THE sharing economy and consumer protection in China
Abstract: The business model of the sharing economy has posed new challenges for both consumers and regulators. The Chinese government has made efforts to improve the consumer protection regime by updating laws and establishing consumer redress schemes. However, the platform liability is ambiguous and limited under existing consumer protection legislation. Furthermore, consumers cannot access effective and easy-to-use complaint processes in the sharing economy. This article reviews China’s laws and regulations relating to consumer protection and its progress. Thereafter, it discusses the problems faced by consumers engaging in the sharing economy, in particular the liability of platforms, local implementation rules over the sharing economy, the mechanism of self-regulation, and the consumer redress options. Finally, the author offers recommendations for improving the current system in the context of the sharing economy.
Key words: sharing economy, consumer protection, Chinese consumer law
I. Introduction
The sharing economy has attracted the attention of a large number of consumers by affording easier and cheaper access to certain products and services. According to a Chinese state report, more than 700 million people participated in the sharing economy in 2017; that is almost half the country's population. In the meantime, the rise of the sharing economy has introduced unforeseen challenges for consumers, incumbent businesses, regulators and policymakers. China reported that complaints about hiring and rental services soared in 2017, in a staggering eightfold increase from 2016. To support the growth of the sharing economy and enhance consumer rights protections, the Chinese government has updated laws related to consumer protection and passed regulations on sharing services throughout the nation. What is the best way to protect consumer rights in the sharing economy? Does China’s existing legislation provide enough protection for consumers involved in the sharing economy? Should China extend its current regulations to provide maximum protection? If so, at what cost? Will consumers gain access to effective systems and processes to resolve their complaints in China’s sharing economy? While it is too early for definitive answers to these questions, we believe it is crucial to begin asking them in an analytical, empirical and critical manner.
Our aim with this paper is to understand the impact of the sharing economy on Chinese consumers (Section 1); to review the existing legal framework on consumer protection in China (Section 2); and to examine the weaknesses of China’s legislation, the effectiveness of self-regulation and redress options for consumers in the sharing economy (Section 3). We end with discussion on proposals for the future improvement of consumer protection in China’s sharing economy (Section 4).
II. The impact of the sharing economy on Chinese consumers
The sharing economy is defined by the Chinese government as “the integration of massive, decentralized resources to meet the diversified needs of economic activities, by using the internet and other modern information technologies.” Fueled by forward-thinking investors and venture capital firms, startups pop up across the country to offer a wide range of sharing services. Various businesses, including cars, bicycles, homes, expensive fashion, everyday clothing, bags, and accessories, are hurled into the sharing economy in China. The sharing economy has attracted the attention of large numbers of consumers by affording easier and cheaper access to these products and services. The Chinese government expects the sharing economy to account for 10% of its GDP by 2020, and to reach roughly 20% by 2025. On the other hand, differing substantially from traditional business models, the sharing economy does not fit neatly into existing regulatory frameworks, and poses considerable risks to consumers.
In 2017, the China Consumer Association (CCA) received 726,840 complaints, and resolved 552,398 complaints (76%). Among all the complaints, contract issues, after-sales service and product quality are still the main causes, accounting for more than 80% of the total number of complaints. Compared to 2016, the number of internet service complaints increased sharply, mainly due to the fact that certain bike-sharing companies failed to refund deposits, generating a surge in consumer complaints. Also, with the final consumption expenditure accounting for 58.8 percent of China’s economic growth in 2017, it is believed that the incidence of consumer injury caused by defective products, and complaints about deceptive marketing practices, are substantially higher than has been reported.
III. The Chinese legal framework and progress in consumer protection
Consumer protection has been, and remains, an important issue in China. China has implemented a variety of product- and sector-specific legislation and regulations since the 1990s, in an effort to improve its consumer protection regime. The Consumer’s Rights and Interests Protection Law (referred to as the Consumer Law) is the cornerstone of this regime, intended to set forth all basic consumer principles in a systematic and comprehensive fashion. Beyond the Consumer Law, the Tort Liability Law, the Product Quality Law, the Food Safety Law, the Advertising Law, the Trademark Law and Anti-Monopoly Law, are designed to ensure the rights of consumers, as well as fair trade, competition, and accurate information in the marketplace. As the general watchdog of consumer protection, the State Administration for Industry and Commerce (SAIC) has also formulated many special rules and regulations that focus on increasing the protection of consumer interests. In addition, on the annual Consumer Rights Day (referred to as “3.15”), the illegal business practices of foreign and domestic companies are paraded and condemned in a CCTV special.
