China Issues Judicial Interpretations on Food and Drugs Punitive Damages Disputes
Published 20 September 2024
Fei Dang
On August 21, 2024, the Supreme People’s Court of China (SPC) published the Interpretation by the Supreme People's Court of Several Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Punitive Damages for Food and Drugs (the Interpretations) and it has become effect on August 22, 2024.
The Interpretations contain 19 provisions and include key points, but not limited to, as follows:
Punitive damages for food that do not conform to food safety standards
In case the food purchased for the purpose of individual or family consumption does not conform to food safety standards and the purchaser requests the producer or operator to pay punitive damages, in accordance with the Article 148(2) of the Food Safety Law, the people’s court shall support such request. When there is no evidence to prove that the purchaser knew that the food purchased did not conform to food safety standards and still purchased it, the people's court shall, at the request of the purchaser, calculate punitive damages of ten times the price based on the price actually paid. [The said Article 148 (2) of the Food Safety Law provides that “Producing food that does not conform to food safety standards or operating food that is known to be not in conformity with food safety standards, the consumer may, in addition to claiming compensation for losses, demand from the producer or operator compensation of ten times the price or three times the loss; if the amount of increased compensation is less than one thousand yuan, it shall be one thousand yuan. However, the labels and instructions of the foodstuffs have defects that do not affect the safety of the foodstuffs and do not mislead the consumers are exempted.]
In case a food product does not comply with the food safety standards in respect of the limits of substances hazardous to human health in food, the varieties, scope of use and dosage requirements of food additives, the nutritional composition requirements of primary and secondary food products for specific groups of people, and the labeling, marking and specification requirements relating to hygiene, nutrition and other food safety requirements, as well as the quality requirements relating to food safety, when a purchaser requests the producer or operator to bear the liability for punitive damages in accordance with the Article 148 (2) of the Food Safety Law, the people's court shall support the request.
Defects of food labels and instructions that cannot require for punitive damages
In case a purchaser requests the producer or operator to pay punitive damages on the ground that the food label, instructions do not meet the food safety, and there are defects in the food label and instructions but also falling into one of the circumstances as follows, the people's court shall not support such request:(1) text, symbols, numbers, font size, font, character height is not standardized, or foreign language font size, character height is larger than those of the Chinese;(2) the occurrence of misspelled words, multiple words, omitted words, traditional Chinese characters or inaccurate foreign language translation, which will not lead to consumer misunderstanding of food safety;(3) the net content, specifications of the labeling method and format is not standardized, or food, food additives and ingredients used in the common name or abbreviation is not standardized, or the list of nutrients, ingredients, the order of the table, the value of the unit is not standardized, or the list of nutrients value of the modification interval, “0” threshold, the labeling unit is not standardized, which does not lead to misunderstanding of food safety by consumers;(4) food without special storage conditions does not label the storage conditions in accordance with the provisions;(5) other defects in the labels and instructions of food products, which do not affect food safety and do not mislead consumers.
Defenses for punitive damages under the Drug Administration Law
In case a drug purchased for personal or family consumption needs is a counterfeit or substandard drug, and the purchaser requests the producer or operator to pay punitive damages in accordance with the Article 144(3) of the Drug Administration Law, the people's court shall support such request in accordance with the law. Under the circumstance, if the producer or operator argues that it shall not apply to the Article 144(3) of the Drug Administration Law and there exists one of the following circumstances, the people’s court shall support such defense:(1) it is an act of producing or selling small quantities of drugs with a self-help or mutual-help nature without the purpose for profit and does not result in the consequences of harm to others;(2) it is producing and selling medicines based on traditional folk recipes in small quantities and without causing the consequences of harm to others;(3) it is importing small quantities of legally marketed medicines from abroad for self-help and mutual assistance without the purpose of making profit.However, if a penalties decision made by an administrative organ or the test conclusions, opinions and other evidence provided by an administrative organ or a drug testing organization are sufficient to prove that the drugs produced, sold or used are counterfeit or substandard, the said defense shall not apply.[The said Article 144(3) of the Drug Administration Law provides that “in case of producing counterfeit or substandard drugs, or intentionally selling or using counterfeit or substandard drugs, the victim or his or her close relatives may, in addition to requesting compensation for damages, request a compensation of ten times the price or three times the damages; if the amount of the increased compensation is less than one thousand yuan, it shall be one thousand yuan.”]
