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Live streamer commits fraud by selling fake product online

Beijing Internet Court | Updated: 2021-10-28

     

Wang, after buying a mobile phone from Xu - a live streaming anchor - on Kuaishou, a short video and livestreaming platform in China, believed the phone was fake and filed a lawsuit at the Beijing Internet Court (BIC) against Xu and the Beijing Express Hand Technology Co Ltd - operator of Kuaishou app - for fraud. 

On Sept 21, 2020, the BIC ruled its first instance judgment that the defendant Xu qualified as an e-commerce operator and Xu's behavior of selling the phone to Wang through private transaction constituted fraud and thus should bear the corresponding punitive compensation liabilities, and that the defendant Kuaishou, as an online service provider, has already fulfilled its legal obligations and thus was not liable as accused. 

Case summary 

Wang, the plaintiff, was interested in a mobile phone presented by the defendant Xu in a livestreaming session as an authentic product at half the market price. Wang was guided by Xu to make the transaction via WeChat, a social media app in China, instead of on a regular e-payment platform. 

Upon receiving the phone, Wang believed it was fake and requested to return it with a full refund, to which Xu would not agree. 

Wang complained to Kuaishou about Xu and was told by them that they had looked into the matter and tried to help Wang and Xu settle it, and had then closed Xu's account. However, Wang found out Xu still continued to do livestreaming business on the platform several days later. 

Wang attempted to meet Xu in person and to do so travelled a long distance to Xu's registered address, but in vain. 

Wang thus sued Xu and Kuaishou at the BIC on the grounds of an online shopping contract dispute and sought dissolution of the contract, return by Xu of the payment made and compensation of three times of the payment plus reasonable expenses related to the case. 

Defendant Xu argued that she was not qualified as a business operator as stipulated in China's law on the protection of consumer rights and interests and thus should not be liable for the triple compensation. Xu was willing to return the phone payment to Wang. As for the claimed expenses, they should not be granted for lack of evidence, Xu said. 

Defendant Kuaishou argued that the company has fulfilled its corresponding obligations and should not be liable. The transaction was conducted privately through WeChat between the two sides and Kuaishou could not supervise off-site behavior. Kuaishou had assisted the plaintiff Wang to communicate with the defendant Xu multiple times since the dispute and promptly banned Xu's account on the platform. The plaintiff's loss was not caused by Kuaishou and thus was unrelated to the company. 

Focus of dispute:

1. Identification of the nature of defendant Xu's livestreaming behavior and whether Xu should bear the corresponding legal liabilities. 

2. Whether defendant Kuaishou should bear the corresponding liabilities.

After the hearing, the court found that: 

1. As a business operator, the defendant Xu's business behavior constituted fraud and should bear punitive liability for compensation. 

A. As stipulated in China's Law on the Protection of Consumer Rights and Interests and the E-commerce Law, Xu qualified as a business operator. 

Both laws specify that business operators must be characterized as commodity sellers or service suppliers. The E-commerce Law applies only to online information network sale of commodities or services, which is a narrower focus than that of the equally applicable Law on the Protection of Consumer Rights and Interests. Thus, if Xu is deemed an e-commerce business operator by selling commodities on an online information network, Xu will automatically be deemed a business operator as stipulated in the Law on the Protection of Consumer Rights and Interests and thus should bear legal responsibilities accordingly. 

The evidence showed that Xu's Kuaishou account was used to register a shop on Kuaishou in March 2019 and a number of commodity links to third-party platforms were put up in the shop. Xu's livestreaming videos during May and June of 2019 all showed a yellow shopping cart sign during Xu's livestreaming sessions. Putting up that sign during livestreaming is a promotion service provided by livestreaming hosts for businesses. 

Thus the court concluded that defendant Xu qualified as an e-commerce business operator. 

B. Xu's selling the phone to Wang constituted business behavior. 

Business behavior refers to the continuous business activities aiming for profit. Livestreaming sales are business activities of commodity selling through the internet and are thus deemed business behaviors. 

Although the phone sale did not occur on the e-commerce platform, the plaintiff Wang bought the phone from the defendant Xu without much hesitation, not only because of the high value Wang attributed to the phone, but also because Wang had trusted Xu as a livestreaming anchor. The private transaction between them could be deemed a livestreaming sale and accordingly a business behavior. 

C. Xu's behavior of the phone selling constitutes fraud.

Both parties took the authenticity of the phone as the premise of the transaction. During the transaction period, defendant Xu clearly told the plaintiff Wang that the phone had no functioning problems. Xu said she had used the phone for half a month before she sold it to Wang. The in-court demonstration of the phone, however, showed its diversion from the authentic product. It was concluded that Xu committed fraud by hiding the truth and misinforming Wang which led to Wang's decision to buy. 

2. Defendant Kuaishou should not bear the corresponding liabilities.

The issue needs to be considered from the perspective of an online livestream service provider.

The evidence showed that Kuaishou had posted on its platform that such off-site transaction behavior as transaction that conducted by WeChat is a serious violation of the order of livestreaming platforms and listed related punishments. Upon receiving the plaintiff's complaints about the defendant Xu, Kuaishou promptly banned Xu's account on the platform. The company had fulfilled its obligations of pre-alert and post-supervision and thus should not bear the corresponding liabilities. 

Details of the Judgment:

1. The online shopping contract between plaintiff Wang and defendant Xu was dissolved on April 4, 2020.

2. Within 10 days of the judgment, the defendant Xu was ordered to refund the phone expense of 4,000 yuan to the plaintiff Wang, and pay him 12,000 yuan as compensation.

3. Within 10 days of the judgment, the defendant Xu was ordered to pay reasonable expenses of 2,924.89 yuan to the plaintiff Wang.