Excellent post by Tom Chow on litigation and the recent milk scandal. This is in response to a nice little article in the Christian Science Monitor:
A case that in the United States would attract swarms of lawyers eyeing the prospect of millions of dollars in damages is primarily a political, not legal, issue in China.
For reasons to do with China’s still-developing law and its authoritarian political system, lawyers are treading carefully around the Sanlu incident, in which four babies have died and nearly 53,000 suffered kidney problems after drinking adulterated powdered milk.
The government is seeking to forestall legal repercussions by pledging free medical care for all babies affected by the tainted milk.
I think Tom and I have the same views on litigation. It can certainly be a major source of progress with respect to consumer protection. I have for many years wished that a more robust tort system here could be instituted that could kick start the consumer movement. Tough to do, however, given the political nature of these issues.
Some comments from Tom:
Why have lawsuits when you can have the government step in and make sure that plaintiffs are made whole? (okay, it’s arguable that the plaintiffs aren’t made whole because they aren’t compensated for pain and suffering, but I don’t want to go there in this part of my post).
I don’t think the Chinese government’s method of compensation is all that fair in terms of pain and suffering (and time and nuisance value) by just paying all treatment fees. But it is great in terms of promoting social stability and trying to quell the unrest. What’s the downside? Ultimately, such an action likely will encourage would-be offenders to continue to market garbage products. And of course, true justice isn’t really served. The government ends up shielding the companies at the cost of damaged parties.
I would also prefer to see a litigation-based system of compensation. However, I appreciate that the government is attempting to remedy the situation. There is some logic to this, of course, since obviously enforcement of product quality standards/rules was involved here. Note that several government officials have been sacked already, so in that sense, the government is appropriately coming forward and admitting that mistakes were made. To compensate the folks harmed follows naturally from this general admission of (at least partial) fault.
Another wrinkle. As I alluded to yesterday, every time someone gets sick anywhere in the world now from a Chinese food product, there is potential for a news story. Not really fair, but after all the stuff last year with pet food, toys and medicine, this is to be expected. Leaves a very small margin for error when it comes to Chinese food exports, doesn't it?
There are real repercussions to this kind of bad press on China's trade with the rest of the world, the development of domestic industries, and the fragile role that China is playing as the linchpin of global supply chains. I'll defer to folks like Rich on the latter issue, but suffice it to say that the government here has a huge interest in making sure that this problem is addressed as quickly as possible. A tort-based solution would drag this out for a long time and cause a PR nightmare for Beijing.
One final thing. Tom rightly points out that even with the government stepping in here, the would-be plaintiffs are still not going to be collecting on pain and suffering (i.e. in tort-speak, will not be "made whole"). Tom notes this in a critical manner as one downside of the proposed solution.
Fair enough, but this is a very Common Law way of thinking. Since pain and suffering are not applied here very often, your average plaintiff would not end up collecting these kinds of damages anyway. It therefore makes sense that the government, in paying victims, only compensates them for what they would otherwise be able to get in a typical judgment. More than that would be seen as punitive.
Speaking of punitive, I think that the government will be quite active in going after the worst offenders here. These companies have tarnished the image of China just when the country was coming off the successful Olympics. Beijing is not amused, and I would not want to be the CEO of one of these offending enterprises.
Scary to even think about it.