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Xu Dajiang spends at least three days a week in supermarkets in China scrutinising products. He's not shopping for bargains; he's looking for any sign of flaws -- an expired sell-by date, a forbidden ingredient, an exaggerated claim on a package, or outright counterfeit.
Earning a living as a professional fraudbuster, Xu is a consumer turned consumer protector, searching for any wrongdoing by local and multinational companies that can be used to file a claim with a retailer and collect damages.
"There will always be manufacturers who treat the law with indifference and flout it no matter how much you tighten the regulations," he said. "That's when fraudbusters like me have a role to play."
Fraudbusting is flourishing in China, thanks to continued food and product safety scandals and a revised consumer protection law enacted in March that increases compensation for those who buy damaged or fake goods. The law allows consumers to try to recoup as much as three times the cost of the original product or service purchased. They can file class-actions for the first time. The law also carries stiffer penalties for businesses that mislead shoppers.
Chinese and international regulators have been cracking down on wrongdoing in the wake of scandals over tainted infant formula and drugs. But consumers still greatly distrust retailers. According to the State Administration for Industry and Commerce, 3.8 billion yuan ($610 million) worth of poor-quality goods were sold in China from 2010 to 2012.
Business opportunity
"If people feel safer and are more willing to spend, business will see more revenue and profit and domestic demand will expand," Jia Dongming, the head of a civil law division under the China Standing Committee, said at a news conference in October after the law was passed.
Would-be fraudbusters see business opportunity under the new law, said Wang Hai, the poster boy for the profession in China. In 1995, Wang, then studying law, bought what he said turned out to be fake Sony headphones in Beijing. The first consumer protection law had just been enacted, and Wang decided to file a claim against the store where he bought the headphones and push for damages. He won his case before Beijing's commerce regulator. Today, he runs a 200-person firm, tracking down fraud and filing claims on behalf of individuals, but mostly advises corporations operating in China on how to enforce trademarks and protect intellectual property.
Wang estimates there are about 100 professional fraudbusters in each of China's biggest cities, including Beijing, Shanghai and Shenzhen. There are no official figures on the industry. With little more than the experience of buying a faulty product, fraudbusters can earn as much as 300,000 yuan a year -- more than three times the average urban wage in Beijing, he said.
Fraudbusters also target domestic and multinational companies for violations of other laws governing false advertising, anticompetitive practices and food safety.
In 2012, Wang filed a suit in Beijing against Nike Inc. for allegedly overcharging customers who bought its Zoom Hyperdunk basketball shoes; he noticed a price difference between various retailers in China and Nike's U.S. site. The shoes cost 1,299 yuan in China, a premium of more than 500 yuan above the same pair elsewhere, according to Chinese news reports. The company also marketed the shoes as having double air cushions when they had only one, Wang said. Beijing's commerce regulator fined Nike 4.87 million yuan for deceptive advertising, state-run Xinhua News Agency reported at the time. Nike did not respond to a request for comment.
Maximise damages
Wang said fraudbusters see their job as both career and community service, but not everyone agrees with him. An executive with an international hypermarket chain in China, who didn't want to be identified because of the sensitive nature of the subject, said many are in it only for the money. He pointed to those who go after fraud by purchasing several cases of expired or faulty products to maximize the amount of damages they can claim.
Xu, defending the practice, said buying more serves two purposes: It increases compensation and prevents unknowing customers from purchasing allegedly tainted items. When he finds and buys what he thinks are bad goods, he goes to a store manager to claim damages. Clear faults, such as goods on the shelves past their sell-by date, are settled on the spot with compensation paid by the retailer.
Improving standards
Fines vary and are a multiple of what the product costs. For expired food items, consumers can claim two fines - three times the product's price, under the revised consumer protection law; and 10 times the product's price, under China's food safety law. Cases over false advertising may take months to settle, Xu said. Companies such as Carrefour SA and Walmart Stores Inc said they're working to improve food standards and supervision. Carrefour lets customers scan bar codes in-store using smartphones to check on an item's expiration date and production origins.
Wal-Mart replaces or offers refunds for faulty products and treats fraudbusters no differently than other customers, said Ray Bracy, a company spokesman in Shenzhen. "They often want to be treated specially, with extraordinary compensation demands," he said.
"Exposing product issues is clearly a good thing," said James Feldkamp, the co-founder of Mingjian, a Chinese website that provides independent product reviews. "The question is what you do with it." Fraudbusters could use their gains to fund consumer advocacy programs, he suggested.
Ye Guang, a former government employee who works as a fraudbuster in Chongqing, said he expects the next few years to be a "golden age" for professional fraudbusters.
'China's laws and legal enforcement structure are maturing,'' he said. "Manufacturers aren't catching up."