Punishment for bad faith claim for punitive damages
In case a purchaser maliciously creates a false impression that a producer or operator is producing or operating food or drugs illegally, and sues the producer or operator for compensation, the people's court shall reject the purchaser's claim; if the claim constitutes a false lawsuit, the people's court shall, in accordance with the relevant provisions of the Code of Civil Procedure, impose a fine or detain the purchaser depending on the severity of the case. If the purchaser’s act infringes upon the producer's or operator's right to reputation and other rights, the people's court shall support the producer or operator’s request of bearing the civil liability for damages by the purchaser.
Transferring clues for crime
Further, during the trial of the food or drug dispute, in case the people's court finds that the behavior of the parties involved is suspected of producing or selling poisonous or harmful food products and counterfeit or substandard medicines, or of false litigation, it shall promptly transfer the relevant clues and materials of such offenses and crimes to the relevant administrative organs and public security organs.
Comment
The Interpretations was first published as a draft for public opinions in order to improve the food and drug safety liability system, as well as the punitive damages mechanism requirement, in November 2023, passed by the No. 1918 meeting of the Trial Committee of the SPC in March, 2024, and became effect on August 22, 2022.
According to the SPC, the Interpretations deals with following relations between: 1) protecting the consumers and promoting the continuous health development of economy and society; 2) protecting the acts of defending right and punishing the illegal claims; 3) unifying the rules and discretion in accordance with laws; 4) civil trial, administrative supervision and criminal combat.
Accordingly, the Interpretations regulate a series of issues, including but not limited to, using the actual payment paid by consumers as the basis of calculating the punitive damages, establishing the rules of refunding and returning of food and drug, providing the liabilities of substitute purchasers and small workshops, specifying the recognition of the labels and instruction defects, regulating bad-faith claim and punishing illegal claim, etc. It is also reported that four typical cases regarding the food safety punitive damages were issued which would help better understand the Interpretations.
The Interpretations contain 19 provisions and include key points, but not limited to, as follows:
Punitive damages for food that do not conform to food safety standards
In case the food purchased for the purpose of individual or family consumption does not conform to food safety standards and the purchaser requests the producer or operator to pay punitive damages, in accordance with the Article 148(2) of the Food Safety Law, the people’s court shall support such request. When there is no evidence to prove that the purchaser knew that the food purchased did not conform to food safety standards and still purchased it, the people's court shall, at the request of the purchaser, calculate punitive damages of ten times the price based on the price actually paid. [The said Article 148 (2) of the Food Safety Law provides that “Producing food that does not conform to food safety standards or operating food that is known to be not in conformity with food safety standards, the consumer may, in addition to claiming compensation for losses, demand from the producer or operator compensation of ten times the price or three times the loss; if the amount of increased compensation is less than one thousand yuan, it shall be one thousand yuan. However, the labels and instructions of the foodstuffs have defects that do not affect the safety of the foodstuffs and do not mislead the consumers are exempted.]
In case a food product does not comply with the food safety standards in respect of the limits of substances hazardous to human health in food, the varieties, scope of use and dosage requirements of food additives, the nutritional composition requirements of primary and secondary food products for specific groups of people, and the labeling, marking and specification requirements relating to hygiene, nutrition and other food safety requirements, as well as the quality requirements relating to food safety, when a purchaser requests the producer or operator to bear the liability for punitive damages in accordance with the Article 148 (2) of the Food Safety Law, the people's court shall support the request.
