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  • Notification of product discontinuance is a must or not?

    Notification of product discontinuance is a must or not?

    Nowadays goods are being updated frequently. Consumers don’t have any trouble with the updated FMCG, however, there are troubles with those updated durable consumer goods (“DCG”), such as appliances. Because consumers may need components and parts for the maintenance and repair of DCG. Therefore, the manufacturer shall pay attention to two issues, 1) how long should components and parts be supplied after the product is discontinued? and 2) does the notification of product discontinuance shall be disclosed?

    • How long should components and parts be supplied after the product is discontinued?

    It shall be determined based on the category of the product.

    For example, for daily household appliances implemented 3 warranty services such as televisions, refrigerators, washing machines, air conditioners, gas water heaters, range hoods and etc., according to Article 7 of the “Provisions on Responsibilities for Repair, Replacement and Return of Some Commodities”, the manufacturer shall ensure that the components and parts that meet the technical requirements will continue to be provided within 5 years after the manufacturing of the product is stopped. For specific products, please refer to the “Catalogue of Some Commodities Subject to Warranty Services”.

    Another example is the automotive products, according to Article 21 of the “Measures for the Administration of Automobile Sales”, the suppliers shall promptly announce to the public the vehicle model of discontinued manufacture or discontinued sales, and shall ensure the supply of parts and the corresponding after-sales service for at least 10 years thereafter.

    • Does the notification of product discontinuance shall be disclosed?

    Firstly, from the perspective of statutory obligation, the manufacturer shall disclose such notification timely under the following 2 circumstances:

    (1) When the main products of a listed company are discontinued, which may have a significant adverse impact on its business performance, according to the “Administrative Measures on Information Disclosure by Listed Companies”, such listed company has a statutory obligation to disclose. For example, in an “Administrative Supervision Measures Decision”, the regulatory authority pointed out that the listed company failed to timely disclose relevant information that the discontinuance of its main products which might have an impact on its operations; and determined this company had violated Article 3, Paragraph 1, and Article 22 of the “Administrative Measures on Information Disclosure by Listed Companies”.

    (2) Regarding products that are included in special regulations such as the “Provisions on Responsibilities for Repair, Replacement and Return of Some Commodities”, the “Measures for the Administration of Automobile Sales”, and so on, the manufacturer shall keep providing components and parts for a certain period, which means it shall disclose such notification, otherwise, it will be difficult to prove the starting date when there is any dispute.

    Secondly, from the perspective of risk prevention regarding the performance of a contract, it is recommended to disclose such discontinuance information to the counterparty under the following circumstances.

    (1) Once the manufacture stops supplying products, it may be unable to fulfill its obligation to supply products, or its distributors may face a huge adverse impact on the inventory, it would be better to disclose to the relevant counterparties. For example, in the case (2017) Hu 0151 Min Chu No.5959, the court held that, “if there is a product shutdown or upgrade during the performance of the contract, the defendant should have notified the plaintiff as soon as possible… When the plaintiff placed the first order with it, the defendant did not inform the plaintiff of the relevant information, and according to the defendant’s admission, it has never disclosed the relevant information to the plaintiff.”.

    (2) When such discontinuance may affect the significant rights and interests of consumers, such as after-sales service, in order to avoid the risk of being identified as fraud, it would better to disclose to the relevant consumers.

    In several cases, consumers have sued manufactures or sellers for not disclosing the discontinuance, which constituted fraud. The courts have considered whether manufactures or sellers have subjective intent to commit fraud, whether the discontinuance has affected the significant rights and interests of consumers, and so on. In the case (2016) Su Min Shen No. 5583, the court held that, “since there is no laws or regulations has prescribed the statutory obligation of disclosing the product discontinuance, the consumer could require the seller and manufacturer to provide after-sales service, the seller and manufacturer did not constitute fraud.”