The sharing platform breaks down traditional industry categorizations and, as a result, presents challenges when labeling the nature of the business, by creating an ambiguous relationship between the provider and user; employer and employee; and owner and consumer. Most people engaged in the sharing economy face risks, and the regulatory position of who should ultimately be held responsible can be uncertain. Against this backdrop, the Chinese government strove to improve its legal framework for consumer protection.
A. Laws on consumer protection
On December 26, 2009, the National People’s Congress Standing Committee (NPCSC) promulgated the “Tort Liability Law” (《侵权责任法》), which was acclaimed in China as a significant modern legislative achievement in civil rights protection. Article 36 of the Tort Liability Law creates obligations for internet service providers (ISP) for any infringement upon an individual's civil rights or interests through the internet. Furthermore, ISP can take necessary protective actions, such as deleting content, screening content or denying service to the offending individual, when ISP has knowledge about an internet user engaging in tortious conduct through the internet. Otherwise, ISP will be jointly liable with the relevant online user for the extended damages.
On 25 October 2013, the NPCSC passed the “Amendment to the Consumer Protection Law” (referred to as the Amendment). The Amendment substantially updated China’s regime for consumer protection by imposing strict liability on platform providers, business operators (including commodity manufacturers, retailers and service providers) and advertisers. For example, consumers may claim compensation against either the supplier or the platform provider if the provider fails to provide the consumer with true information on the goods/services provider. Also, a platform provider will be jointly liable to aggrieved consumers where the provider knows or should have known that the sellers or service providers infringed upon the lawful rights and interests of consumers through the platform, but fails to take necessary measures.
Further, the Amendment includes, among other things, provisions on the protection of consumer information and improvement of the functions of consumer associations and regulation bodies. Business operators are prohibited from collecting, using, and disclosing the personal information of consumers without their informed consent. The CCA is allowed to participate in the development of laws, regulations, rules, and mandatory standards related to consumer rights and interests, and the supervision and inspection of commodities and services conducted by the relevant administrative departments. Thus, the Amendment paved the way for further legislative developments in response to the increasingly challenging task of consumer protection in a modern era, which is heavily influenced by the sharing economy.
On April 24, 2015, the NPCSC revised the “Food Safety Law” (Revision), imposing stricter controls and supervision on food production and management. Article 131 of the Revision set out obligations for both online food operators and platform providers, requiring that online food-trading platform providers demand real-name registration by food operators and specify the food safety responsibilities of these operators. Consumers purchasing food through a third-party online food-trading platform may claim damages against the food trader admitted to the platform or the food producer if purchases of food cause any damage to their lawful rights and interests. In other words, the provider of an online food-trading platform shall assume joint and several liability with the food trader if it fails to provide valid contact information for the food trader admitted to the platform.
B. Regulations on consumer protection
In addition to legislation, a number of administrative regulations have been promulgated to highlight the need to enhance consumer protection in the sharing economy. On January 26, 2014, SAIC issued the “Administrative Measures for Online Trading” (referred to as the Administrative Measures, 《网络交易管理办法》), specifying the recovery measures for consumers, and imposing duties and regulations both on online commodity dealers and platforms. For example, Article 14 prohibits the sale of counterfeit commodities, establishing that online dealers and relevant service providers shall disclose true and accurate information on products or services, sanctioning false or misleading representations.
On January 5, 2015, SAIC introduced the “Penalty Measures for Infringement on the Rights and Interests of Consumers” (referred to as the Penalty Measures, 《侵害消费者权益行为处罚办法》) in order to flesh out the Consumer Law by addressing a range of consumer protection issues. The Penalty Measures provided a definition of “consumer personal information” and clarified the existing prohibitions of the Amendment, such as merchant misconduct related to fraud on consumers; misleading and fraudulent publicity; consumer personal information protection; and unfair form contracts.
