On August 21, 2024, the Supreme People’s Court held a press conference to announce the Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Punitive Damages in Food and Drug Dispute Cases (hereinafter referred to as the “Interpretation”) and four typical cases involving punitive damages for food safety . The “Interpretation” came into effect on August 22, 2024.
The “Interpretation” comprises 19 articles that provide provisions on protecting the rights of ordinary consumers, refunding and returning food and drugs, the liability of purchasing agents, the liability of small workshops, the identification of flaws in labels and instructions, the concurrence of punitive damage liability, the responsibility for producing and selling counterfeit and substandard drugs, the determination of the punitive damages base, the regulation of repeated purchasing for claims, and the punishment of illegal claims.
Significant changes that will result from the introduction and implementation of the Interpretation in the following areas:
1. The rule of punitive damages of ten times the price will not apply to large purchases and high claims by purchasers exceeding the reasonable needs of daily consumption, and the actual price paid will be used as the basis for calculating the punitive damages.2. The following requirements have been put forward for the food and drugs requested to be returned by the operator: if the food labeling, marking or instructions do not conform to the food safety standards, and the food producer can continue to sell the food in accordance with the law if remedial measures are taken and food safety can be guaranteed, the operator has the right to request the purchaser to return the food and drugs; however, according to the regulations, if harmless disposal, destruction and other measures need to be taken for the food and drugs, then the Food Safety Law will be applied, the operator’s request for the return will not be supported. 3. The occasional and mutually supportive nature of purchasing on behalf of others does not fall under punitive damages liability, but commercial purchasing on behalf of others should bear punitive damages liability according to the law. 4. Food production and processing workshops, as well as food vendors, bear punitive damages liability not based on whether the food complies with specific management measures formulated by provinces, autonomous regions, or municipalities, but rather on whether the food meets food safety standards.5. Food labeling, instructions do not meet food safety standards, but does not affect food safety is no longer a producer or operator of punitive damages defense.
The following is a breakdown of the key provisions of the judicial interpretation.
I. For Ordinary Consumers, the Actual Payment Should Generally Be the Basis for Calculating Punitive Damages
In November 2023, the Supreme People’s Court released four typical cases that clarified the support for punitive damages claims within the scope of reasonable living consumption needs, addressing issues in practice where some purchasers make large purchases and seek high compensation beyond their reasonable living needs, disrupting market order and infringing on the legitimate rights and interests of producers and operators. There has been debate in practice regarding whether this rule applies only to “buyers who knowingly purchase fake goods” or to all purchasers, including ordinary consumers. The punitive damages system stipulated in Article 148, Paragraph 2 of the Food Safety Law and Article 144, Paragraph 3 of the Drug Administration Law (hereinafter referred to as the “Drug Administration Law”) aims to protect consumer interests. More accurately, the object of protection is the consumer behavior. The nature of the behavior of the same subject may vary in different contexts. For example, a natural person operates a restaurant and purchases five barrels of cooking oil from an operator, one for household consumption and four for restaurant operations. After discovering that the cooking oil does not meet food safety standards, the person sues the operator for punitive damages on all five barrels. Only the behavior of purchasing the one barrel for household consumption qualifies as consumer behavior, and the tenfold punitive damages claim for that barrel should be supported. The “Interpretation” upholds the scope of living consumption needs as the condition for applying the punitive damages system in food and drug cases, thereby unifying judicial standards.
II. Establishing Rules for Refunds and the Return of Food and Drugs
In the context of the “refund one, pay ten” compensation liability in food and drug cases, “refund one” and “pay ten” represent different types of liabilities. The former is compensatory, primarily aimed at compensating for losses, while the latter is punitive, aimed at punishing and deterring illegal activities. Article 2 of the “Interpretation” stipulates the “refund one” liability. According to Article 157 of the Civil Code of the People’s Republic of China (hereinafter referred to as the “Civil Code"), in the event of an invalid contract, property should be returned or compensation should be made. Therefore, Article 2, Paragraph 1 of the “Interpretation” states: “If the purchaser knew that the food purchased did not meet food safety standards or that the drug purchased was counterfeit or substandard, and requests the operator to refund the payment after purchase, the people’s court shall support the claim.”
In accordance with Article 157 of the Civil Code, when the operator refunds the payment to the purchaser, the purchaser should also return the food or drugs to the operator. If the return is not possible, compensation should be made. However, if the returned food or drugs re-enter the market, it could harm consumer rights. In response to this, Paragraph 2 of Article 1 of the “Interpretation” (Draft for Comments) stipulates: “If the operator requests the purchaser to return the food or drugs, the people’s court shall support it according to law. If the food or drugs returned cannot be resold, the people’s court may explain this in the judgment document.” During the solicitation of opinions, the main concern regarding this provision was that the people’s courts or administrative authorities should take measures such as harmless treatment or destruction of problematic food or drugs to prevent them from re-entering the market. After consideration, the Supreme Court adopted this suggestion and amended the provision: first, it stipulates that if the food label, mark, or instruction does not meet food safety standards, and the food producer can take remedial measures to ensure food safety, the operator has the right to request the purchaser to return the food or drugs; second, it stipulates that if harmless treatment, destruction, or other measures should be taken, they should be handled in accordance with the relevant provisions of the Food Safety Law and the Drug Administration Law.
III. Purchasing Agents Should Bear Punitive Damages Liability According to Law
With the development of the internet economy, purchasing agents have become an important shopping method for consumers. There are differing views on the liability of purchasing agents in practice, and the “Interpretation” addresses this issue. During the drafting of the “Interpretation,” two viewpoints emerged regarding the liability of purchasing agents: one is that a commission-agent relationship is formed between the purchasing agent and the consumer, and the legal consequences of the agent’s actions should be borne by the consumer as the principal. Since the type and quantity of food or drugs purchased are determined by the consumer, the purchasing agent should not bear punitive damages liability. The other view is that purchasing agents, as operators, should bear the liability of operators. If a purchasing agent knowingly purchases food that does not meet safety standards or counterfeit or substandard drugs, they should bear punitive damages liability.
Article 3 of the “Interpretation” takes into account various opinions and stipulates different liabilities for different types of purchasing behaviors. First, incidental or mutual assistance purchasing among the public does not apply to punitive damages liability. Such purchasing behavior does not constitute business activity, and the purchasing agent should not bear the punitive damages liability that should be borne by the operator. Second, purchasing agents who engage in purchasing as a business activity are considered operators and should bear punitive damages liability according to law. If a purchasing agent, engaged in business, knowingly purchases food or drugs that do not meet safety standards or are counterfeit or substandard, they should bear punitive damages liability according to law.
Paragraph 2 of Article 3 of the “Interpretation” stipulates the right of recourse for purchasing agents. First, it stipulates that after bearing punitive damages liability, purchasing agents have no right of recourse against the producer. Punitive damages liability is aimed at punishing and deterring illegal activities. Since the purchasing agent bears punitive damages liability for their own fault, allowing them to seek recourse against the producer would not help deter illegal purchasing activities. Second, it stipulates that if the agent did not know that the purchased food or drugs did not meet safety standards and bore compensation liability to the purchaser, they have the right to seek recourse against the producer according to law. The provision on the right of recourse for purchasing agents also applies to other operators since the nature of purchasing as a business is similar to other business activities.
