Thanks to the pro-business policies and a free-market economy, doing business in Hong Kong is incredibly attractive.
But that doesn’t mean businesses get a free pass to treat their customers — consumer protection regulations ensure customers don’t get the short end of the stick due to unfair business practices.
Whether you are an established business or toying with the idea of registering a company in Hong Kong, it helps to know:
- how consumer protection laws apply to you,
- what are your legal obligations toward customers; and
- the best practices to follow that keep your customers satisfied and sustain your business
This guide simplifies the law for you and offers all the key insights about Hong Kong’s consumer protection regulations. Bonus: you also get a cheat sheet to get a head start with legal compliance. So dig in!
Key Consumer Protection Regulations in Hong Kong
Consumer protection regulations ensure every consumer in Hong Kong is treated fairly and also provide legal protection from businesses taking advantage of them.
Here’s an overview of the important consumer protection laws:
Trade description is an umbrella term for any information about a good or service that helps a customer’s decision-making process.
TDO makes it punishable for businesses to provide any false, misleading, or incomplete trade description. The Customs and Excise Department enforces TDO.
It applies to:
- all goods and services sold/provided in Hong Kong even if they are manufactured outside Hong Kong;
- traders who operate out of Hong Kong but sell to overseas customers.
As a business owner, you should provide accurate information about anything you sell — whether the price, origin, quality, or features — so that your customers can make an informed decision.
Penalty: A fine of HKD 500,000 and a jail term of 5 years.
Say you want to open a trading company in Hong Kong to sell mobile phone accessories.
But a group of other small businesses selling mobile phone accessories in the same location as yours decide to charge the same price for all the products. This would make it impossible for your business to compete and take off.
The Competition Ordinance prohibits such anti-competitive conduct and ensures that all businesses enjoy a level playing field. It also protects consumers and gives them access to a wide range of goods and services.
In particular, the Ordinance penalizes the following anti-competitive behaviors:
- Restrictive agreements and concerted practicesBusinesses cannot enter into a contract that restricts competition.
- Abuse of market powerIf you enjoy a dominant position in the market, you cannot use it to reduce competition.
- Anti-competitive mergers and acquisitionsYou cannot merge with a business or acquire it if it potentially reduces the competition in the market.
Penalty: Businesses can face fines of up to 10% of their total turnover for every year of violation, with a maximum duration of 3 years. Directors also face disqualification for 5 years. The Competition Tribunal decides the penalty based on the conduct.
Product safety regulations
Two key legislations deal with product safety:
(i) The Sale of Goods Ordinance
SGO gives business owners the right to sell their goods only when they meet the following conditions:
- Merchantable quality
The goods should be free of any defects that would make them unfit for use.
- Fit for purpose
The goods should serve the purpose for which the seller sells them.
- Correspond with the description or sample
The goods should match the description that the business owner provides.
For example, you have a shoe business and advertise that you sell shoes made of nubuck leather. If a buyer orders a pair and receives shoes made out of recycled plastic, the product you sell doesn’t match the description.
Buyers can reject goods that do not fulfill the SGO requirements and sue the seller for damages.
CGSO deals with the safety requirements of consumer goods for private use or consumption in Hong Kong.
CGSO does not cover goods such as food, water, electrical products, pharmaceutical products, children’s toys, etc.
As a business owner, you should ensure the following for legal compliance with CGSO:
- Fulfill the safety requirements of consumer goods set out by the Secretary for Commerce and Economic Development
- Inspect all consumer goods for safety prior to supplying them
- Provide relevant safety warnings about potential hazards, whenever necessary, in English and Chinese
- Determine the safety of your goods by testing them in an approved laboratory
- Maintain a record of the consumer goods you supply along with safety warnings
Penalty: CGSO provides both civil and criminal penalties.
First-time offenders face a fine of HKD 100,000 and/or a jail term of 6 months. Subsequent offenders face a fine of HKD 500,000 and/or a jail term of 2 years.
A consumer can also sue a seller of unsafe goods in civil courts and recover damages for pain and suffering.
Apart from SGO and CGSO, Hong Kong also has specific product safety ordinances, such as:
- Toys and Children’s Products Safety Ordinance.
- Public Health and Municipal Services Ordinance for food and drugs sold for human consumption
Data privacy and protection laws
The Personal Data (Privacy) Ordinance (PDPO) protects the privacy of individuals in Hong Kong by regulating the collection and retention of personal data.