On August 5, 2016, SAIC released the “Draft of the Regulations on the Implementation of the Law on the Protection of Consumer Rights and Interests for Public Opinion Solicitation” (referred to as the Implementation Regulations, 《消费者权益保护法实施条例》（征求意见稿）》), as a means to implement the Amendment for the purpose of enhancing the protection of consumers’ rights and interests. The Implementation Regulations address, among other issues, the timely recall of defective products, return policies, consumer data protection, and prepaid cards, reiterating the obligations of manufacturers, retailers, and business operators under the Amendment.
On November 17, 2016，SAIC released the “Opinion on Strengthening Consumer Protection in the Internet Economy” (《关于加强互联网领域消费者权益保护工作的意见》) to emphasise the protection of consumers in online sales, specifically the quality of goods traded online; it also touches on the various enforcement methods which the authorities will take, such as random sampling, name-and-shame, and the monitoring of emerging products/technology. On January 6, 2017, “Interim Measures for the Return without Reasons of Commodities Purchased Online within Seven Days” (《网络购买商品七日无理由退货暂行办法》) was released, granting consumers the right to return products purchased from online business operators within seven days of receipt, without the need for a reason.
Also, implementing policies such as “Opinions on Cultivating and Developing the Rental Housing Market” (《国务院办公厅关于加快培育和发展住房租赁市场的若干意见》); “Guiding Opinion of the General Office of the State Council on Deepening Reform and Promoting the Healthy Development of the Taxi Industry ” (《国务院办公厅关于深化改革推进出租汽车行业健康发展的指导意见》, referred to as GOSC Opinion); and “Interim Measures for the Administration of Online Car Hailing Operations and Services” (《网络预约出租汽车经营服务管理暂行办法》, referred to as Interim Measures) aimed at promoting startups and innovation based on the sound development of the accommodation and transport-sharing economy.
Meanwhile, local governments have joined the battle against illegal sharing companies by developing new regulatory schemes in different sharing sectors. Local regulations and their implementation will be discussed in Section III. To some extent, this new framework reinforced the obligations upon platforms and source providers to enhance consumer protection. Yet consumers still face risks due to inadequate legislation and poor implementation in China’s sharing economy.
III. The challenges for consumer protection in China’s sharing economy
A. Vague platform liability
Increasingly, the Chinese government has attempted to legalize and place some responsibilities on platforms. However, China’s law does not provide a clear answer to the question of what legal consequences follow from a platform’s engagement in the process of concluding (and potentially performing) contracts between customers and suppliers. Article 36 of the Tort Liability Law sets out that a third-party ISP shall be held liable for utilizing the internet to infringe on users’ rights and interests; or failing to take necessary measures to prevent the infringement, upon the notification of the infringed party or being made aware of infringement by a user of its network. In other words, ISPs are not liable for the infringement without consumer notification or proof of the ISPs’ knowledge of the infringing activity. Nonetheless, the law does not specify what evidentiary materials are required to prove knowledge of the existence of infringement. In the case of infringement by users, these standards of liability for an ISP turn on whether the ISP knew of the activity and had sufficient control over it to prevent or reduce the infringement. In this regard, the consumer (the infringed party) may bear the burden of proof in demonstrating that the ISP has knowledge of the infringement, which can often be difficult to prove without specific guidelines for evidence requirements.
Article 44 of the Consumer Law states that consumers can claim compensation from internet trade platforms that do not provide real names, addresses and contact information for their sellers or service providers, when consumers suffer damages arising from the purchase of goods or services through such platforms. However, the Consumer Law does not contain express and implied warranties and remedies in other cases where platforms have provided real information on their providers. The Consumer Law also assigns the task of protecting consumer privacy to the sharing platform by restricting the collection, use, and disclosure of consumers’ personal information and requiring customers' consent prior to using this data. It is not clear whether implied consent is sufficient in all scenarios, or to what extent platforms should disclose to users or consumers details of the proposed future use of the information collected.