IV. Conditions Under Which Small Workshops and Others Bear Punitive Damages Liability
There are differing views in practice on whether small food production workshops and food vendors that produce or sell food that does not meet safety standards are subject to punitive damages liability under Article 148, Paragraph 2 of the Food Safety Law. The first view is that they should not be subject to punitive damages. The reason is that Article 36, Paragraph 3 of the Food Safety Law stipulates: “Specific management measures for small food production workshops and food vendors shall be formulated by the provinces, autonomous regions, and municipalities directly under the central government.” Article 127 stipulates: “Punishment for illegal activities of small food production workshops and food vendors shall be carried out in accordance with the specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government.” According to these provisions, small food production workshops and food vendors are managed by provinces, autonomous regions, and municipalities directly under the central government, and the punitive damages provisions of the Food Safety Law do not apply to them. The second view is that they should be subject to punitive damages. The reason is that people’s courts should implement the “strictest standards” requirement. Applying punitive damages to small food production workshops and food vendors under the Food Safety Law helps crack down on “black workshops” and protects food safety. Moreover, Article 148 of the Food Safety Law does not exempt small food production workshops and food vendors from punitive damages. Given the large number of small food production workshops and food vendors and their close relationship to public health, Article 4, Paragraph 1 of the “Interpretation” stipulates that purchasers have the right to request the producer or operator to bear punitive damages liability under Article 148, Paragraph 2 of the Food Safety Law if the food produced or sold by small food production workshops and food vendors does not meet food safety standards.
Article 127 of the Food Safety Law stipulates that punishment for illegal activities of small food production workshops and food vendors shall be carried out in accordance with the specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government. In practice, there are cases where the determination of whether small food production workshops and food vendors bear punitive damages liability is based on whether the food complies with specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government, rather than whether it meets food safety standards. This is inconsistent with the provisions of Article 148, Paragraph 2 of the Food Safety Law. To address this issue, Article 4, Paragraph 2 of the “Interpretation” stipulates that the liability of small food production workshops and food vendors should not be based on whether the food complies with specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government, but rather on whether it meets food safety standards, to avoid unjustly increasing the liability of small food production workshops and food vendors.
When applying the punitive damages rules for food safety, the principle of systematic interpretation should be adhered to. The obligations of small food production workshops and food vendors under the Food Safety Law are mainly stipulated in Article 36, Paragraph 1: “Small food production workshops and food vendors engaged in food production and operation activities shall comply with the food safety requirements commensurate with their production and operation scale and conditions as stipulated by this Law, ensure that the food produced and operated is hygienic, non-toxic, and harmless, and the food safety supervision and management departments shall strengthen supervision and management of them.” When handling punitive damages disputes involving small food production workshops and food vendors, people’s courts should focus on whether the food they produce or operate meets the substantive food safety requirements of being hygienic, non-toxic, and harmless. The courts should strictly implement the “strictest standards” requirement to protect food safety according to law, while also considering the actual conditions of small food production workshops and food vendors. The courts should protect the rights and legitimate business operations of lawful and honest small food production workshops and food vendors, while also cracking down on “black workshops” that produce and sell counterfeit and substandard food. The typical case “Lu v. Pickle Workshop Product Liability Dispute,” published by the Supreme People’s Court in August 2024, also clarified the judicial rule that small workshops that produce and sell safe and harmless but unpackaged food without marked production dates and shelf life do not bear punitive damages liability.
V. Clarifying the Relationship Between Food Safety Standards and Punitive Damages Liability
In practice, some views hold that according to Article 150 of the Food Safety Law, food safety refers to food being non-toxic, harmless, meeting the required nutritional standards, and not causing any acute, subacute, or chronic harm to human health. The scope of food safety standards is very broad, and some food may not meet food safety standards, particularly those related to the food production and operation process, but may still be safe. In such cases, it may not be appropriate to hold producers or operators liable for punitive damages. Due to the long-term and latent nature of the harm that unsafe food can cause to consumer health, it is difficult for consumers to prove whether food that does not meet safety standards will cause substantial harm to their health. To protect food safety and consumer rights, the “Interpretation” does not adopt this view.
Article 5 of the “Interpretation” stipulates the types of food safety standards that, if not met, will result in punitive damages liability. It should be noted that the article does not list “hygienic requirements for food production and operation processes,” but adds “and others” after each item. This “and others” refers to other unlisted items. According to this article, people’s courts cannot exclude the application of procedural food safety standards and should determine whether non-compliance with procedural food safety standards affects food safety. Some producers have poor production environments, fail to separate raw and cooked food, or store hazardous substances with food; some operators violate procedural food safety standards in the packaging, transportation, and storage processes, leading to food contamination. Such violations of procedural food safety standards endanger food safety, and the operators should be held liable for punitive damages according to law.
VI. Establishing Rules for Identifying Flaws in Labels and Instructions
There is widespread public concern over whether producers or operators should be held liable for punitive damages if food labels or instructions do not meet food safety standards. The Supreme People’s Court attaches great importance to the significance of food labels and instructions for food safety and clearly rejects the erroneous view that “food labels and instructions are unimportant and do not affect food safety.” Article 11 of the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Civil Disputes over Food Safety (I)” issued by the Supreme People’s Court stipulates: “If the production and operation of pre-packaged food that does not clearly indicate the name, address, ingredients, or ingredient list of the producer, or does not clearly indicate the production date and shelf life, and the consumer claims that the producer or operator should bear punitive damages liability under Article 148, Paragraph 2 of the Food Safety Law, the people’s court shall support it, unless otherwise provided by laws, administrative regulations, or national food safety standards on labeling matters.” On this basis, Article 7 of the “Interpretation” stipulates that if the purchaser requests the producer or operator to pay punitive damages on the grounds that the food’s label or instructions do not meet food safety standards, and the producer or operator argues that the label or instructions do not meet food safety standards but do not affect food safety, the people’s court shall not support their defense.
The Food Safety Law stipulates that if the label or instructions have flaws that do not affect food safety and do not mislead consumers, the producer or operator shall not be liable for punitive damages. The identification of flaws in labels and instructions is a matter of widespread public concern, and the “Interpretation” specifically addresses this issue. It includes three aspects:
1. First, it stipulates the circumstances that do not constitute flaws in food labels or instructions. Article 6 of the “Interpretation” stipulates that failure to label, intentional mislabeling, and significant mislabeling do not constitute flaws in food labels or instructions. Failure to label refers to the failure to indicate matters that must be labeled according to food safety standards unless it falls under the circumstances stipulated in Article 8 of the “Interpretation” where labeling is not required. Intentional mislabeling refers to deliberately mislabeling information required by food safety standards, such as deliberately altering the shelf life or production date. The provision on intentional mislabeling is primarily aimed at the production and operation of counterfeit and substandard food, such as labeling false producer names and addresses;
2. Second, it stipulates the identification standards for flaws in labels and instructions. Article 7 of the “Interpretation” stipulates that flaws in labels and instructions must meet two conditions: first, they must not affect food safety. Whether food safety is affected should be substantively judged in accordance with the provisions on food safety in Article 150 of the Food Safety Law. Second, they must not mislead consumers. The “Interpretation” adopts a combination of subjective and objective principles to determine whether flaws in labels and instructions mislead consumers. If the purchaser knew of the flaws when purchasing the food, it does not constitute misleading; if the purchaser was unaware, the judgment is based on whether the flaws would cause an ordinary consumer to misunderstand food safety;
3. Third, it stipulates the forms of flaws in food labels and instructions. Article 8 of the “Interpretation,” based on the provisions of Article 148, Paragraph 2 of the Food Safety Law and drawing on the provisions of Article 37 of the “Measures for the Supervision and Administration of Food Production and Operation” issued by the State Administration for Market Regulation, clarifies the following circumstances that constitute flaws in labels and instructions: 1). The font size, style, or height of text, symbols, or numbers is not standardized, or the font size or height of foreign text is larger than Chinese characters; 2). There are typos, extra or missing words, traditional characters, or inaccurate foreign translations, but they do not mislead consumers about food safety; 3). The labeling of net content and specifications is not standardized, the use of common names or abbreviations for food, food additives, and ingredients is not standardized, the sequence, values, and units of the nutrition facts table or ingredient list are not standardized, or the rounding intervals of values and “0” boundary values in the nutrition facts table are not standardized, but they do not mislead consumers about food safety; 4). For food with no special storage conditions required, the storage conditions are not indicated as required; 5. Other flaws exist in food labels and instructions, but they do not affect food safety and do not mislead consumers.
