MACRO FACTORS ABOUT LAW MAKING IN HONG KONG: A CASE STUDY ON (THE LACK OF) CONSUMER PROTECTION Angus Young Hang Seng Management College & Southwest University of Political Science and Law
BACKGROUND & CONTEXT Everyone is a consumer. Therefore, consumption and related rights affect everyone. For Hong Kong consumption or consumerism has an added importance - Apart from labour the territory has a lack of natural resources, economic growth is increasingly generated by value adding. Whether these value adding activities are retail, services or manufacturing, they are directed at consumers as end users. Culture and leisure drives consumption. Shopping for Hong Kongers is more than a leisurely past time, it is part of the culture, a means of socialisation, and embedded into their identity.
EXISTING LAWS The primary consumer protection laws in Hong Kong is the Sale of Goods Ordinance (Cap. 26) [SOG] The SOG was enacted in Hong Kong in 1896 after the UK s SOG Act 1893 came into effect. This law primarily deals with the sale of goods and issues of such transactions not usually covered in contract law. Express terms of sale of goods are conditions of the contract - a breach of condition normally gives rise to repudiate the contract. Express terms are usually quite straight forward and explicit
EXISTING LAWS Implied terms are more important because these statutory rights that cannot be void or disclaimed by sellers. Title: assume seller has a right to sell or a right to sell at the time when ownership is to pass. If the seller has no title, he/she is liable to buyer. Description: an implied condition is that goods sold shall correspond with the description provided Merchantable Quality: when seller sells goods in the course of business, an implied condition is that goods supplied are of merchantable quality
EXISTING LAWS merchantable quality means goods are expect to have the standard, appearance and finish, safety and durability as usually bought. Fitness for Purpose: this implied term presents more problems. If only one purpose, they are unmerhantable if unfit for that purpose. If the description was so general for several purposes, then they are merchantable if fit for any one of those purpose. Buyer can expressly make known to the seller his/her purpose.
OTHER STATUTORY PROVISIONS Control of Exemption Clauses Ordinance (Cap. 71) Supply of Services Ordinance (Cap. 457) Misrepresentation Ordinance (Cap. 284) Unconscionable Contracts Ordinance (Cap. 485)
PROBLEMS WITH EXISTING LAWS Apart from the obvious age of the legislation, SOG has constraints emanating from traditional model of contract laws, where parties have equal bargaining powers. The key difference is the added protection provided under implied terms. Issues about superior bargaining power of the seller s relative to the buyers were not addressed. Another facet is information asymmetry (price and non-price issues) and information manipulation. Other matters like conduct of business vendors and their staff members are also important.
PROBLEMS WITH EXISTING LAWS Access to justice asymmetry cost of litigation, burden of proof by buyers are onerous. Special issues like vulnerability of certain consumers or situations are equally important. Weak regulator and weak [lack of] enforcement powers are part of the problem. Over dependent on markets to self correct or make adjustments against unscrupulous or malicious sellers are too native. Also assumptions about the availability of or ease in seeking alternative products or service providers to consumers are unrealistic.
FUNCTION OF HK CONSUMER COUNCIL S4(1) To protect and promote the interests of consumers of goods and services and purchasers, mortgagors and lessees of immovable property by- (a) collecting, receiving and disseminating information concerning goods, services and immovable property; (b) receiving and examining complaints by and giving advice to consumers of goods and services and purchasers, mortgagors and lessees of immovable property; (c) taking such action as it thinks justified by information in its possession, including tendering advice to the Government or to any public officer;
FUNCTION OF HK CONSUMER COUNCIL (d) encouraging business and professional associations to establish codes of practice to regulate the activities of their members; (e) undertaking such other functions as the Council may adopt with the prior approval of the Chief Executive in Council. (2) The Chief Executive may by notice in writing to the Council declare any goods, services or immovable property or class of goods, services or immovable property to be outside the scope of the Council's functions under subsection (1).