Meanwhile, Article 51 of the Draft Regulations requires online platforms to establish systems to compensate consumers and actively mediate disputes, and applies the same compensation rule to the platforms as regulated in Consumer Law. Even so, the regulations fail to specify how third-party platforms ought to address consumer complaints, and the extent of platform liability. This legal ambiguity has, in practice, brought about uncertainty for both platforms and consumers, particularly where the adoption of new types of technology or business models are concerned.
In other cases, regulative consumer protection does not yet exist, or is limited, or is still under discussion with regard to private-to-private sharing economy transactions. Currently, all sharing services require a one-time deposit, which gives sharing companies a one-off financial buffer that will be insufficient in the long run, if profits are slow to take off. Since early 2017, Wukong, Dingding, Kuqi, Xiaolan, Xiaoming and other bike-sharing companies have experienced financial difficulties and a lack of funds for necessary investments. Although, local governments have issued guidelines for the bike-sharing market, there are no clear requirements concerning details such as how to manage and use deposit funds. With business failures, platform-retained deposit refunds have caused great concern among consumers. The nation’s first case of shared-bicycle public interest litigation was decided in the Guangzhou Intermediate People’s Court on March 22, 2017. Xiaoming Bike Company was accused of failure to refund users' deposits; the court ordered the company to return the deposits to consumers and apologize to the public. However, the company’s operator stated that it was unable to return the deposits of 700,000 users, and the company was about to go bankrupt. Another bike-sharing company -- Kuqi -- had received more than 210,000 complaints since August 2017 for failing to return deposits. According to the China Consumers Association, by the end of November 2017, at least six well-known bike-sharing startups had shut down, and more than RMB 1 billion (USD $150 million) in deposits could not be refunded to users. Continued application of such outmoded regulatory regimes is likely to harm consumers. Therefore, it is questionable whether the laws are sufficient to safeguard the rights of consumers in the sharing economy.
B. Rigid implementation by local government
The Chinese central government has shown its acceptance and willingness to cooperate with the booming sharing economy, and has attempted to strike a balance between innovation and consumer protection. As Chinese Premier Li Keqiang said, the regulation of the sharing economy should be tolerant while prudent, as there is still much yet to be learned about new business models.
In the policy implementation process, we find conflicting regulatory goals and interests between national policymakers and local governments. The national policymakers have articulated a desire to give full consideration to the sharing economy’s development needs, paying equal attention to its development and regulation, supporting and guiding all sorts of market players to actively explore new forms and models of the sharing economy. Local governments, in contrast, have sought to maintain control over access to local job opportunities, social welfare allocation, and the protection of local industries, including the traditional taxi sector. For example, GOSC required platforms to dispatch only licensed cars and drivers, ensuring the legitimate rights and interests of passengers without undue price increases. At the same time, the Interim Measures provide specific norms and standards regarding online car-hailing operations and services, and the measures to be taken to safeguard passengers. The Interim Measures also reserved broad discretion to local governments, particularly regarding the power to impose restrictions on cars and drivers registered with ride-hailing companies. Neither the GOSC Opinion nor the Interim Measures, however, provided detailed explanations on the meaning or connotation of peculiar phrases, such as “high quality service” and “operation with differentiation”.When local governments make implementation rules, they nevertheless tend to interpret the concepts as strict requirements as to standards for ride-hailing cars, and usually prescribe a minimum price and/or certain price criteria, indicating that ride-hailing car costs shall remain high-end.
In October 2016, transport authorities in several large Chinese cities, such as Beijing, Shanghai, Shenzhen, Guangzhou, and Tianjin, released a draft of local rules for car-hailing services. The new ride-share regulations issued by Beijing, Shanghai and Shenzhen set tighter restrictions on vehicle size and licenses, and required data on a driver's household (residency, 户口). Under the new rules, ride-hailing companies must stop using out-of-town drivers, and hire only local residents to sit behind the wheel. It is anticipated that such restrictions will disqualify the vast majority of current ride-hailing drivers, who are rural migrant workers. The requirement for minimum wheelbase width will reduce the number of rideshare cars, as well. The restrictions imposed by local governments have resulted in societal attention and debate. According to Didi Chuxing, fewer than 10,000 of its 410,000 Shanghai drivers would meet the permanent household requirement; in addition, plans for tighter vehicle standards, including specifying a minimum wheelbase width, would rule out more than 80% of the service’s cars in Shanghai. These proposals would likely result in a sharp drop in the market supply of ride-sharing vehicles, a significant decrease in the number of drivers, and a steep rise in costs. Setting higher thresholds for drivers to stay in the car-hailing business would hurt consumers, although such rules are designed to protect passengers.
