Wei He, July 21, 2021, first published in INTA Bulletin

Wuxi Intermediate People’s Court recently awarded punitive damages to consumers of counterfeit coffee purporting to be from U.S. coffeemaker Starbucks.

The court awarded punitive damages of RMB 21.72 million (US $3.36 million) in a May 13, 2021, first-instance civil decision that became publicly available in the weeks following.

Unlike traditional trademark infringement cases with the rights owner as the plaintiff, the case was unusual as it was initiated by the Consumers Council of Jiangsu Province (JSCC), an NGO [nongovernmental organization] focused on the protection of consumers’ rights and interests, on behalf of the consumers at large, based on the Law on the Protection of Rights and Interests of Consumers.

The consumer group initiated the public interest civil case following an administrative case concerning counterfeit Starbucks coffee. In 2018, Wuxi Municipal Administration for Market Regulation raided Shuang Shan Food (Xiamen) Co., Ltd. (SSF), a company which had knowingly and fraudulently distributed in China counterfeit Starbucks coffee manufactured by another party since 2017 with total sales amounting to more than RMB 7 million (US $1.1 million). The case was subsequently transferred for criminal prosecution. In 2019, the manufacturer as well as SSF and its director were convicted of manufacturing or selling the fake coffee. In early 2020, the public prosecutor suggested that JSCC file a public interest civil lawsuit against SSF on behalf of an unspecified group of consumers who had purchased the counterfeit Starbucks products that SSF distributed.

The case was determined under relevant provisions of Civil Procedural Law, the “Interpretations of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Cases Involving Consumer Civil Public Interest Litigation”, and the “Law on the Protection of Rights and Interests of Consumers”, as follows:

1. The Civil Procedural Law provides that the authorities and specified organizations may file a lawsuit against acts that jeopardize the public interests of society, such as polluting the environment or damaging the rights and interests of consumers at large;
2. The Interpretations of the Supreme People’s Court affirms that the local consumer councils are the appropriate organizations to take civil litigation on behalf of consumers at large; and
3. The “Law on the Protection of Rights and Interests of Consumers” provides that if a business operator provides goods or services fraudulently, it will pay punitive damages at a value of three times the aggregated price paid by consumers for the goods sold, or for the services provided.

This is one of very few public interest civil lawsuits protecting consumers’ rights that have been brought in China. The next issue facing the JSCC will be allocating the damages awarded to the consumers at large in a fair and acceptable manner. The decision may be appealed.