Here are the key aspects of PDPO that business owners should comply with:
- Obtain consent before you collect any personal information of customers
- Tell your customers the purpose and use of the data you are collecting
- Use the data only for the purposes for which it was collected
- Retain data only for as long as you need it
- Handle data securely and have systems in place to prevent any unauthorized access
- Allow individuals to access their personal data
- Use the personal data of deceased individuals for research or statistical purposes but only if it is in the public interest and you implement appropriate privacy safeguards
Penalty: The Privacy Commissioner for Personal Data can initiate an enforcement action against anyone collecting/using personal data violating PDPO. The severity of the act determines the amount of financial penalties.
For serious offenses, the penalty is HKD 1,000,000.
Understanding Consumer Rights in Hong Kong
Businesses need a clear understanding of consumer rights to ensure legal compliance with consumer protection laws.
Consumers in Hong Kong enjoy the following set of rights:
A. Right to information
Consumers should have full information about the goods and services they buy.
This includes complete transparency about the price, features, warranty, safety warnings, quality, and quantity of the goods or services.
B. Right to choose
Consumers can decide what’s best for them from a range of products and services available. They are free to compare prices, features, and quality before deciding what they want to purchase.
C. Right to fair trade practices
Consumers have a right to be protected against unfair or deceptive trade practices by businesses.
D. Right to safety
Businesses cannot sell goods or services that are hazardous to the health or safety of consumers. Consumers also have a right to privacy of their personal data.
E. Right to redress
Consumers can seek compensation if they suffer any harm or loss due to the goods or services sold.
Fair Trade Practices for Business Owners
Adopting fair trade practices benefits you in numerous ways:
- you gain the trust of your customers
- you comply with legal obligations
- you avoid potential legal disputes that cost both time and money
Implementing fair trade practices isn’t rocket science, though.
You can start with this checklist:
Accurate product descriptions and marketing
Providing accurate information makes it easier for customers to make an informed decision.
So don’t make any misleading claims. Always clearly highlight the benefits and limitations.
Lastly, never influence or pressurize your customer to buy your product.
Transparent pricing and terms
Maintain complete transparency about the pricing of your product. If there are any additional fees payable, be sure to inform consumers.
Ensure that it is easy for a prospective buyer to locate the price of the product or service.
Ethical advertising and promotions
Never promote your product/service using any false advertising.
Your advertising campaign also shouldn’t hurt any culture or religion. Be mindful of using sustainable methods of promotion to reduce your environmental impact.
Quality assurance and product safety
Whatever you sell should be of high quality for your consumer’s safety.
Implement a quality assurance program to test the products and services against your quality standards before launch. You can also set up testing labs to identify whether your product poses any safety concerns to prevent potential accidents.
Don’t skip training your employees about the various safety and quality checks and keep updating the processes regularly.
Ensuring Legal Compliance for Your Hong Kong Business
Complying with Hong Kong consumer regulations is critical for operating your business smoothly and avoiding lawsuits.
Consider these steps for legal compliance:
Familiarizing yourself with relevant regulations
Several organizations in Hong Kong conduct seminars and send newsletters to help business owners understand consumer protection laws.
You can also check government websites like Commerce and Economic Development Bureau to learn more.
Implementing internal policies and procedures
You can also come up with a clear rulebook of do’s and don’ts to minimize the chances of violating any consumer law.
Start by identifying the key risks, such as data privacy, product safety, and marketing strategies. You can implement policies that lay down the industry-standard benchmarks to aim for and provide guidelines to follow when things don’t go as planned.
Regularly monitoring and reviewing business practices
Schedule regular audits and reviews of internal policies and practices to identify gaps. Set up a dedicated team to monitor your business’s compliance with Hong Kong consumer protection regulations.
Train your employees to make them aware of the importance of consumer protection.
Seeking legal advice when necessary
Speaking to a lawyer specializing in consumer law can help you to stay up with legal developments.
Regulations applicable to your business may vary depending on your industry and the products/services you offer. A lawyer can provide inputs to ensure appropriate legal compliance.
Handling Consumer Complaints and Disputes
Failing to manage consumer complaints and disputes can tarnish the reputation of your business. You also run the risk of facing legal action and financial penalties.
Here’s what you can do to avoid running into any legal problems:
Developing a comprehensive customer service policy
A comprehensive customer service policy is the bedrock of every successful business.
89 percent of consumers come back when they experience a positive customer service experience.
A strong customer service policy also increases customer satisfaction and loyalty, boosting sales and improving your bottom line. And the more efficiently you resolve issues your customers face, the better your chances of minimizing negative feedback.