Another example of local regulation occurs in short-term house rental. Local ordinances regulating short-term house rentals often include a cap on the maximum number of units, a limitation on their size, health and fire codes, but also licensing and permitting regimes. Many small-scale, short-term rental hosts find it hard to meet these strict requirements in offering temporary rentals. Thus, those hosts who are already renting property and have not met these requirements must exit the market. Where regulations act as barriers to the entry of peer-to-peer platform market participants, consumers may experience detriment due to higher prices or reduced choices.
C. Inadequacy of self-regulation
The Chinese government set out its policy objective in developing multi-party collaborative governance in the sharing economy. Accordingly, platform enterprises should strengthen their internal governance and security, reinforce their assumed social responsibility, and strictly regulate operations. Industry associations need to promote the introduction of industry service standards and self-discipline conventions, and improve social supervision.
1. Platform Enterprises
It is notable that the Consumer Law does not provide the normative coverage for platform self-regulation. Yet the Implementation Regulations required the platforms to establish management systems for transaction security, information processing, and credit evaluation. Among other things, the platforms should create a traceable and scientific credit security review system, and establish a perfect safety accident disposal and coping mechanism. Unfortunately, there are barriers standing in the way of building an effective self-regulation system in China.
For one thing, China has not established a sound social credit system for both providers and consumers. A great deal of valuable information and data from providers are maintained by government agencies, but the scope of information publication is so narrow that the disclosure is insufficient. Platform enterprises cannot easily obtain the information they need. In consequence, the effectiveness of security credit review is lessened because of the difficulty of enterprise docking and accessing governmental data. As Didi Chuxing claimed, as a result of data governance policies, it is difficult for a company to verify the residency status of its drivers, although residency requirements are encoded in local government rules. Furthermore, information resources are separated among various platforms, and each platform tends to establish its own information system and database. Due to the lack of an effective mechanism for information exchange, a service providers’ and consumers’ information disclosure system has not yet been established. Thus, providers’ and consumers’ credit record data is insufficient for users to make definitive judgments. The difficulties in obtaining public data, and the urgent need to establish a statistical monitoring system, still exist.
Another important part of self-regulation is how and where data demonstrating compliance with existing laws and regulations can and should be disclosed. Indeed, disclosing some data about service providers -- data requested by and provided to the government -- would impose a monumental financial burden upon the platforms. In many cases, the Chinese government struggles to enforce such regulations, since many platforms do not provide adequate information. Municipal governments, such as in Shanghai and Hangzhou, have asked ride-hailing companies to link the data of their cars and drivers to a supervisory database run by local traffic authorities and police agencies. Yet there are still many vehicles engaged in illegal commercial operations, largely due to the fact that the online taxi platforms have not fully and accurately integrated their taxi driver data into the supervisory system of the competent transport authorities, as prescribed by regulations. In March of 2018, more than 200 vehicles were seized for illegal operation in Hangzhou, after the municipal government announced the regulations for ride-hailing services.
