Law

Liability, shmiability: The lack of legal responsibility regarding China’s tainted baby milk scandal

Courts Compound Pain of China’s Tainted Milk
By Edward Wong
The New York Times
October 16, 2008

Tainted infant formula is the latest in a long string of food and drug safety problems that have exposed corruption and inefficiency among China’s regulators. But the problem goes well beyond the inability of regulators to police a huge, dynamic economy. Companies that produce shoddy goods rarely face financial penalties from the legal system, run by the Communist Party.

Some lawyers and judges are making great efforts in China to establish the power of the courts. Still, courts often remain passive pawns in the party’s efforts to handle big disputes behind closed doors.

This NYT article explains how China’s courts are avoiding taking any responsibility for the pain of thousands of parents across China who have yet to receive justice and compensation for the death of their children following last month’s tainted milk scandal. A similar situation occurred after the Sichuan earthquake, in which children died when their schools collapsed. Local governments agreed to compensate grieving parents with money, so long as they agreed to drop demands for investigations into faulty school building construction. “Most of the parents accepted the money, but many said they were furious that no one had been held responsible for the deaths of their children,” Wong writes.

Class-action lawsuits, commonly filed in the West for widespread product liability cases, are harder to initiate (and even harder to win) in China, where government officials view them as a political threat, as well as a hindrance to social stability. In fact, these types of lawsuits are actively discouraged. Some judges make the excuse that since Chinese courts have little experience dealing with class-action suits, then consumers would probably end up with little legal protection, so it’s best to go the “traditional” route and dole out compensation for things like medical bills.

The court’s inaction, Wong writes, involves these major reasons:

• “Chinese officials, under pressure to promote fast rates of economic growth and to enforce social stability, routinely favor producers over consumers.”
• “Officials also view high-profile lawsuits as a potential political threat and go to great lengths to silence the plaintiffs rather than allowing the wheels of justice to turn.”
• “The milk scandal involves a web of complicity linking company executives to government officials. Those connections make sorting out responsibility a delicate political task. Rather than allow the courts to weigh in, officials prefer to press complainants to take compensation.”

The problem is, keeping these cases under wraps by paying the plaintiffs into silence has profound long-term consequences for China’s growth and development:

Qian Weiqing, the head of the Dacheng Law Office in Beijing, said at a legal conference last week that the government, in continually suppressing such lawsuits, had “missed many opportunities to improve the system to deal with these problems, including perfecting the law enforcement system, the judicial system and the relief system.”

What do you think? Would the acceptance of class-action lawsuits in China threaten the country’s social stability? Is the government ready to take on mass complaints? Are Chinese companies prepared to face retribution? Can they adequately payback their plaintiffs?

And if Chinese courts do not take these issues more seriously, according to international norms, will that somehow threaten the future of the country’s economic growth?

Now, considering ResponsibleChina deals with corporate social responsibility, I am of the viewpoint that state regulation is not enough to prevent future food scandals, just as Peter Ford writes about for the Christian Science Monitor in his article, “Behind bad baby milk, an ethical gap in China’s business” (h/t to China Law Blog.) Corporations must also take responsibility, for at least the fact that “producers realize now how precious their brand name is,” says Dali Yang, a politics professor at the University of Chicago.

“Central regulatory reform is only part of the problem,” argues Richard Suttmeier, a University of Oregon expert on Chinese product safety. “There is nothing you can snap your fingers at and solve.”

With nearly half a million food producing and processing companies, according to official figures, “there are more individual producers than the government could ever regulate,” Prof. Suttmeier adds.

The authorities “will be defeated constantly” unless “they begin to think how you make multiple producers responsible agents,” he says.

A wide range of reforms is needed, he warns, from capital markets that would starve misbehaving companies of funds to a legal system that would allow aggrieved consumers to sue firms for damages.

But when a crisis like this does occur, I think it’s still important for the courts to take action, is it not? The blame can’t rest solely with the companies. There needs to be checks and balances on both.

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