Here’s what can go in your customer service policy:
- your customer service standards and goals
- expected timeline for addressing customer queries/complaints
- how your employees should handle customer complaints and inquiries, particularly when customers are being difficult
- The training and support you will provide to employees for customer service
- your metrics for tracking the success of your company’s customer service
Managing and resolving complaints effectively
Legal problems are unavoidable when business owners fail to resolve customer complaints effectively.
Here’s a cheat sheet for effective complaint management and resolution:
- Start by acknowledging the customer’s concern. You can go a long way when you make someone feel heard.
- Be apologetic about the inconvenience and assure the customer that you will fix it promptly
- Launch an investigation and aim for a speedy resolution
- Ask if the solution is satisfactory or if you can do anything else
Understanding the Role of the Consumer Council
The Consumer Council of Hong Kong is an independent body. A customer who is not satisfied with the resolution offered by a business can approach the council.
It cannot take any legal action against businesses, but it can publicize the names of offending businesses.
It also has powers to order mediation and conciliation for dispute resolution.
Avoiding legal disputes and potential penalties
The best way to insulate your business from potential legal action by customers? Stick to honest marketing practices.
Whether you are selling a product or service, don’t compromise on the quality.
Resist the urge to make any misleading claims to boost your sales. If your customer has a genuine complaint, acknowledge it and resolve it proactively.
The Role of Consumer Education in Protecting Consumers
Customer who is unaware of their legal rights as consumers face a heightened risk of being harmed by unfair trade practices.
Importance of consumer awareness
Awareness of consumer protection regulations helps buyers to make an informed choice and protect themselves from deceptive traders/trade practices.
Customers are aware of their rights and hold businesses accountable when they default in legal compliance. This creates a level playing field and promotes healthy competition in the market.
Educating customers about their rights and responsibilities
Several organizations, such as Consumer Council and Consumer Rights Awareness Network, work toward making customers aware of their rights and responsibilities.
Customers should also know what remedies are available when a trader fails to act as per consumer protection laws.
Promoting ethical consumption
There is a close link between consumer protection and ethical consumption.
Ethical businesses tend to be more accountable to their customers and maintain complete transparency about their trade practices. Customers who purchase from such businesses are less likely to be victims of deceptive practices.
Importance of Ethical Business Practices and Corporate Social Responsibility
Implementing ethical practices such as CSR can help you to gain customers’ trust and increase your market reputation.
The link between ethical business practices and Consumer trust
Ethical business practices are honest and transparent ways of conducting business. It includes:
- treating employees and customers fairly without following any discriminatory practices
- taking accountability for actions
- giving back to the society
Businesses that operate ethically develop a strong bond with their customers and earn their trust. Customers that trust your business stay loyal, refer your business to family and friends and increase the chances of your success.
Ethical business practices also boost brand awareness, increasing conversions and making you more attractive to investors.
Implementing corporate social responsibility initiatives
Businesses that take CSR seriously will likely offer quality products and maintain transparency about their practices. They are also less likely to use deceptive practices or cheat their customers.
Even though CSR initiatives are not mandatory in Hong Kong, implementing them can help you gain more customers.
Balancing Profitability and consumer protection
Of course, the ultimate goal of any business is profit generation.
But that shouldn’t be at the cost of acting against consumer laws. You get happy customers when you conduct business in compliance with consumer protection regulations. And satisfied customers stay loyal and provide referrals, helping you to boost your bottom line.
Even though Hong Kong is a favorable jurisdiction to start your business, you cannot cheat your customers.
Make sure to understand how consumer laws apply to your business and take steps for legal compliance. Business owners who prioritize consumer rights and use fair trade practices have a better chance of surviving in a competitive economy.
Keen to set up a business in Hong Kong but afraid of how to ensure legal compliance with consumer laws? Need someone who can hit the ground running and help you understand consumer protection regulations?
Contact Air Corporate today.
1. Are e-commerce transactions protected by Hong Kong consumer protection regulations?
Currently, there are no specific regulations in Hong Kong that safeguard customers of e-commerce transactions. Trade Descriptions Ordinance and Sale of Goods Ordinance provide generic protection against unfair trade practices.
However, the Legislative Council of Hong Kong has emphasized the need for specific legislation for protecting e-consumers.
2. Do the Hong Kong consumer laws provide a right to a refund?
The current legislation doesn’t provide such a right.
3. What happens if a business owner violates Hong Kong consumer protection regulations?
Depending on the nature and severity of the violation, a business owner may face fines or imprisonment.
In some cases, the court may also order the business to shut down.