'Fraud-busters' can still help fight shoddy goods

CHINA’S market watchdogs at all levels reportedly received 2.4 million consumer complaints in 2017, ranging from counterfeits to misleading advertising and consumer rights infringements.

According to an industry report, that is an increase of 44 percent year on year.

In an era when fakes abound, consumer activists spring up, especially those who make a living by intentionally buying substandard or expired goods and seeking multiple times the value of the products in compensation.

Wang Hai, China’s first professional fraud-buster, rose to fame in the mid-1990s when he came across a clause in China’s Consumer Rights Protection Law, which said that consumers can request a refund at twice the original price if it is proved to be a fake or flawed product.

He decided to test it out and bought several fake Sony headphones.

After confirming that the headphones were fake, the retailer agreed to compensate him. He soon realized how much he stood to profit, as the market was rife with fakes and substandard goods.

He then established his own organization, called Wang Hai Online, in an attempt to cash in on the growing demand for consumer rights protection.

Wang’s success attracted others to follow suit. Ji Wanchang, who used to be a peddler, has been rummaging for knockoffs of luxury products in shops since 2000. Xu Dajiang, who had worked all kinds of odd jobs, earned his fame in Guangzhou as a counterfeit hunter, and he is currently working in support of the local market watchdogs.

Counterfeit hunters like Wang were initially hailed as heroes for taking on manufacturers of defective or fake products — all the more so following a string of food and drug safety scandals.

Nevertheless, the authorities’ attitude toward professional counterfeit hunters has changed dramatically.

In August 2016, the State Administration of Industry and Commerce issued the Enforcement Regulation of Consumer Rights Protection Law. Article 2 stipulates that consumers who purchase commodities or services for daily consumption are protected by this regulation. However, this regulation does not apply to individuals or organizations that purchase commodities or services for profit.

It’s generally believed that authorities have sent a clear message that professional counterfeit hunters can no longer use the Consumer Rights Law to their benefits.

The authorities have even gradually imposed restrictions on professional fraud-busters on the grounds that their presence has resulted in moral hazards and market disorder.

Instead of seeking to resolve disputes, some fraud-busters have gone so far as to blackmail businesses.

Ji, for example, once accused a high-end clothing brand of selling garments with quality problems. With almost no solid proof, he blatantly asked for 1 million yuan (US$160,000) in compensation, according to a report carried by China.org.cn, a national news portal.

Additionally, professional fraud-busters are sometimes accused of exploiting the punitive damage clause to maximize the compensation due to them.

Forcing out professional fraud-busters may be great news for businesses, but it is doubtful that consumers will feel the same.

Despite all the downsides, it is irrefutable that professional counterfeit hunters have done a bang-up job in enhancing the consumer rights awareness of the public.

Counterfeit hunters like Wang as well as their organizations have played an active role in purifying the market and deterring counterfeiters.

Moreover, if punitive damages were dropped out of the law, professional fraud-busters would lose their motivation in combating shoddy goods.

This might lead to an abysmal situation where counterfeits become more rampant. And consumers would end up paying the price.

Therefore, instead of blaming professional consumer activists for wasting judicial resources or forcing them out once and for all, authorities should lower the cost for individuals in safeguarding consumer rights and step up their own efforts in cracking down on counterfeits.