As soft as tofu: consumer product defamation on the Chinese internet.

• Author: Spahn, Elizabeth
• Position: Max Computer Station, Inc. v. Wang Hong, Life Times & PC World

ABSTRACT

This Article examines the most notorious Chinese internet defamation case, Wang Hong v. Maxstation, which awarded substantial damages against an individual consumer as well as two on line magazines for criticizing a laptop product on the internet. The case created a widespread political controversy on the internet in China, highlighting an underlying tension in the current policies of the Chinese government, which promotes a more open market economy while maintaining tight censorship over public speech. The case developed landmark legal doctrine in China, extending judge made defamation law while ignoring the Chinese consumer protection statute. Extending defamation doctrine to include factual omissions as evidence of falsity substantially departs from prior Chinese law creating serious conflicts with defamation law in other countries. Allowing a corporation to recover for insult and injured feelings, regardless of the truth of the underlying claims, and without recognizing some exception for opinion or fair comment, departs very substantially from defamation law in other WTO jurisdictions, where truth is an absolute defense to defamation, and expression of opinion/fair comment derogatory language about products by consumers is more widely tolerated. The case cannot be viewed historically as a successful application of rule "according to" law, given that the decisions ignore the relevant statute. The case may stand for an early example of rule "off" law in which Supreme People's Court Interpretations are given precedence over statutes.

TABLE OF CONTENTS I. INTRODUCTION II. FACTUAL SETTING OF THE CASE III. DEFAMATION LAW A. Omission of Facts as False Speech 1. Consumer Versus Media Omissions of Facts 2. Fact Versus Opinion: Comparison with Other Nations' Legal Standards 3. Remedies for False Statements of Fact a. Injunctive Relief b. Damages B. Insulting Words 1. Injury to Feelings of a Corporation Versus a Natural Person 2. Damages for a Corporation's Injured Feelings V. CONSUMER PROTECTION LAW A. Omission of Consumer Protection Statute from Courts' Opinions B. Overview of Chinese Consumer Protection Statutes VI. CONFLICTS BETWEEN JUDGE-MADE AND STATUTORY LAW A. Civil Law vs. Common Law Systems B. Do Interpretations of the SPC Trump National People's Congress Statutes? VII. EXTRA-LEGAL FACTORS: CULTURAL AND HISTORICAL CONTEXT OF THE DECISION A. Guanxi B. The Business Decision to Sue C. Protecting Corporations from Boycott Calls on the Internet D. Internet Control Campaigns by the Party and State VIII. CONCLUSION A. Subsequent Developments B. Legal Consequences I. INTRODUCTION

There are 1.3 billion potential Chinese consumers. (1) There is also a vibrant internet combined with infamously expanding efforts by the Chinese Communist Party (Party) and state to control internet speech. The Party and state seek freer economic markets while maintaining strict control over public speech. A legal system is developing as the transition into a freer market economy expands. China is developing rule "according to" law, (2) and the impact may be global.

Thus, when a large group of law students at the politically sensitive Peking University campus gathered in February 2000 for an academic forum (3) on an obscure internet defamation case, my interest was piqued, particularly when a fairly high level Party official barged into the forum, brusquely announced that the plaintiffs case was correct, and left. The appeal in the case (4) had yet to be heard. The internet chat rooms and bulletin boards filled with commentary, (5) some vituperative, criticizing the plaintiff corporation and its products. The case became a true cause celebre among the internet intelligentsia.

The Wang Hong case, a relatively minor dispute between a consumer and a computer manufacturer over an allegedly faulty screen repair, escalated into a major internet controversy and a test of the Chinese legal system's public acceptance and legitimacy. It developed new law in China regarding product disparagement defamation, which is consumer criticism of a product. It also positioned Chinese law regarding product disparagement, defamation by consumers, and internet media magazines well outside the mainstream of its trading partners in the World Trade Organization (WTO), potentially opening Chinese consumers to exploitation by less than scrupulous multinational businesses. The case highlights the need for product safety and reliable information exchange forums to protect relatively inexperienced Chinese consumers in the newly burgeoning Chinese consumer economy.