2. Industry associations
As significant non-governmental stakeholders of the sharing economy, industry associations are expected to play a regulating role in sharing-economy businesses by establishing standards, ethics, and licensing requirements; administering licensing exams; collecting fees; and even taking punitive actions against bad actors. In 2016, the UK trade body, Sharing Economy UK (SEUK), launched its TrustSeal, setting minimum standards for sharing-economy businesses to ensure that they act with integrity and maintain professional standards. Correspondingly, Ireland in 2016 created a non-profit industry association, Sharing Economy Ireland, establishing standards for responsible sharing practices. In December 2015, the Commission on the Sharing Economy in China (CSE分享经济工作委员会) founded by the Internet Society of China (中国互联网协会), became the first non-governmental organization dedicated to promoting the development of China’s sharing economy. In June 2016, the Internet Society of China released the "Self-Discipline Convention for China's Internet-based Sharing Economy Services" (《中国互联网分享经济服务自律公约》) to increase consumer confidence and protection, setting forth the requirements for personal safety and property protection, and designing a dispute resolution system. More than forty sharing economic enterprises, including Didi Chuxing, Ctrip and Qunar, joined the Convention, an indication that the sharing economy has taken a new step in jointly maintaining a fair market environment and improving overall service levels.
Nevertheless, most sharing economy associations have not created self-disciplined frameworks with clear or workable standards. For example, the Hangzhou B&B Industry Association (杭州市民宿行业协会), established in December 2016, aims to improve collaboration and self-discipline within the house-sharing business. However, the association provides no standards or guidelines for housing sharing services, such as fire safety or the architectural quality of a building, which are essential to ensure a rental property in habitable condition. In most parts of China, landlords are required only to provide an identification card, ownership certificate or lease contract, and a few photographs of the property, in order to list it on house-sharing platforms. Such credentials are not subject to strict authentication, and tenants are not required to provide proof of identification at all. More importantly, industry associations in general lack the power or means to discipline their members for noncompliant behavior, unless the authority is granted by law. In May 2017, the China Bicycle Association (中国自行车协会) set up a Bike Sharing Professional Committee (共享单车专业委员会), striving to establish and improve self-discipline mechanisms for their industry and to safeguard the legitimate rights and interests of its members. As in the case of house-sharing, there are no specific implementation requirements or effective punishments for noncompliant conduct.
D. Options for redress
The Consumer Law provides five resolutions for consumers disputes. In general, arbitration and court litigation are not chosen as consumers’ preferred dispute resolution methods. In view of the fact that most online businesses do not include arbitration clauses in contracts with individuals, consumers cannot take their disputes to an arbitration institute. On the other hand, considering the high cost of litigation, bringing suit is not widely accepted as a sensible way of resolving disputes.
As an administrative law enforcement agency, SAIC is responsible for market surveillance and consumer protection at the national level. In 1999, SAIC set up the “12315” hotline to facilitate consumer complaints and settle disputes. In February 2014, SAIC adopted the “Measures for the Handling of Consumer Complaints” (Complaint Measures), including the settlement procedure for consumer complaints lodged with the SAIC. In March 2017, SAIC launched a national platform (“12315 Internet Platform”) to better deal with consumer complaints and consultations regarding product quality. The new platform allows consumers to complain or report to local regulatory authorities once they complete the required registration via PC or an app. With the support of the platform, local authorities can directly be informed of and then deal with consumers' requests. In 2017, the SAIC and other market supervision departments accepted almost 2.5 million complaints from consumers, a year-on-year increase of 44.0%, of which 685,700 complaints related to online shopping.
Because it is a quasi-governmental organization in terms of budget, organizational structure and personnel, the CCA delegates various consumer protection duties under the Consumer Law, which includes accepting consumers’ complaints, and conducting investigations and mediation in connection with those complaints. The CCA has played an important role in consumer protection, as a means of encouraging law enforcement in this area. Although the complaint-resolution activities of CCA are impressive, it is important to point out that if a business does not cooperate with the CCA, then it is extremely difficult for a case to be resolved. As a public organization, the CCA does not have legal authority over consumer dispute resolution and thus can exercise only the function of mediation. When processing consumer disputes, the CCA often abstains from conducting deeper investigations into the producer and industry, nor does it relay reports to the regulation authorities (such as SAIC) for further inquiry. The separation of consumer complaints and business regulations, spearheaded by distinct institutions, hampers the possibility of adequate consumer protection. In instances where individual consumers appeal their cases to the CCA and are compensated, the producer can still continue its deceptive practices with other consumers, without government intervention.