Defects of food labels and instructions that cannot require for punitive damages
In case a purchaser requests the producer or operator to pay punitive damages on the ground that the food label, instructions do not meet the food safety, and there are defects in the food label and instructions but also falling into one of the circumstances as follows, the people's court shall not support such request:(1) text, symbols, numbers, font size, font, character height is not standardized, or foreign language font size, character height is larger than those of the Chinese;(2) the occurrence of misspelled words, multiple words, omitted words, traditional Chinese characters or inaccurate foreign language translation, which will not lead to consumer misunderstanding of food safety;(3) the net content, specifications of the labeling method and format is not standardized, or food, food additives and ingredients used in the common name or abbreviation is not standardized, or the list of nutrients, ingredients, the order of the table, the value of the unit is not standardized, or the list of nutrients value of the modification interval, “0” threshold, the labeling unit is not standardized, which does not lead to misunderstanding of food safety by consumers;(4) food without special storage conditions does not label the storage conditions in accordance with the provisions;(5) other defects in the labels and instructions of food products, which do not affect food safety and do not mislead consumers.
Defenses for punitive damages under the Drug Administration Law
In case a drug purchased for personal or family consumption needs is a counterfeit or substandard drug, and the purchaser requests the producer or operator to pay punitive damages in accordance with the Article 144(3) of the Drug Administration Law, the people's court shall support such request in accordance with the law. Under the circumstance, if the producer or operator argues that it shall not apply to the Article 144(3) of the Drug Administration Law and there exists one of the following circumstances, the people’s court shall support such defense:(1) it is an act of producing or selling small quantities of drugs with a self-help or mutual-help nature without the purpose for profit and does not result in the consequences of harm to others;(2) it is producing and selling medicines based on traditional folk recipes in small quantities and without causing the consequences of harm to others;(3) it is importing small quantities of legally marketed medicines from abroad for self-help and mutual assistance without the purpose of making profit.However, if a penalties decision made by an administrative organ or the test conclusions, opinions and other evidence provided by an administrative organ or a drug testing organization are sufficient to prove that the drugs produced, sold or used are counterfeit or substandard, the said defense shall not apply.[The said Article 144(3) of the Drug Administration Law provides that “in case of producing counterfeit or substandard drugs, or intentionally selling or using counterfeit or substandard drugs, the victim or his or her close relatives may, in addition to requesting compensation for damages, request a compensation of ten times the price or three times the damages; if the amount of the increased compensation is less than one thousand yuan, it shall be one thousand yuan.”]
Punishment for bad faith claim for punitive damages
In case a purchaser maliciously creates a false impression that a producer or operator is producing or operating food or drugs illegally, and sues the producer or operator for compensation, the people's court shall reject the purchaser's claim; if the claim constitutes a false lawsuit, the people's court shall, in accordance with the relevant provisions of the Code of Civil Procedure, impose a fine or detain the purchaser depending on the severity of the case. If the purchaser’s act infringes upon the producer's or operator's right to reputation and other rights, the people's court shall support the producer or operator’s request of bearing the civil liability for damages by the purchaser.
Transferring clues for crime
Further, during the trial of the food or drug dispute, in case the people's court finds that the behavior of the parties involved is suspected of producing or selling poisonous or harmful food products and counterfeit or substandard medicines, or of false litigation, it shall promptly transfer the relevant clues and materials of such offenses and crimes to the relevant administrative organs and public security organs.
Comment
The Interpretations was first published as a draft for public opinions in order to improve the food and drug safety liability system, as well as the punitive damages mechanism requirement, in November 2023, passed by the No. 1918 meeting of the Trial Committee of the SPC in March, 2024, and became effect on August 22, 2022.
According to the SPC, the Interpretations deals with following relations between: 1) protecting the consumers and promoting the continuous health development of economy and society; 2) protecting the acts of defending right and punishing the illegal claims; 3) unifying the rules and discretion in accordance with laws; 4) civil trial, administrative supervision and criminal combat.
Accordingly, the Interpretations regulate a series of issues, including but not limited to, using the actual payment paid by consumers as the basis of calculating the punitive damages, establishing the rules of refunding and returning of food and drug, providing the liabilities of substitute purchasers and small workshops, specifying the recognition of the labels and instruction defects, regulating bad-faith claim and punishing illegal claim, etc. It is also reported that four typical cases regarding the food safety punitive damages were issued which would help better understand the Interpretations.