Besides, during the drafting of the “Interpretation,” there were differing views on whether the situation where the label indicates “no added” for ingredients not actually added, but does not indicate the specific content as required, constitutes a flaw in the label or instructions. For example, Chinese consumers generally have high salt (sodium) intake, and the sodium content is particularly important for consumer health, especially for certain groups. The “National Food Safety Standard - General Rules for Pre-packaged Food Nutrition Labeling” stipulates in Article 2.4: “The core nutrients in the nutrition label include protein, fat, carbohydrates, and sodium.” Article 4.1 stipulates: “The mandatory labeling content in all pre-packaged food nutrition labels includes the content value of energy and core nutrients and their percentage of the nutrient reference value (NRV). When other ingredients are labeled, appropriate forms should be adopted to make the labeling of energy and core nutrients more prominent.” If the food label or instructions indicate “no added” salt (sodium) or other ingredients, but the ingredients themselves contain these ingredients, and the specific content is not indicated as required by food safety standards, consumers may mistakenly believe that the food does not contain salt (sodium) or other ingredients, leading to misunderstandings about food safety. Therefore, such situations should generally not be recognized as flaws in labels or instructions.
VII. Refining and Improving the Rules for Punitive Damages in Drugs
Drug safety is closely related to the protection of public health rights. Article 10 of the “Interpretation” stipulates: “If a purchaser buys counterfeit or substandard drugs for personal or family consumption needs and requests the producer or operator to pay punitive damages according to Article 144, Paragraph 3 of the Drug Administration Law, the people’s court shall support it according to law.” When the Drug Administration Law was revised in 2019, the provisions in Articles 48 and 49 of the 2015 version of the Drug Administration Law that provided for “treatment as counterfeit drugs” and “treatment as substandard drugs” were deleted. Whether punitive damages liability should be borne for the production and sale of drugs prohibited by the State Drug Administration or for the production and import of drugs that require approval under the Drug Administration Law but have not been approved, or for the sale of drugs that require inspection under the Drug Administration Law but have not been inspected, has been debated in practice. During the drafting of the “Interpretation,” the spirit of the 2019 revision of the Drug Administration Law, the diverse needs of the public, and the tradition and practice of Chinese medicine were fully considered. Article 11 of the “Interpretation” stipulates the following three types of behavior that should not bear punitive damages liability:
1. First, the production or sale of small amounts of drugs for self-rescue or mutual assistance without causing harm to others, not for profit. This behavior is self-rescue or mutual assistance among the public, not for profit, and does not constitute business activity, so punitive damages liability is not required.
2. Second, the production and sale of drugs based on traditional folk formulas in small quantities without causing harm to others. Chinese medicine is based on years of experience and hereditary traditions. Some individuals produce and sell drugs based on traditional folk formulas to meet the medical needs of local residents, and even enjoy high respect among some communities. The “Interpretation” takes into account the medical needs of some regions and the development of traditional medicine, stipulating that as long as such behavior does not cause harm to others, punitive damages liability is not required.
3. Third, the import of small quantities of legally marketed drugs from abroad for self-rescue or mutual assistance, not for profit. This behavior is also self-rescue or mutual assistance among the public, not for profit, and does not constitute business activity, so punitive damages liability is not required. This provision applies if two conditions are met: first, the drugs are imported in small quantities; second, the drugs are legally marketed abroad.
If there is already evidence proving that the disputed behavior involves the production, sale, or use of counterfeit or substandard drugs, such as administrative penalties issued by administrative agencies or inspection conclusions or opinions provided by administrative agencies or drug inspection institutions, the people’s court should determine whether the disputed behavior constitutes the production, sale, or use of counterfeit or substandard drugs based on the existing evidence.
VIII. Stipulating the Application Rules for Different Punitive Damages Liabilities
Article 9 of the “Interpretation” stipulates that consumers have the right to choose between “refund one, pay three” or “refund one, pay ten” to enhance consumer rights protection. This resolves the issue where the behavior of producers or operators simultaneously meets the conditions for both “refund one, pay three” and “refund one, pay ten,” and the consumer requests “refund one, pay ten” but is only protected by “refund one, pay three.” “Refund one, pay three” means that after being defrauded, in addition to requesting a refund of the payment, the consumer has the right to request the operator to pay punitive damages three times the price of the purchased goods or the cost of services, according to Article 55, Paragraph 1 of the Consumer Rights Protection Law of the People’s Republic of China (hereinafter referred to as the “Consumer Rights Protection Law”). “Refund one, pay ten” means that after purchasing food that does not meet food safety standards or counterfeit or substandard drugs, in addition to requesting a refund of the payment, the consumer has the right to request the producer or operator to pay punitive damages ten times the price, according to Article 148, Paragraph 2 of the Food Safety Law or Article 144, Paragraph 3 of the Drug Administration Law. Consumers also have the right to request the producer or operator to pay punitive damages three times the loss according to the aforementioned provisions, but in practice, consumers often prefer “refund one, pay ten.” The article also stipulates that if consumers mistakenly file a claim for “refund one, pay ten,” they have the right to change it to “refund one, pay three” during the litigation. Since the changed claim does not exceed the scope of the original claim, the people’s court can make a ruling according to law without requiring consumers to formally change their claim, avoiding an increase in consumer rights protection costs and unnecessary procedural delays.
IX. Regulating Malicious High Compensation Claims
The punitive damages system for food and drugs has played a positive role in combating and deterring illegal production and operation of food and drugs, protecting food and drug safety, and safeguarding the legitimate rights and interests of consumers. However, some purchasers, in pursuit of improper benefits, use the provisions of the Food Safety Law, the Drug Administration Law, and the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Food and Drug Dispute Cases” to make purchases far beyond their reasonable living needs by increasing the payment amount, thereby achieving high compensation claims. Some purchasers, knowing that there are issues with the food or drugs, repeatedly purchase the same food or drugs produced or operated by the same producer or operator within a short period of time, seeking to increase compensation. These behaviors cause some producers or operators to bear significant liability for minor faults, deviating from the spirit of the Food Safety Law, the Drug Administration Law, and the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Food and Drug Dispute Cases,” and have sparked debate over whether “buyers who knowingly purchase fake goods” should be supported.
