Law must be revised to root out fake products

In the ongoing Jumei scandal, the e-commerce company has apologized and promised to have the fake products returned. It explained that it has strict rules in place to prevent fake products from being sold, but that it has failed to find the cheating activities of the wrongdoing third-party vendor.

In other words, the company has shifted the majority of responsibility to the third-party vendor. If regulators did not step in, it seems the company, together with other e-commerce platforms involved in the scandal, may go through the storms largely unscathed.

Indeed, Jumei has a large number of third-party vendors operating on its platform — it is estimated that those third-party vendors contribute to over half of the platform’s revenues. It is difficult for the company to carry out due diligence checks to ensure there is no cheating at all.

Still, consumers have logged on to its website — not that of the third-party vendors — to buy luxury products. It should not be exempt from punishment simply because the company claimed it did not know about the cheating by third-party dealers.

Given the rampant cheating activities by online dealers in China, regulators should mete out severe punishment to protect consumers’ interests and thwart those companies from continuing to blatantly violate intellectual property rights, rules and laws.

Consumers, however, are not allowed to wage a class action lawsuit against companies that are held accountable in cheating. They can only sue the companies individually, which means many of them may opt not to go through the legal process to protect their interests because of the lengthy and complicated procedures. As a result, the companies need not pay as much compensation to the victimized consumers, even if they lost the case.

Such a de facto leniency for commercial interests has played an important role in encouraging some irresponsible market players to cheat, because they could gain enormously, but the potential costs would be insignificant.

Therefore, to protect the interest of consumers, China must revamp its legal system to ensure that the potential cost of cheating by businesses outweighs their potential gains. Or it would be almost impossible to build an honest business environment.