Hong Kong’s Consumer Protection Regulations: What Business Owners Need to Know

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
• 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 that every consumer in Hong Kong is treated fairly and provide legal protection from businesses taking advantage of them.

Here's an overview of the important consumer protection laws:

Trade Descriptions Ordinance

Trade description is an umbrella term for any information about a good or service that helps a customer's decision-making process.

Trade Descriptions Ordinance (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.

Competition Ordinance

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 practices Businesses cannot enter into a contract that restricts competition.
• Abuse of market power If you enjoy a dominant position in the market, you cannot use it to reduce competition.
• Anti-competitive mergers and acquisitions You 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:

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.

Consumer Goods Safety Ordinance

Consumer Goods Safety Ordinance (CGSO) deals with the safety requirements of consumer goods for private use or consumption in Hong Kong.

The Goods Safety Ordinance does not prescribe mandatory safety tests on products before they are put up for sale.

Sellers or suppliers are encouraged to have their consumer goods tested by an approved laboratory to determine if they are safe.

CGSO does not cover goods such as food, water, electrical products, pharmaceutical products, children's toys, etc.

Under the CGSO, all consumer goods (except those listed in the Schedule) must meet the general safety requirements or the safety standards and specifications prescribed by the Secretary for Commerce and Economic Development (SCED).

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 SCED
• 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.

Additionally, anyone who sells unsafe goods is liable to have their products seized by the Customs and Excise Department and other authorized officers.

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

Hong Kong Safety Mark

In addition to the general safety requirements of the CGSO, some products must pass mandatory safety tests and certification by the Hong Kong Certification Centre (HKCC) before they can be sold in Hong Kong.

This program ensures these products meet local and international safety standards.

The HKCC grants qualified products the Hong Kong Safety Mark (HKSM).

Products that typically require the HKSM include electrical appliances, toys, and children's products.

This program helps to safeguard consumers from potential safety hazards and promotes fair trade practices.

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
• Publish a privacy policy on your website
• 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.

Seeking Legal Help

While the Consumer Council can help resolve disputes, consumers with a significant consumer interest against unfair business practices can also seek legal help from the Consumer Legal Action Fund (CLAF).

Established in 1994, CLAF provides financial and legal assistance to consumers who have used all other means to resolve a dispute with a business.

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 pressure your customers 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 rule book 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 stay up to date 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% 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

Customers who are 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 make informed choices 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 (CRAN), 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 society

Businesses that operate ethically develop a strong bond with their customers and earn their trust.

Customers who trust your business stay loyal, refer your business to family and friends, and increase your chances of 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 mean violating consumer laws. Conducting business in compliance with consumer protection regulations results in happy customers who stay loyal and provide referrals, helping you boost your bottom line.

Conclusion

Even though Hong Kong is a favorable jurisdiction to start your business, you cannot cheat your customers.

Understand how consumer laws apply to your business and take legal compliance steps. 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!