“Buyers who knowingly purchase fake goods” is not a legal concept. The public commonly refers to the behavior of purchasers who know that the food does not meet safety standards or that the drugs are counterfeit or substandard but still purchase and seek compensation as “buyers who knowingly purchase fake goods.” For a long time, there has been debate in society over whether “buyers who knowingly purchase fake goods” should be supported. In response, Article 3 of the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Food and Drug Dispute Cases” stipulates: “In disputes arising from food or drug quality issues, if the purchaser asserts rights against the producer or seller, and the producer or seller defends on the grounds that the purchaser knew of the quality issues but still purchased, the people’s court shall not support this defense.” In response to issues caused by “buyers who knowingly purchase fake goods” making large purchases and seeking high compensation beyond reasonable living needs, the Supreme People’s Court issued four typical cases in November 2023, clarifying that punitive damages claims within the scope of reasonable living consumption needs should be supported. The “Interpretation” further refines and improves the rules for regulating malicious high compensation claims by “buyers who knowingly purchase fake goods” in four aspects:
1. First, the “Interpretation” supports punitive damages claims for all purchasers within the scope of reasonable living consumption needs. For ordinary consumers, Article 1 of the “Interpretation” stipulates that if the purchaser buys food for personal or family living consumption needs, and there is no evidence that they knowingly purchased food that did not meet safety standards, the actual payment amount should be used as the base for calculating punitive damages at ten times the price. For “buyers who knowingly purchase fake goods,” the “Interpretation” stipulates that the claim for punitive damages should be supported within the scope of reasonable living consumption needs, taking into account factors such as shelf life, the usual consumption habits of ordinary consumers, and the frequency of purchases. The “Interpretation” unifies the conditions for supporting punitive damages claims for food and drugs under the standard of “reasonable living consumption needs.” However, when determining whether the claim exceeds “reasonable living consumption needs,” it is necessary to consider the specific circumstances of the case to both combat and deter illegal production and sale of food and drugs and regulate malicious high compensation claims by “buyers who knowingly purchase fake goods,” while avoiding increasing the costs of consumer rights protection for ordinary consumers.
2. Second, the “Interpretation” stipulates that the producer or operator bears the burden of proof for “buyers who knowingly purchase fake goods.” According to the principle of “he who asserts must prove,” Paragraph 3 of Article 12 of the “Interpretation” stipulates that if the producer or operator claims that the purchaser knowingly purchased food that did not meet safety standards and is seeking compensation, they must provide evidence to support their claim. If the producer or operator cannot prove that the purchaser is a “buyer who knowingly purchased fake goods,” the actual payment amount of the purchaser should still be used as the base for calculating punitive damages at ten times the price.
3. Third, the “Interpretation” stipulates the calculation rules for punitive damages in cases of repeated purchases and claims. Article 13 of the “Interpretation” stipulates that in cases where the purchaser makes repeated purchases of the same non-compliant food from the same operator and seeks compensation, the claim for punitive damages should be supported within the scope of reasonable living consumption needs based on the total quantity of multiple purchases of the same food. For example, in the typical case “Zhang v. Shanghai Fresh Food Company Sales Contract Dispute” issued by the Supreme People’s Court in November 2023, the purchaser, knowing that the salted duck eggs were just past their shelf life, made two purchases within two days, buying 46 salted duck eggs, paying separately for each egg, thereby creating 46 separate purchase records. The purchaser then used the provision in Article 148, Paragraph 2 of the Food Safety Law, which sets minimum punitive damages amount of 1,000 yuan, to request compensation of 1,000 yuan for each egg, totaling 46,000 yuan. Although the purchaser’s behavior of making 46 purchases within two days, buying one salted duck egg each time, is significantly different from the usual consumption habits, the total number of salted duck eggs purchased by the purchaser did not exceed reasonable living consumption needs. The court of first instance used the total price of the 46 salted duck eggs as the base for calculating punitive damages at ten times the price, thereby combating and deterring the illegal sale of expired salted duck eggs while regulating malicious high compensation claims according to law. During the drafting of the “Interpretation,” some suggested that if the purchaser has already claimed compensation from one operator, their claim against other operators for the same food should not be supported. The “Interpretation” does not adopt this view. Illegal operators should not be exempt from punitive damages liability because other operators have borne punitive damages.
4. Fourth, the “Interpretation” stipulates the calculation rules for punitive damages in cases of repeated purchases and multiple claims. Article 14 of the “Interpretation” stipulates that for purchasers who make repeated purchases of the same problematic food from the same operator and seek multiple claims, only punitive damages within the scope of reasonable living consumption needs should be supported for “buyers who knowingly purchase fake goods.” Article 13 of the “Interpretation” applies to cases where repeated purchases and a single claim are made within a short period of time, while Article 14 applies to cases where repeated purchases and multiple claims are made within a short period of time. In practice, some purchasers, seeking high punitive damages, file separate lawsuits for each purchase of food. Taking the above case as an example, if the purchaser files separate lawsuits for the 46 purchases, the people’s court should review whether each lawsuit exceeds reasonable living consumption needs. When determining reasonable living consumption needs, factors such as shelf life, the usual consumption habits of ordinary consumers, and the frequency of purchases should be considered. Considering “frequency of purchases” means that for subsequent lawsuits filed by the purchaser, the court should consider both the portion that has already been compensated in previous cases and the time interval between purchases. The amount of punitive damages that “buyers who knowingly purchase fake goods” can obtain under this provision is generally the same as under Article 13 of the “Interpretation,” and they cannot obtain greater benefits due to different litigation strategies. However, if the operator continues to sell expired salted duck eggs after being ordered to bear punitive damages, and the purchaser makes further purchases and seeks compensation, the claim for punitive damages within the scope of reasonable living consumption needs should still be supported until the operator ceases the illegal activity.
X. Combating Illegal Claims According to Law
The people’s courts protect the legitimate rights and interests of both consumers and producers and operators according to law; they protect rights protection actions according to law while severely punishing illegal claims; they promote lawful business operations by operators while advocating for honest rights protection by purchasers. In practice, some purchasers, in pursuit of illegal benefits, smuggle expired food into stores, purchase it, and then claim compensation from the operator; some conspire, with one person hiding expired food and another purchasing it to claim compensation from the operator; some falsify the production dates of food and drugs and claim compensation from the producer or operator. Such malicious behavior of fabricating the illegal production and operation of food and drugs by producers or operators and making illegal claims damages the interests of producers and operators, disrupts production and business order, and consumes judicial and administrative resources. The people’s courts will punish such behavior according to law.
Article 15 of the “Interpretation” stipulates that if purchasers maliciously fabricate the illegal production and operation of food or drugs by producers or operators and extort compensation through complaints or lawsuits, suspected of extortion, the people’s courts shall promptly transfer relevant clues and materials regarding illegal crimes to public security organs. Whether the purchaser’s behavior constitutes the crime of extortion should be determined according to the Criminal Law of the People’s Republic of China and other relevant laws.
Article 16 of the “Interpretation” stipulates the handling of purchasers who maliciously fabricate the illegal production and operation of food or drugs by producers or operators and file lawsuits to claim compensation: 1) first, the purchaser’s lawsuit should be dismissed; 2) second, false litigation actors should be fined or detained; 3) third, the people’s courts should support the producer or operator’s claim for compensation for damages caused by the purchaser. By increasing the cost of illegal behavior, illegal claims can be deterred.
Article 17 of the “Interpretation” also stipulates that if the purchaser’s behavior is suspected of constituting the crime of false litigation, the people’s courts should promptly transfer relevant clues and materials regarding illegal crimes to public security organs to punish illegal claims, protect the legitimate rights and interests of producers and operators, and maintain normal market order.
Comment
In summary, the “Interpretation” issued by the Supreme People’s Court provides detailed and clear regulations to ensure food and drug safety and protect the legitimate rights and interests of consumers. Through the regulation of key issues such as consumer rights protection, refund and return rules, the liability of purchasing agents, the liability of small workshops, and the identification of flaws in labels and instructions, the “Interpretation” further clarifies the applicable conditions and standards for determining punitive damages liability. At the same time, the “Interpretation” also makes specific arrangements for regulating malicious high compensation claims and combating illegal claims, ensuring that the rights of lawful operators are not infringed upon by improper actions. Overall, this judicial interpretation not only unifies judicial standards at the legal level but also provides clearer guidance for the future adjudication of related cases, aiming to balance consumer protection and market order, thereby effectively promoting the realization of social fairness and justice.