NUMBER OF COMPLAINTS RECEIVED BY HKCC 23,113 Consumer complaints (2006-7) 175,386 Number of enquires (2006-7)* 22,517 Consumer complaints (2007-8) 137,845 Number of enquires (2007-8)* 44,409 Consumer complaints (2008-9) 131,241 Number of enquires (2008-9)* 31,207 Consumer complaints (2009-10) 119,745 Number of enquires (2009-10)* 28,914 Consumer complaints (2010-11) 113,935 Number of enquires (2010-11)*
LITIGATION ASSISTANCE THROUGH HKCC The Consumer Council is the Trustee of the Consumer Legal Action Fund through a Declaration of Trust executed on 30 November 1994 The Fund was established with a Government grant of $10 million initially. A further sum of $10 million was granted by the Government to the Fund in May 2010. The Fund aims to give easier consumer access to legal remedies by providing financial support and legal assistance for the benefit of consumers, particularly, groups with similar grievances in cases involving significant public interest and injustice.
LITIGATION ASSISTANCE THROUGH HKCC Altogether, the Fund considered 36 applications of different categories in 2010-11. The applications involved 16 consumer incidents. After thorough consideration, the Fund declined applications relating to consumer incidents in the areas of club house services, wedding services, broadcasting, property repair services, financial services and sale of goods.
COMPARISONS AUSTRALIA In Australia, sellers must demonstrate that they comply with consumer protection laws (include unfair terms) [*burden of proof is on the seller not consumer] Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) and Competition and Consumer Act 2010 (Cth) http://www.austlii.edu.au/au/legis/cth/consol_act/caca 2010265/ http://www.austlii.edu.au/au/legis/cth/consol_act/tpacl a22010495/
COMPARISONS AUSTRALIA Previous act Trade Practices Act 1974 (Cth) http://www.austlii.edu.au/au/legis/cth/num_act/tpa19 74149/ Australian Competition and Consumer Council The ACCC has broad enforcement powers against businesses http://www.accc.gov.au/content/index.phtml/itemid/34 4494 The ACCC also has sizable resources to regulate and enforce the law - 833 staff and AUD$147.8 million (2010-11)
COMPARISONS SINGAPORE Singapore s consumer protection laws are similar to Australia s but consumers are expected to enforce breaches. Consumer Protection (Fair Trading) Act (Cap. 52A) [enacted 2009, effective 1 Sept 2012] http://www.ipto.gov.sg/ml_info/consumer%20protecti on%20fair%20trading%20act%20chp%2052a.pdf Consumers Association of Singapore (CASE) It is not a regulator Its role are: Consumer education Working with retailers Pushing for legislation
ECONOMIC ARGUMENTS FOR CONSUMER PROTECTION Classical economics assumed that parties have perfect information, equal bargaining powers, and rational. However, neo-classical and institutional / behavioural economics realised that there are short comings. [h]owever, circumstances in which markets can fail to deliver optimal outcomes. A lack of competition is a case in point. Another important source of market failure occurs when consumers do not have sufficient information about the products and prices available in markets. OECD Consumer Policy Toolkit (2010)
ECONOMIC ARGUMENTS FOR CONSUMER PROTECTION Common problems includes misleading advertising, information failures, consumer s behavioural biases and market failures leading to consumer detriment. Consumer detriment arises when market outcomes fall short of their potential, resulting in welfare losses for consumers Elements of detriment include both financial and nonfinancial impacts, such as direct financial losses, time loss, stress and physical injury. OECD Consumer Policy Toolkit (2010)
SOCIAL ARGUMENTS FOR CONSUMER PROTECTION Consumption is more than consuming, it has become part of our social and individual identity It is a cultural trait and more - Habitus. It also defines the new middle class where consumption has evolved beyond purchasing necessities like food into a form of status symbol. Consumption and the consumer culture has been nurtured since childhood. Therefore consumer protection has social dimensions in terms of preserving and perpetuation of our identity and lifestyles.
REFORMING HONG KONG CONSUMER LAWS AND REGIME? Taking the enactment of competition law in Hong Kong as an example it took the government about 19 years to do it. Why? Strong business lobby against enacting competition laws Such laws would only increase the cost of business and number of litigation Change of tune by the government came about with the increasing public complaints over the conduct of large businesses
OPEN QUESTIONS Consumers are satisfied with status quo or frustrated with the lack of change? Consumer complaints too trivial and could clog up the courts if new laws are introduced? No major events or any crisis compelling legal reform? Positive non-intervention policy conviction or excuse? Businesses are resisting the introduction of more laws or self regulation by businesses a better way? Lack of democratic rights have a flow on effect on consumer protection laws?