison among private law, administrative law and criminal law enforcement from a law and economics perspective, see Weber and Faure 2015.

  86. 86.

    In addition, some other differences may be found as well. For example, it is argued that, in a market that pursues sufficient competition, consumer law may not be interested in tying the parties together beyond what is necessary for effective competition. This is the reason why consumers are granted the rights enabling them to get out of a contract, such as the right to rescission in case the product or the service is defective and the right of withdrawal. See Micklitz 2005, pp. 574–577. This could lead to a hypothesis that the consumer law in a competitive market provides more tools for the consumer to escape from the contract while the consumer law in a regulated market provides less. Nevertheless, this study leaves this hypothesis to the future research.

  87. 87.

    See Smits 2012b. This book has been translated into Chinese, see Smits (斯密茨) 2017.

  88. 88.

    See Smits 2012b, p. 9.

  89. 89.

    Smits 2006, p. 531.

  90. 90.

    See Durovic and Micklitz 2017.

  91. 91.

    Smits 2006, p. 537.

  92. 92.

    It is widely recognised that one of the main aims of study of comparative law is to contribute to legal harmonisation. Thus, if harmonisation is a trend, comparative law is very ‘useful’ in this sense. See Zweigert and Kötz 1998, p. 24 ff.

  93. 93.

    Law of the People’s Republic of China on the Protection of Consumer Rights and Interests (2013 Amendment) (《中华人民共和国消费者权益保护法(2013修正)》).

  94. 94.

    See Jia (贾东明) 2013, p. 106.

  95. 95.

    See Chap. 5.

  96. 96.

    See Smits 2006, p. 528.

  97. 97.

    Smits 2012a, p. 178.

  98. 98.

    See Chap. 4.

  99. 99.

    This is further addressed in the following text. See Sect. 1.5.2 of this chapter.

  100. 100.

    For example, regarding the influence of CISG on China, see Han (韩世远) 2011, pp. 7–13. For the influence on the EU, see Smits 2007, p. 1187.

  101. 101.

    See Sect. 1.4.2.1 of this chapter.

  102. 102.

    Simona Novaretti’s article is a good example which shows the philosophy behind the contractual legal rules and practice. See Novaretti 2010.

  103. 103.

    See Trentmann 2016, p. 399.

  104. 104.

    See Bogdan 2013, pp. 57–62.

  105. 105.

    Although much attention is paid to China’s economic growth, the focus is usually on the side of production but not consumption. See Trentmann 2016, p. 355. Indeed, not too much research on Chinese consumer law has been conducted.

  106. 106.

    See Zhang 2006.

  107. 107.

    Contract Law of the People’s Republic of China (《中华人民共和国合同法》).

  108. 108.

    See Ling 2002. See also Bu 2013, pp. 81–86.

  109. 109.

    Another book addressing Chinese contract law that should be mentioned is ‘Chinese Contract Law: Civil and Common Law Perspectives’. See DiMatteo and Chen 2017.

  110. 110.

    See Binding 2014.

  111. 111.

    See Fu 2011.

  112. 112.

    See Han 2017.

  113. 113.

    See, for example, Micklitz 2005, Reisch and Micklitz 2006, Cseres 2008.

  114. 114.

    Hans Dietmar Schweisgut, ‘A word from the EU Ambassador’, available at: <http://eeas.europa.eu/delegations/china/eu_china/40th_anniversary_of_eu_china_relations/index_en.htm>, last visited: 2016/7/22.

  115. 115.

    ‘The EU represents 14% of China’s external trade. EU-China bilateral trade in goods reached € 467.5 billion in 2014 and increased of 9.1% from the previous year’. ‘EU_China Trade (11/03/2015)’, available at: <http://eeas.europa.eu/delegations/china/press_corner/all_news/news/2015/20150311_en.htm>, last visited: 2016/7/22.

  116. 116.

    For some illustrations, see Sect. 1.1 of this chapter.

  117. 117.

    This is on the basis of Article 6 of the Regulation 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I).

  118. 118.

    For a summary of literature, see Sibony and Helleringer 2015, FN no. 1, pp. 209–210.

  119. 119.

    For example, Oren Bar-Gill and Omri Ben-Shahar use the CESL as an example to show that four regulatory techniques (mandatory pro-consumer agreements, mandated disclosure, regulation of entry to and withdrawal from contracts and pro-consumer default rules and contract interpretation) used by European consumer contract law may be ineffective – and perhaps worse – inefficient and harmful to consumers. See Bar-Gill and Ben-Shahar 2013.

  120. 120.

    See, for example, Helleringer and Sibony 2017 and OECD 2017.

  121. 121.

    As aforementioned, Michael Faure and Hanneke Luth’s research shows that behavioural economics may lead to a call for more substantive control of standard terms and may argue for a more limited dependence upon information disclosure and consumer vigilance in standard terms in consumer policy. See Faure and Luth 2011.

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  1. School of Law, Fudan University, Shanghai, China

    Jiangqiu Ge

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Ge, J. (2019). Introduction. In: A Comparative Analysis of Policing Consumer Contracts in China and the EU. Springer, Singapore. https://doi.org/10.1007/978-981-13-2989-0_1

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