The “Interpretation” comprises 19 articles that provide provisions on protecting the rights of ordinary consumers, refunding and returning food and drugs, the liability of purchasing agents, the liability of small workshops, the identification of flaws in labels and instructions, the concurrence of punitive damage liability, the responsibility for producing and selling counterfeit and substandard drugs, the determination of the punitive damages base, the regulation of repeated purchasing for claims, and the punishment of illegal claims.
Significant changes that will result from the introduction and implementation of the Interpretation in the following areas:
1. The rule of punitive damages of ten times the price will not apply to large purchases and high claims by purchasers exceeding the reasonable needs of daily consumption, and the actual price paid will be used as the basis for calculating the punitive damages.2. The following requirements have been put forward for the food and drugs requested to be returned by the operator: if the food labeling, marking or instructions do not conform to the food safety standards, and the food producer can continue to sell the food in accordance with the law if remedial measures are taken and food safety can be guaranteed, the operator has the right to request the purchaser to return the food and drugs; however, according to the regulations, if harmless disposal, destruction and other measures need to be taken for the food and drugs, then the Food Safety Law will be applied, the operator’s request for the return will not be supported. 3. The occasional and mutually supportive nature of purchasing on behalf of others does not fall under punitive damages liability, but commercial purchasing on behalf of others should bear punitive damages liability according to the law. 4. Food production and processing workshops, as well as food vendors, bear punitive damages liability not based on whether the food complies with specific management measures formulated by provinces, autonomous regions, or municipalities, but rather on whether the food meets food safety standards.5. Food labeling, instructions do not meet food safety standards, but does not affect food safety is no longer a producer or operator of punitive damages defense.
The following is a breakdown of the key provisions of the judicial interpretation.
I. For Ordinary Consumers, the Actual Payment Should Generally Be the Basis for Calculating Punitive Damages
In November 2023, the Supreme People’s Court released four typical cases that clarified the support for punitive damages claims within the scope of reasonable living consumption needs, addressing issues in practice where some purchasers make large purchases and seek high compensation beyond their reasonable living needs, disrupting market order and infringing on the legitimate rights and interests of producers and operators. There has been debate in practice regarding whether this rule applies only to “buyers who knowingly purchase fake goods” or to all purchasers, including ordinary consumers. The punitive damages system stipulated in Article 148, Paragraph 2 of the Food Safety Law and Article 144, Paragraph 3 of the Drug Administration Law (hereinafter referred to as the “Drug Administration Law”) aims to protect consumer interests. More accurately, the object of protection is the consumer behavior. The nature of the behavior of the same subject may vary in different contexts. For example, a natural person operates a restaurant and purchases five barrels of cooking oil from an operator, one for household consumption and four for restaurant operations. After discovering that the cooking oil does not meet food safety standards, the person sues the operator for punitive damages on all five barrels. Only the behavior of purchasing the one barrel for household consumption qualifies as consumer behavior, and the tenfold punitive damages claim for that barrel should be supported. The “Interpretation” upholds the scope of living consumption needs as the condition for applying the punitive damages system in food and drug cases, thereby unifying judicial standards.
II. Establishing Rules for Refunds and the Return of Food and Drugs
In the context of the “refund one, pay ten” compensation liability in food and drug cases, “refund one” and “pay ten” represent different types of liabilities. The former is compensatory, primarily aimed at compensating for losses, while the latter is punitive, aimed at punishing and deterring illegal activities. Article 2 of the “Interpretation” stipulates the “refund one” liability. According to Article 157 of the Civil Code of the People’s Republic of China (hereinafter referred to as the “Civil Code"), in the event of an invalid contract, property should be returned or compensation should be made. Therefore, Article 2, Paragraph 1 of the “Interpretation” states: “If the purchaser knew that the food purchased did not meet food safety standards or that the drug purchased was counterfeit or substandard, and requests the operator to refund the payment after purchase, the people’s court shall support the claim.”
In accordance with Article 157 of the Civil Code, when the operator refunds the payment to the purchaser, the purchaser should also return the food or drugs to the operator. If the return is not possible, compensation should be made. However, if the returned food or drugs re-enter the market, it could harm consumer rights. In response to this, Paragraph 2 of Article 1 of the “Interpretation” (Draft for Comments) stipulates: “If the operator requests the purchaser to return the food or drugs, the people’s court shall support it according to law. If the food or drugs returned cannot be resold, the people’s court may explain this in the judgment document.” During the solicitation of opinions, the main concern regarding this provision was that the people’s courts or administrative authorities should take measures such as harmless treatment or destruction of problematic food or drugs to prevent them from re-entering the market. After consideration, the Supreme Court adopted this suggestion and amended the provision: first, it stipulates that if the food label, mark, or instruction does not meet food safety standards, and the food producer can take remedial measures to ensure food safety, the operator has the right to request the purchaser to return the food or drugs; second, it stipulates that if harmless treatment, destruction, or other measures should be taken, they should be handled in accordance with the relevant provisions of the Food Safety Law and the Drug Administration Law.
III. Purchasing Agents Should Bear Punitive Damages Liability According to Law
With the development of the internet economy, purchasing agents have become an important shopping method for consumers. There are differing views on the liability of purchasing agents in practice, and the “Interpretation” addresses this issue. During the drafting of the “Interpretation,” two viewpoints emerged regarding the liability of purchasing agents: one is that a commission-agent relationship is formed between the purchasing agent and the consumer, and the legal consequences of the agent’s actions should be borne by the consumer as the principal. Since the type and quantity of food or drugs purchased are determined by the consumer, the purchasing agent should not bear punitive damages liability. The other view is that purchasing agents, as operators, should bear the liability of operators. If a purchasing agent knowingly purchases food that does not meet safety standards or counterfeit or substandard drugs, they should bear punitive damages liability.
Article 3 of the “Interpretation” takes into account various opinions and stipulates different liabilities for different types of purchasing behaviors. First, incidental or mutual assistance purchasing among the public does not apply to punitive damages liability. Such purchasing behavior does not constitute business activity, and the purchasing agent should not bear the punitive damages liability that should be borne by the operator. Second, purchasing agents who engage in purchasing as a business activity are considered operators and should bear punitive damages liability according to law. If a purchasing agent, engaged in business, knowingly purchases food or drugs that do not meet safety standards or are counterfeit or substandard, they should bear punitive damages liability according to law.
Paragraph 2 of Article 3 of the “Interpretation” stipulates the right of recourse for purchasing agents. First, it stipulates that after bearing punitive damages liability, purchasing agents have no right of recourse against the producer. Punitive damages liability is aimed at punishing and deterring illegal activities. Since the purchasing agent bears punitive damages liability for their own fault, allowing them to seek recourse against the producer would not help deter illegal purchasing activities. Second, it stipulates that if the agent did not know that the purchased food or drugs did not meet safety standards and bore compensation liability to the purchaser, they have the right to seek recourse against the producer according to law. The provision on the right of recourse for purchasing agents also applies to other operators since the nature of purchasing as a business is similar to other business activities.
