Introduction:

As the nation’s consumption level continues to rise and automobiles become more prevalent, disputes related to automobile purchases have been on the rise. Invoking Article 55 of the Law of the People’s Republic of China on the Protection of Consumer Rights and Interests, some consumers have called for operators to be held accountable for triple punitive damages on the grounds of fraud.

This article focuses on how consumers can appropriately use the law to protect their legal interests and how operators should respond.

The Provision on “triple punitive damages”

The first paragraph of Article 55 of the Law of the People’s Republic of China on the Protection of Consumers’ Rights and Interests (hereinafter referred to as the “Consumer Protection Law”) stipulates that: “Business operators which fraudulently provide commodities or services shall, as required by consumers, increase the compensation for consumers’ losses, and the increase in compensation shall be three times the payment made by a consumer for the commodity purchased or the service received or be RMB 500 if the increase as calculated before is less than RMB 500, except as otherwise provided for by the law”.

How to Determine What Constitutes “Fraud” Under the Consumer Protection Law？

From a generalized perspective, the following four elements are required to constitute “fraud”:

1.       The operator must have the intent to deceive;

2.       The operator has committed fraud;

3.       The consumer has been deceived and has made a misjudgment;

4.       The consumer has made a declaration of intent based on flawed judgment.

Specifically, the operator intentionally commits fraudulent acts to mislead consumers into making decisions, and in such cases, the corresponding acts of the operator may be deemed to be “fraud” under the Consumer Protection Law.

Therefore, what kind of behavior of the operator may constitute “fraud”?

Article 3 of the Notice by the Supreme People’s Court Regarding Issuing the Meeting Minutes on the Implementation of the Civil Code by Courts Nationwide (Law [2021] No. 94 of April 6, 2021) stipulates that “Where any person intentionally provides false information, or intentionally conceals the truth so as to induce the party to make a wrong declaration of will, the people’s court may determine such an act as fraud provided for in Articles 148 and 149 of the Civil Code”.

Therefore, for the operator, if they are “intentionally informing false information” or “intentionally concealing the truth”, they may be deemed to be conducting fraudulent behavior. However, in judicial practice, various courts have different tendencies to decide on the extent of the impact and seriousness of such acts. Based on cases in judicial practice, such as (2019) ZGFMS 898 of Supreme People’s Court and (2017) Zhe 01 MZ 8765 of Hangzhou Intermediate People’s Court), when assessing whether the severity of the situation amounts to “fraud”, the courts typically inspect factors such as the “well-being and safety of individuals”, “significant property interests”, “the fundamental objectives of the agreement”, and “the security, primary function, and essential utility of the vehicle”.

Suggestions:

For consumers:

1.       Prior to the transaction, check the records of the vehicle from relevant 4S dealerships.

2.       During the transaction, if feasible, invite professionals or specialized organizations to conduct inspections and testing of the vehicle.

3.       Keep all documentation related to the vehicle transaction, including transaction documents, vehicle inspection records, chat logs, etc.

4.       As the application of the “triple punitive damages” policy is subject to certain conditions, consumers can actively negotiate with the business operator within a reasonable range based on consultation with professionals to resolve disputes.

For business operators:

1.       Fulfill the obligation of comprehensive inspection and verification.

2.       Regarding important components (including automobile power system, engine, transmission system, steering system, braking system, etc.) as well as parts involving safety performance, major functions, and basic usage, it is necessary to disclose corresponding maintenance records and information truthfully, comprehensively, and proactively to consumers.

3.       Appropriately keep written records of the information which has been disclosed to consumers.

How to tackle the Vehicle Purchase Tax when a vehicle has been returned or replaced?

According to the Law of the People's Republic of China on Vehicle Purchase Tax (Presidential Decree No. 19), if a taxpayer returns a vehicle on which vehicle purchase tax has been levied to a vehicle manufacturing enterprise or a sales branch, the taxpayer may apply to the tax authorities for a refund of the vehicle purchase tax. The amount of the refund is based on the tax paid, with a deduction of 10 per cent for each full year from the date of payment of the tax to the date of application for refund.

If a vehicle that has the vehicle purchase tax already paid needs to be returned to the vehicle manufacturer due to quality problems, an application for a tax refund with the manufacturer's vehicle certificate and the original tax payment certificate of the vehicle purchase tax can be made. If the original tax payment certificate of the vehicle cannot be returned, the tax will not be refunded.

If the vehicle needs to be replaced by the vehicle manufacture due to the quality problems, the changing procedures for the vehicle purchase tax shall proceed with the manufacturer's proof of replacement of the vehicle and the replacement of the new car invoice. It should be noted that the original vehicle purchase tax will not be refunded if the certificates are missing.

After replacing the new vehicle, when the taxable price of the new vehicle is equal to the taxable price of the original vehicle, only the vehicle purchase tax change procedures need to be handled; when the taxable price of the new vehicle is higher or lower than the taxable price of the original vehicle, the difference will be handled as a tax reimbursement or refund after the change procedures.

Conclusion:

Automobile consumption is an important expense in our daily lives and has become a key area and pillar industry for stabilizing growth and expanding domestic demand. With the rapid development of new energy vehicles and intelligent network technology, consumer complaints in the field of automobile consumption have shown a trend of diversification and complexity. Consumers and business operators should continuously strengthen their legal awareness to prevent and resolve disputes appropriately.

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The above content is provided for informational purposes only. The provision of this article does not create a professional mandate between DP Group and the reader and does not constitute legal or financial advice. Professional advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal or financial advice.