Regulations in China can be a minefield for many food and supplement companies due to their complexity, regional differences, and the speed at which they change.
And there is a small army of professional consumers eager to highlight any errors, however minor, in an attempt to secure a windfall.
Under the law, these people don’t need to prove any injury, merely that a product does not comply.
“This is the single biggest headache for MNCs in China doing business,” said David Ettinger, a partner at Keller & Heckman LLP.
“These are people who go after products and find something wrong with it. More often than not, it is not a safety issue, but a minor issue that the professional shopper will argue is not compliant with the law and therefore, they should be awarded damages.”
Spurious claims
Because of China’s history of food safety scandals, there are many who see professional shoppers as heroes. But the increasingly spurious nature of some claims, as well as the tactics employed by the shoppers, could see the authorities take a stricter stance.
Ettinger added: “Some of the professional shoppers are converting others, in some cases up to one million people, to buy products and then claim the compensation. They are teaching people how to become a professional consumers via WeChat, which they also use to communicate the non-compliance issue. Are these heroes are profiteers? It depends where you are standing. But they are certainly making a lot of money.”
Ettinger highlighted one case involving a chocolate company, where the label listed the nutritional content per 100g, but the total actually added up to 100.04g.
Some of these consumers actually test the products in a lab, and if they win a case in one province, they move on to another and make the same claim.
“We are now going from province to province responding to and defending against the complaints,” he told the China International Nutrition and Health Summit, organised by USCHPA.
Coping mechanisms
One solution is to settle for 10 times the purchase price, on condition that the claim is withdrawn and not made anywhere else.
“That doesn’t always mean the authorities will let it go, but unless it is a very serious issue, we find they usually do,” he said.
Ettinger went on to provide 10 “coping strategies” for brands operating in China or looking at doing so.
1) The biggest issues are problems with the label. You can get the ingredients right, but the label can be wrong.
2) Be obsessive about following Chinese legal requirements in production and operations.
3) Review all ingredients and adverts before any distribution plan.
4) Periodically check products on the shelves to ensure transportation has not affected packaging.
5) Employ a specialist team to deal with these professionals.
6) Stay close to your retailers, because professional shoppers will target them.
7) Cooperate with the authorities. You have a better chance of winning a case if you have a good reputation.
8) Keep up with local regulatory developments in each province. This applies not only to product regulations, but also the rules around what professional shoppers are permitted to do.
9) Never easily give in. Most cases can be dealt with in private if they have legal merit.
10) Remember money is not the issue; it’s the brand's reputation that’s at risk.