IV. Conditions Under Which Small Workshops and Others Bear Punitive Damages Liability
There are differing views in practice on whether small food production workshops and food vendors that produce or sell food that does not meet safety standards are subject to punitive damages liability under Article 148, Paragraph 2 of the Food Safety Law. The first view is that they should not be subject to punitive damages. The reason is that Article 36, Paragraph 3 of the Food Safety Law stipulates: “Specific management measures for small food production workshops and food vendors shall be formulated by the provinces, autonomous regions, and municipalities directly under the central government.” Article 127 stipulates: “Punishment for illegal activities of small food production workshops and food vendors shall be carried out in accordance with the specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government.” According to these provisions, small food production workshops and food vendors are managed by provinces, autonomous regions, and municipalities directly under the central government, and the punitive damages provisions of the Food Safety Law do not apply to them. The second view is that they should be subject to punitive damages. The reason is that people’s courts should implement the “strictest standards” requirement. Applying punitive damages to small food production workshops and food vendors under the Food Safety Law helps crack down on “black workshops” and protects food safety. Moreover, Article 148 of the Food Safety Law does not exempt small food production workshops and food vendors from punitive damages. Given the large number of small food production workshops and food vendors and their close relationship to public health, Article 4, Paragraph 1 of the “Interpretation” stipulates that purchasers have the right to request the producer or operator to bear punitive damages liability under Article 148, Paragraph 2 of the Food Safety Law if the food produced or sold by small food production workshops and food vendors does not meet food safety standards.
Article 127 of the Food Safety Law stipulates that punishment for illegal activities of small food production workshops and food vendors shall be carried out in accordance with the specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government. In practice, there are cases where the determination of whether small food production workshops and food vendors bear punitive damages liability is based on whether the food complies with specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government, rather than whether it meets food safety standards. This is inconsistent with the provisions of Article 148, Paragraph 2 of the Food Safety Law. To address this issue, Article 4, Paragraph 2 of the “Interpretation” stipulates that the liability of small food production workshops and food vendors should not be based on whether the food complies with specific management measures formulated by the provinces, autonomous regions, and municipalities directly under the central government, but rather on whether it meets food safety standards, to avoid unjustly increasing the liability of small food production workshops and food vendors.
When applying the punitive damages rules for food safety, the principle of systematic interpretation should be adhered to. The obligations of small food production workshops and food vendors under the Food Safety Law are mainly stipulated in Article 36, Paragraph 1: “Small food production workshops and food vendors engaged in food production and operation activities shall comply with the food safety requirements commensurate with their production and operation scale and conditions as stipulated by this Law, ensure that the food produced and operated is hygienic, non-toxic, and harmless, and the food safety supervision and management departments shall strengthen supervision and management of them.” When handling punitive damages disputes involving small food production workshops and food vendors, people’s courts should focus on whether the food they produce or operate meets the substantive food safety requirements of being hygienic, non-toxic, and harmless. The courts should strictly implement the “strictest standards” requirement to protect food safety according to law, while also considering the actual conditions of small food production workshops and food vendors. The courts should protect the rights and legitimate business operations of lawful and honest small food production workshops and food vendors, while also cracking down on “black workshops” that produce and sell counterfeit and substandard food. The typical case “Lu v. Pickle Workshop Product Liability Dispute,” published by the Supreme People’s Court in August 2024, also clarified the judicial rule that small workshops that produce and sell safe and harmless but unpackaged food without marked production dates and shelf life do not bear punitive damages liability.
V. Clarifying the Relationship Between Food Safety Standards and Punitive Damages Liability
In practice, some views hold that according to Article 150 of the Food Safety Law, food safety refers to food being non-toxic, harmless, meeting the required nutritional standards, and not causing any acute, subacute, or chronic harm to human health. The scope of food safety standards is very broad, and some food may not meet food safety standards, particularly those related to the food production and operation process, but may still be safe. In such cases, it may not be appropriate to hold producers or operators liable for punitive damages. Due to the long-term and latent nature of the harm that unsafe food can cause to consumer health, it is difficult for consumers to prove whether food that does not meet safety standards will cause substantial harm to their health. To protect food safety and consumer rights, the “Interpretation” does not adopt this view.
Article 5 of the “Interpretation” stipulates the types of food safety standards that, if not met, will result in punitive damages liability. It should be noted that the article does not list “hygienic requirements for food production and operation processes,” but adds “and others” after each item. This “and others” refers to other unlisted items. According to this article, people’s courts cannot exclude the application of procedural food safety standards and should determine whether non-compliance with procedural food safety standards affects food safety. Some producers have poor production environments, fail to separate raw and cooked food, or store hazardous substances with food; some operators violate procedural food safety standards in the packaging, transportation, and storage processes, leading to food contamination. Such violations of procedural food safety standards endanger food safety, and the operators should be held liable for punitive damages according to law.
VI. Establishing Rules for Identifying Flaws in Labels and Instructions
There is widespread public concern over whether producers or operators should be held liable for punitive damages if food labels or instructions do not meet food safety standards. The Supreme People’s Court attaches great importance to the significance of food labels and instructions for food safety and clearly rejects the erroneous view that “food labels and instructions are unimportant and do not affect food safety.” Article 11 of the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Civil Disputes over Food Safety (I)” issued by the Supreme People’s Court stipulates: “If the production and operation of pre-packaged food that does not clearly indicate the name, address, ingredients, or ingredient list of the producer, or does not clearly indicate the production date and shelf life, and the consumer claims that the producer or operator should bear punitive damages liability under Article 148, Paragraph 2 of the Food Safety Law, the people’s court shall support it, unless otherwise provided by laws, administrative regulations, or national food safety standards on labeling matters.” On this basis, Article 7 of the “Interpretation” stipulates that if the purchaser requests the producer or operator to pay punitive damages on the grounds that the food’s label or instructions do not meet food safety standards, and the producer or operator argues that the label or instructions do not meet food safety standards but do not affect food safety, the people’s court shall not support their defense.
The Food Safety Law stipulates that if the label or instructions have flaws that do not affect food safety and do not mislead consumers, the producer or operator shall not be liable for punitive damages. The identification of flaws in labels and instructions is a matter of widespread public concern, and the “Interpretation” specifically addresses this issue. It includes three aspects:
1. First, it stipulates the circumstances that do not constitute flaws in food labels or instructions. Article 6 of the “Interpretation” stipulates that failure to label, intentional mislabeling, and significant mislabeling do not constitute flaws in food labels or instructions. Failure to label refers to the failure to indicate matters that must be labeled according to food safety standards unless it falls under the circumstances stipulated in Article 8 of the “Interpretation” where labeling is not required. Intentional mislabeling refers to deliberately mislabeling information required by food safety standards, such as deliberately altering the shelf life or production date. The provision on intentional mislabeling is primarily aimed at the production and operation of counterfeit and substandard food, such as labeling false producer names and addresses;
2. Second, it stipulates the identification standards for flaws in labels and instructions. Article 7 of the “Interpretation” stipulates that flaws in labels and instructions must meet two conditions: first, they must not affect food safety. Whether food safety is affected should be substantively judged in accordance with the provisions on food safety in Article 150 of the Food Safety Law. Second, they must not mislead consumers. The “Interpretation” adopts a combination of subjective and objective principles to determine whether flaws in labels and instructions mislead consumers. If the purchaser knew of the flaws when purchasing the food, it does not constitute misleading; if the purchaser was unaware, the judgment is based on whether the flaws would cause an ordinary consumer to misunderstand food safety;
3. Third, it stipulates the forms of flaws in food labels and instructions. Article 8 of the “Interpretation,” based on the provisions of Article 148, Paragraph 2 of the Food Safety Law and drawing on the provisions of Article 37 of the “Measures for the Supervision and Administration of Food Production and Operation” issued by the State Administration for Market Regulation, clarifies the following circumstances that constitute flaws in labels and instructions: 1). The font size, style, or height of text, symbols, or numbers is not standardized, or the font size or height of foreign text is larger than Chinese characters; 2). There are typos, extra or missing words, traditional characters, or inaccurate foreign translations, but they do not mislead consumers about food safety; 3). The labeling of net content and specifications is not standardized, the use of common names or abbreviations for food, food additives, and ingredients is not standardized, the sequence, values, and units of the nutrition facts table or ingredient list are not standardized, or the rounding intervals of values and “0” boundary values in the nutrition facts table are not standardized, but they do not mislead consumers about food safety; 4). For food with no special storage conditions required, the storage conditions are not indicated as required; 5. Other flaws exist in food labels and instructions, but they do not affect food safety and do not mislead consumers.