The litigation took place during 2000 and 2001 in the highly respected courts of Beijing. The leading judge in the trial court, Chen Jiping, was promoted directly to the People's Supreme Court of China (PSC) shortly after issuing his opinion, while the case was pending on appeal in the Intermediate Appellate Court. (6) Close examination of the technical legal reasoning used in both the trial court and appellate court opinions provides an opportunity to observe the Chinese legal system at work and to test various abstract claims about the independence and professionalism of the Chinese judges.

Much of the Western scholarly discussion about the development of rule "according to" law in contemporary China takes place at a fairly high level of abstraction. Detailed analysis of the legal reasoning used in a specific Chinese case is rarely undertaken. This is in part because Chinese judges do not always articulate their legal reasoning in a formal, written opinion. Further, it is relatively common for law professors in China to comment on cases as urgent current events in the popular media, thus playing the role of advocate and popular media commentator. Detailed legal analysis is also rare in part because many of the legally-trained Westerners who study China have backgrounds in international policy, cultural studies, and political science focusing primarily on the crucial macro-issues. This Article is one modest example of careful and detailed legal analysis of a specific Chinese ease, giving the Chinese courts the same detailed attention and scholarly analysis that professors in the United States often give to domestic court decisions.

Close examination of the trial and appellate opinions will also serve as an example of the "ease-note" format used in common law legal systems. In the case-note format, legal scholars provide research and feedback to the judiciary, policy makers, and other scholars on the professional aspects of the craft of legal analysis, removed in time from the highly charged political atmosphere after the brouhaha has died down. This Article will be suitable for use in teaching Chinese law students who are steeped in a civil law tradition, which places considerably less emphasis on case law and precedent and which does not currently emphasize the concrete analytical reasoning involved in applying law to specific fact patterns. (7)

Perhaps more significantly, the substantive legal doctrine in this case develops new law regarding the intersection of Chinese defamation law and consumer protection law. The resolution developed in this opinion highlights an underlying tension in the current policies of the Chinese government, which seeks to harmonize a relatively open market economy with tight censorship and control over public information and speech. While private communications have become increasingly free from governmental interference, public speech remains under tight, and perhaps increasingly severe, government restrictions. From the Western perspective, an increase in economic trade is often believed to be the necessary precursor to a freer and more open civil society. From the Chinese perspective, the correct path of economic development is the current approach of harmonizing increasing free trade with political stability through censorship of public speech.

According to many leading economic theorists, development of a free market ultimately depends on market discipline provided by the choices of rational consumers. Classic free market theories posit that rational consumers will choose products that provide the highest quality at the cheapest prices. Good corporations with good products and services will be rewarded by increased market share, while poor performance will lead to a decreased market share. To choose rationally, of course, consumers must have access to information about products, including information about the experiences, good and bad, of other consumers with that specific product or corporation. Thus, a sharp dichotomy develops where a policy encourages free economic markets while suppressing speech by consumers.

The defamation case analyzed in this Article is relatively simple: a corporation successfully sued an individual consumer and two internet magazines reporting the consumer's comments for product disparagement (defamation) because of the individual consumer's postings on the internet. (8) The lawsuit resulted in massive fines against the individual consumer, who was eventually jailed for nonpayment on Consumer Day. The ease serves as a study for testing the assumptions underlying both Western and Chinese government policies regarding the development of law, consumer rights, and corporate protection of reputation in the context of the vibrant Chinese internet. It also provides a specific case study of the development of rule "according to" law in contemporary China.

A number of legal scholars and commentators in the United States and other Western nations have examined the development of government regulations of and crackdowns on the Chinese internet. (9) Major scholarly literature in the West has also analyzed the development of the rule "according to" law. (10) A few commentators have addressed the Chinese consumer protection legal regime, (11) and a few have addressed Chinese law regarding defamation. (12) One very significant and...