Major Speeches, Presentations and Press Releases

LCQ3: Regulation of unscrupulous sales practices

     Following is a question by the Dr Hon Priscilla Leung and a reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (November 30):


     Earlier on, a chain fitness centre closed down its business after a winding-up petition had been filed with the court against it, causing substantial financial losses to its members who could not find ways to seek compensation. Prior to this, quite a number of members of the public had complained to me that the fitness centre adopted various high-pressure and unscrupulous tactics to promote memberships and fitness courses. In addition, the provisional liquidator of the fitness centre has recently sent short messages to members of the centre to enquire whether they agree to sell their personal data to potential buyers for use in direct marketing. On the other hand, the Consumer Council received more than 1 500 complaints against fitness centres between January and September this year. At present, the Consumer Council normally handles various types of disputes by way of mediation, which has no legal effect. Although the Consumer Council has set up the Consumer Legal Action Fund (the Fund) to give consumers access to legal remedies by providing financial support and legal assistance, there are comments that the Fund's vetting and approval procedures are cumbersome and litigation proceedings are time-consuming. In this connection, will the Government inform this Council:

(1) whether it knows if the Office of the Privacy Commissioner for Personal Data (OPCPD) has received any complaint regarding the provisional liquidator's attempt to sell personal data of members of the fitness centre for use in direct marketing; if OPCPD has, of the details; whether the Government has taken any timely measures to curb such an act, and whether it has considered stepping up law enforcement actions to curb the unscrupulous sales practices of fitness centres; if it has, of the details; if not, the reasons for that;

(2) whether it will adopt the Consumer Council's earlier recommendation to establish a Consumer Dispute Resolution Centre to provide free service of "Mediation First, Arbitration Next" for consumers and businesses so as to speed up the handling of consumer disputes, and whether it will empower the Consumer Council to step up efforts to combat unscrupulous sales practices in order to protect the rights and interests of consumers; if it will, of the details; if not, the reasons for that; and

(3) whether it will make reference to the practices of other jurisdictions, such as the United States and Australia, and review the existing legislation to see if the regulation of pre-payment mode of consumption transactions is adequate, and to ascertain if the relevant regulation can effectively combat various unscrupulous sales practices; if it will, of the details; if not, the reasons for that?



     Having consulted the Constitutional and Mainland Affairs Bureau and the Department of Justice, my consolidated reply to the three parts of the question is as follows:

(1) In July this year, the closure of a chain of fitness centres aroused concerns among consumers.

Personal data

     According to the Personal Data (Privacy) Ordinance (PDPO), if a merchant has not provided the data subjects with the prescribed information in writing and obtained their written consent (which includes situations where the data subjects have not responded), no personal data may be provided to a third party for use in direct marketing. If a data user acts in breach of this requirement and where the provision of the personal data is for gain (such as in return for money), he is liable on conviction to a fine of $1,000,000 and imprisonment for five years.

     The question refers to the provisional liquidator of a fitness centre proposing to sell the personal data of its members. In this regard, the Office of the Privacy Commissioner for Personal Data (PCPD) has hitherto received six complaints. The six complaints were not substantiated, because there was no evidence of the fitness centre's provisional liquidator contravening the above-mentioned requirements, or because it received no response from the complainant to its enquiry. If PCPD receives complaints in the future about data users selling personal data without prior consent from the data subjects, or if it has reasonable grounds to believe there is a breach of the requirements under PDPO, PCPD will handle the complaints, and may conduct compliance checks or investigations.

Deterrence of unscrupulous trade practices of fitness centres

     The Customs and Excise Department (C&ED) has been exerting earnest efforts towards combating unfair trade practices deployed by the fitness industry. Following the closure of a chain of fitness centres in July this year, the C&ED has suitably deployed staff to expedite the handling of complaints. As at October this year, the C&ED had received 1 670 complaints regarding the fitness centre chain "wrongly accepting payment" and "applying false trade descriptions". The C&ED has contacted all complainants for case details and is currently conducting investigation. Arrests have been made accordingly. The C&ED will continue to take vigorous enforcement actions against unscrupulous trade practices.

     In promoting compliance among the fitness industry, the C&ED conducted large-scale seminars in 2013, 2015 and July this year, with a view to strengthening understanding of the Trade Descriptions Ordinance by the management and frontline staff of the industry. Over 600 industry participants attended the seminars. The C&ED also convened a number of meetings with the management of several large-scale fitness centres in May and October this year. At the meetings, the C&ED reminded traders of their supervisory responsibilities, and encouraged them to train their staff and formulate staff codes of practices and guidelines, so as to prevent frontline staff from deploying unfair trade practices.

     On public education, the C&ED held a seminar for the members of all 18 District Councils and their staff in May this year to improve their understanding of the protection conferred by the law, as well as the points to note when reporting unscrupulous traders so that complaint referrals can be made more efficiently. Moreover, taking into account the allegations in some complaints, the C&ED held six seminars at rehabilitation centres for persons with mild mental handicap from February to June this year, to help them and their family members understand common unfair trade practices.

(2) Law enforcement agencies and the Consumer Council (CC) perform their respective duties. The law enforcement agencies are mandated to conduct criminal investigation on unfair trade practices. On the other hand, the CC exercises its functions in accordance with section 4 of the Consumer Council Ordinance, which includes collecting, receiving and disseminating information concerning goods, services and immovable property; receiving complaints by consumers; and encouraging business and professional associations to establish codes of practice to regulate the activities of their members, etc. In exercising such functions, the CC can use the information collected to name unscrupulous traders who are not amenable to repeated advice and thereby alerting consumers. This has a significant deterrent effect on unscrupulous traders. The CC also makes every effort in acting as a conciliator to resolve disputes between traders and complainants. In fact, the majority of complaints received by the Council can be resolved through conciliation.

     According to the study report published by the CC in August this year on consumer arbitration, its recommendations on establishing a Consumer Dispute Resolution Centre seeks to promote to the community the notion of settling disputes outside the judicial system. The Government has all along been promoting and encouraging the resolution of disputes through mediation and arbitration. A number of non-governmental organisations and the private sector offer mediation and arbitration services, allowing disputes to be resolved outside the courts. We will continue to explore with the CC and the Department of Justice on promoting the resolution of consumer disputes by non-judicial means.

(3) Consumer contracts involving pre-payment are commonplace in many industries. The regulation of all such contracts would have significant implications on many trades and industries. Considerations on relevant policy should be premised on respecting contracts for sale and purchase freely entered into between traders and consumers. The Government must have sufficient and reasonable grounds before intervening in a contract entered into between two parties.

     We understand that in the United States, the regulations in individual states stipulate that fitness service contracts shall not exceed three years in duration, or that contract fees shall not exceed a prescribed amount. Previously in New South Wales, Australia, the regulations used to stipulate that fitness service contracts should not exceed one year in length, or the unexpired period of the lease of the fitness centre premises. However, such regulations of New South Wales were repealed last year to achieve red-tape reduction. In our view, the suggestion of imposing ceilings on contract length or value of pre-payment in consumer contracts amount to a direct intervention into the business plans of traders and must be considered carefully.

     Thank you, President.

Ends/Wednesday, November 30, 2016
Issued at HKT 14:30