Besides, during the drafting of the “Interpretation,” there were differing views on whether the situation where the label indicates “no added” for ingredients not actually added, but does not indicate the specific content as required, constitutes a flaw in the label or instructions. For example, Chinese consumers generally have high salt (sodium) intake, and the sodium content is particularly important for consumer health, especially for certain groups. The “National Food Safety Standard - General Rules for Pre-packaged Food Nutrition Labeling” stipulates in Article 2.4: “The core nutrients in the nutrition label include protein, fat, carbohydrates, and sodium.” Article 4.1 stipulates: “The mandatory labeling content in all pre-packaged food nutrition labels includes the content value of energy and core nutrients and their percentage of the nutrient reference value (NRV). When other ingredients are labeled, appropriate forms should be adopted to make the labeling of energy and core nutrients more prominent.” If the food label or instructions indicate “no added” salt (sodium) or other ingredients, but the ingredients themselves contain these ingredients, and the specific content is not indicated as required by food safety standards, consumers may mistakenly believe that the food does not contain salt (sodium) or other ingredients, leading to misunderstandings about food safety. Therefore, such situations should generally not be recognized as flaws in labels or instructions.
VII. Refining and Improving the Rules for Punitive Damages in Drugs
Drug safety is closely related to the protection of public health rights. Article 10 of the “Interpretation” stipulates: “If a purchaser buys counterfeit or substandard drugs for personal or family consumption needs and requests the producer or operator to pay punitive damages according to Article 144, Paragraph 3 of the Drug Administration Law, the people’s court shall support it according to law.” When the Drug Administration Law was revised in 2019, the provisions in Articles 48 and 49 of the 2015 version of the Drug Administration Law that provided for “treatment as counterfeit drugs” and “treatment as substandard drugs” were deleted. Whether punitive damages liability should be borne for the production and sale of drugs prohibited by the State Drug Administration or for the production and import of drugs that require approval under the Drug Administration Law but have not been approved, or for the sale of drugs that require inspection under the Drug Administration Law but have not been inspected, has been debated in practice. During the drafting of the “Interpretation,” the spirit of the 2019 revision of the Drug Administration Law, the diverse needs of the public, and the tradition and practice of Chinese medicine were fully considered. Article 11 of the “Interpretation” stipulates the following three types of behavior that should not bear punitive damages liability:
1. First, the production or sale of small amounts of drugs for self-rescue or mutual assistance without causing harm to others, not for profit. This behavior is self-rescue or mutual assistance among the public, not for profit, and does not constitute business activity, so punitive damages liability is not required.
2. Second, the production and sale of drugs based on traditional folk formulas in small quantities without causing harm to others. Chinese medicine is based on years of experience and hereditary traditions. Some individuals produce and sell drugs based on traditional folk formulas to meet the medical needs of local residents, and even enjoy high respect among some communities. The “Interpretation” takes into account the medical needs of some regions and the development of traditional medicine, stipulating that as long as such behavior does not cause harm to others, punitive damages liability is not required.
3. Third, the import of small quantities of legally marketed drugs from abroad for self-rescue or mutual assistance, not for profit. This behavior is also self-rescue or mutual assistance among the public, not for profit, and does not constitute business activity, so punitive damages liability is not required. This provision applies if two conditions are met: first, the drugs are imported in small quantities; second, the drugs are legally marketed abroad.
If there is already evidence proving that the disputed behavior involves the production, sale, or use of counterfeit or substandard drugs, such as administrative penalties issued by administrative agencies or inspection conclusions or opinions provided by administrative agencies or drug inspection institutions, the people’s court should determine whether the disputed behavior constitutes the production, sale, or use of counterfeit or substandard drugs based on the existing evidence.
VIII. Stipulating the Application Rules for Different Punitive Damages Liabilities
Article 9 of the “Interpretation” stipulates that consumers have the right to choose between “refund one, pay three” or “refund one, pay ten” to enhance consumer rights protection. This resolves the issue where the behavior of producers or operators simultaneously meets the conditions for both “refund one, pay three” and “refund one, pay ten,” and the consumer requests “refund one, pay ten” but is only protected by “refund one, pay three.” “Refund one, pay three” means that after being defrauded, in addition to requesting a refund of the payment, the consumer has the right to request the operator to pay punitive damages three times the price of the purchased goods or the cost of services, according to Article 55, Paragraph 1 of the Consumer Rights Protection Law of the People’s Republic of China (hereinafter referred to as the “Consumer Rights Protection Law”). “Refund one, pay ten” means that after purchasing food that does not meet food safety standards or counterfeit or substandard drugs, in addition to requesting a refund of the payment, the consumer has the right to request the producer or operator to pay punitive damages ten times the price, according to Article 148, Paragraph 2 of the Food Safety Law or Article 144, Paragraph 3 of the Drug Administration Law. Consumers also have the right to request the producer or operator to pay punitive damages three times the loss according to the aforementioned provisions, but in practice, consumers often prefer “refund one, pay ten.” The article also stipulates that if consumers mistakenly file a claim for “refund one, pay ten,” they have the right to change it to “refund one, pay three” during the litigation. Since the changed claim does not exceed the scope of the original claim, the people’s court can make a ruling according to law without requiring consumers to formally change their claim, avoiding an increase in consumer rights protection costs and unnecessary procedural delays.
IX. Regulating Malicious High Compensation Claims
The punitive damages system for food and drugs has played a positive role in combating and deterring illegal production and operation of food and drugs, protecting food and drug safety, and safeguarding the legitimate rights and interests of consumers. However, some purchasers, in pursuit of improper benefits, use the provisions of the Food Safety Law, the Drug Administration Law, and the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Food and Drug Dispute Cases” to make purchases far beyond their reasonable living needs by increasing the payment amount, thereby achieving high compensation claims. Some purchasers, knowing that there are issues with the food or drugs, repeatedly purchase the same food or drugs produced or operated by the same producer or operator within a short period of time, seeking to increase compensation. These behaviors cause some producers or operators to bear significant liability for minor faults, deviating from the spirit of the Food Safety Law, the Drug Administration Law, and the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Food and Drug Dispute Cases,” and have sparked debate over whether “buyers who knowingly purchase fake goods” should be supported.