More importantly, appealing to the CCA or the SAIC would be time-consuming and costly, especially in the sharing economy. In a product liability claim, for example, consumers generally need to provide substantial evidence of a product defect to persuade the CCA or the SAIC to launch a suit against a producer. In many cases, the product quality sold online is cannot be traced from source providers to its terminus. Furthermore, in the context of the sharing economy, many private individuals offer their own personal services or products. The quality standards for these have not been included in Chinese law. Consumers are often confused about the requirements the sharing product or service should meet, and cannot obtain enough evidence to support their claims. Even in cases with known specific quality standards, consumers must gather concrete evidence from third-party testing institutions, and assume all costs of product testing, to file a claim.
Complaint-handling procedures that specifically encourage consumers to first seek redress with service providers can be successful, and increase service providers’ awareness of consumer needs, rights and responsibilities. Due to a lack of an effective and easy-to-use complaint process in the sharing economy, consumers find it disturbing to voice their complaints, and they typically make complaints to the platforms and seek equitable relief. In response, the sharing platforms have addressed the issue by blacklisting problem resource providers and returning the payment for translation to the requestor. However, this is not always enough to compensate for the harm suffered by consumers. If providers refuse or cannot provide resources when the demand actually arrives (e.g., an Uber driver cancels a ride), consumers who are forced to make other choices would not receive compensation for their loss of money and time. Consequently, China currently does not provide an effective way to redress consumer grievances in the sharing economy.
V. Conclusion
The legal framework of the Consumer Law, and the consumer protection standards of other laws and regulations, currently do not provide adequate protection for consumers in China’s sharing economy. In order to achieve a sustainable development goal within the sharing economy, the Chinese government needs to adjust its legislative framework to adapt to the transformation which the sharing economy has made to regulation and consumer protection.
To begin with, it must clarify liability within current legislative frameworks. Liability rules should be ex-ante clear, and all involved parties should be properly notified and insured. The platform is an online service provider more than an information provider, whose liability should be provided by proposing a common approach to swiftly and proactively detect, remove and prevent the reappearance of noncompliant content online. For example, a car-sharing platform should set standards for transactions, and undergo a qualification review to prevent the use of false driver's licenses. If the platform operator fails to act with due diligence to prevent violations of rights, it is jointly liable with the supplier for consumers’ damages or losses.
Secondly, it is essential to keep the balance between national and local regulation stable and reflective of the need for consumer protection. While adequate consumer protection requires some regulatory oversight, over-regulation will reduce the size of the market, pushing buyers and sellers into the informal sector. Local government should follow elastic methods to regulate the sharing economy without unnecessarily distorting or hindering market developments that would otherwise be pro-competitition. For instance, such regulatory flexibility could include low corporate tax rates; better access to credit through financial market reform; and flexible contracting laws.
Next, the practice of self-regulation should be encouraged. A self-regulatory solution for the sharing economy must contain some form of transparency and governmental oversight. Accordingly, China should manage data-sharing to help invent self-regulatory solutions to societal issues that are especially difficult to address by centralized governmental interventions. This should include enacting standards for data-sharing and distribution, guiding data integration and communication, and classifying data into different categories for different users engaging in sharing transactions. Furthermore, industry associations need to develop strong enforcement capabilities by establishing service standards and external enforcement mechanisms. We should also encourage the creation of a new class of self-regulatory organizations to set and enforce regulations for peer-to-peer sharing marketplaces, perhaps initially with some governmental oversight.
Finally, the consumer complaint handling system must be improved. Mechanisms are needed for consumers to voice complaints to their sharing service providers and regulators. Complaint-handling and redress mechanisms should be accessible, affordable, independent, fair, accountable, timely and efficient. Cooperation between CCA and law enforcement agencies might prove particularly effective in this regard. In the event of a dispute, alternative mechanisms (such as conciliation, arbitration and self-resolution) following clear and transparent procedures can be introduced for settling disputes, in addition to formal adjudication and administrative action; so that consumers can defend their rights rapidly, free or at minimal cost. In addition to more modern and structured legislative techniques, it would also be useful for consumer protection to strengthen legal precedents in order to close gaps in the existing legal system; the state can thus respond more effectively to future developments.