“Buyers who knowingly purchase fake goods” is not a legal concept. The public commonly refers to the behavior of purchasers who know that the food does not meet safety standards or that the drugs are counterfeit or substandard but still purchase and seek compensation as “buyers who knowingly purchase fake goods.” For a long time, there has been debate in society over whether “buyers who knowingly purchase fake goods” should be supported. In response, Article 3 of the “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Food and Drug Dispute Cases” stipulates: “In disputes arising from food or drug quality issues, if the purchaser asserts rights against the producer or seller, and the producer or seller defends on the grounds that the purchaser knew of the quality issues but still purchased, the people’s court shall not support this defense.” In response to issues caused by “buyers who knowingly purchase fake goods” making large purchases and seeking high compensation beyond reasonable living needs, the Supreme People’s Court issued four typical cases in November 2023, clarifying that punitive damages claims within the scope of reasonable living consumption needs should be supported. The “Interpretation” further refines and improves the rules for regulating malicious high compensation claims by “buyers who knowingly purchase fake goods” in four aspects:
1. First, the “Interpretation” supports punitive damages claims for all purchasers within the scope of reasonable living consumption needs. For ordinary consumers, Article 1 of the “Interpretation” stipulates that if the purchaser buys food for personal or family living consumption needs, and there is no evidence that they knowingly purchased food that did not meet safety standards, the actual payment amount should be used as the base for calculating punitive damages at ten times the price. For “buyers who knowingly purchase fake goods,” the “Interpretation” stipulates that the claim for punitive damages should be supported within the scope of reasonable living consumption needs, taking into account factors such as shelf life, the usual consumption habits of ordinary consumers, and the frequency of purchases. The “Interpretation” unifies the conditions for supporting punitive damages claims for food and drugs under the standard of “reasonable living consumption needs.” However, when determining whether the claim exceeds “reasonable living consumption needs,” it is necessary to consider the specific circumstances of the case to both combat and deter illegal production and sale of food and drugs and regulate malicious high compensation claims by “buyers who knowingly purchase fake goods,” while avoiding increasing the costs of consumer rights protection for ordinary consumers.
2. Second, the “Interpretation” stipulates that the producer or operator bears the burden of proof for “buyers who knowingly purchase fake goods.” According to the principle of “he who asserts must prove,” Paragraph 3 of Article 12 of the “Interpretation” stipulates that if the producer or operator claims that the purchaser knowingly purchased food that did not meet safety standards and is seeking compensation, they must provide evidence to support their claim. If the producer or operator cannot prove that the purchaser is a “buyer who knowingly purchased fake goods,” the actual payment amount of the purchaser should still be used as the base for calculating punitive damages at ten times the price.
3. Third, the “Interpretation” stipulates the calculation rules for punitive damages in cases of repeated purchases and claims. Article 13 of the “Interpretation” stipulates that in cases where the purchaser makes repeated purchases of the same non-compliant food from the same operator and seeks compensation, the claim for punitive damages should be supported within the scope of reasonable living consumption needs based on the total quantity of multiple purchases of the same food. For example, in the typical case “Zhang v. Shanghai Fresh Food Company Sales Contract Dispute” issued by the Supreme People’s Court in November 2023, the purchaser, knowing that the salted duck eggs were just past their shelf life, made two purchases within two days, buying 46 salted duck eggs, paying separately for each egg, thereby creating 46 separate purchase records. The purchaser then used the provision in Article 148, Paragraph 2 of the Food Safety Law, which sets minimum punitive damages amount of 1,000 yuan, to request compensation of 1,000 yuan for each egg, totaling 46,000 yuan. Although the purchaser’s behavior of making 46 purchases within two days, buying one salted duck egg each time, is significantly different from the usual consumption habits, the total number of salted duck eggs purchased by the purchaser did not exceed reasonable living consumption needs. The court of first instance used the total price of the 46 salted duck eggs as the base for calculating punitive damages at ten times the price, thereby combating and deterring the illegal sale of expired salted duck eggs while regulating malicious high compensation claims according to law. During the drafting of the “Interpretation,” some suggested that if the purchaser has already claimed compensation from one operator, their claim against other operators for the same food should not be supported. The “Interpretation” does not adopt this view. Illegal operators should not be exempt from punitive damages liability because other operators have borne punitive damages.
4. Fourth, the “Interpretation” stipulates the calculation rules for punitive damages in cases of repeated purchases and multiple claims. Article 14 of the “Interpretation” stipulates that for purchasers who make repeated purchases of the same problematic food from the same operator and seek multiple claims, only punitive damages within the scope of reasonable living consumption needs should be supported for “buyers who knowingly purchase fake goods.” Article 13 of the “Interpretation” applies to cases where repeated purchases and a single claim are made within a short period of time, while Article 14 applies to cases where repeated purchases and multiple claims are made within a short period of time. In practice, some purchasers, seeking high punitive damages, file separate lawsuits for each purchase of food. Taking the above case as an example, if the purchaser files separate lawsuits for the 46 purchases, the people’s court should review whether each lawsuit exceeds reasonable living consumption needs. When determining reasonable living consumption needs, factors such as shelf life, the usual consumption habits of ordinary consumers, and the frequency of purchases should be considered. Considering “frequency of purchases” means that for subsequent lawsuits filed by the purchaser, the court should consider both the portion that has already been compensated in previous cases and the time interval between purchases. The amount of punitive damages that “buyers who knowingly purchase fake goods” can obtain under this provision is generally the same as under Article 13 of the “Interpretation,” and they cannot obtain greater benefits due to different litigation strategies. However, if the operator continues to sell expired salted duck eggs after being ordered to bear punitive damages, and the purchaser makes further purchases and seeks compensation, the claim for punitive damages within the scope of reasonable living consumption needs should still be supported until the operator ceases the illegal activity.
X. Combating Illegal Claims According to Law
The people’s courts protect the legitimate rights and interests of both consumers and producers and operators according to law; they protect rights protection actions according to law while severely punishing illegal claims; they promote lawful business operations by operators while advocating for honest rights protection by purchasers. In practice, some purchasers, in pursuit of illegal benefits, smuggle expired food into stores, purchase it, and then claim compensation from the operator; some conspire, with one person hiding expired food and another purchasing it to claim compensation from the operator; some falsify the production dates of food and drugs and claim compensation from the producer or operator. Such malicious behavior of fabricating the illegal production and operation of food and drugs by producers or operators and making illegal claims damages the interests of producers and operators, disrupts production and business order, and consumes judicial and administrative resources. The people’s courts will punish such behavior according to law.
Article 15 of the “Interpretation” stipulates that if purchasers maliciously fabricate the illegal production and operation of food or drugs by producers or operators and extort compensation through complaints or lawsuits, suspected of extortion, the people’s courts shall promptly transfer relevant clues and materials regarding illegal crimes to public security organs. Whether the purchaser’s behavior constitutes the crime of extortion should be determined according to the Criminal Law of the People’s Republic of China and other relevant laws.
Article 16 of the “Interpretation” stipulates the handling of purchasers who maliciously fabricate the illegal production and operation of food or drugs by producers or operators and file lawsuits to claim compensation: 1) first, the purchaser’s lawsuit should be dismissed; 2) second, false litigation actors should be fined or detained; 3) third, the people’s courts should support the producer or operator’s claim for compensation for damages caused by the purchaser. By increasing the cost of illegal behavior, illegal claims can be deterred.
Article 17 of the “Interpretation” also stipulates that if the purchaser’s behavior is suspected of constituting the crime of false litigation, the people’s courts should promptly transfer relevant clues and materials regarding illegal crimes to public security organs to punish illegal claims, protect the legitimate rights and interests of producers and operators, and maintain normal market order.
Comment
In summary, the “Interpretation” issued by the Supreme People’s Court provides detailed and clear regulations to ensure food and drug safety and protect the legitimate rights and interests of consumers. Through the regulation of key issues such as consumer rights protection, refund and return rules, the liability of purchasing agents, the liability of small workshops, and the identification of flaws in labels and instructions, the “Interpretation” further clarifies the applicable conditions and standards for determining punitive damages liability. At the same time, the “Interpretation” also makes specific arrangements for regulating malicious high compensation claims and combating illegal claims, ensuring that the rights of lawful operators are not infringed upon by improper actions. Overall, this judicial interpretation not only unifies judicial standards at the legal level but also provides clearer guidance for the future adjudication of related cases, aiming to balance consumer protection and market order, thereby effectively promoting the realization of social fairness and justice.