The profitability of the practice has given rise to ‘professional counterfeit hunting’. After the Food Safety Law introduced a punitive damages system, increasing compensation from three-fold to ten-fold, a surge of professional hunters entered the food sector, where there was previously little to be gained. While this has helped regulate food business operations to some extent, it has also led to cases of ‘staged violations’—where fakes are created specifically to be ‘busted’.
Alternative food systems are already established abroad, but are still in their infancy in China. These systems advocate for direct links between consumers and producers, based on the principle that the more intermediaries involved, the greater the risk to food safety.
There is a vast difference between small-scale family production and large-scale factory production. There is a hope that more supportive standards and requirements can be developed for smallholders, cottage industries, and other small-scale operators.
Recently, food safety has once again captured public attention, though not in the form of a food safety scandal. On one hand, news reports have frequently highlighted ‘exorbitant fines’: a farmer in Zhejiang was fined 50,000 yuan for slaughtering and selling his own pig for 700 yuan; an elderly man in Luoyang, Henan, was fined 110,000 yuan for making a 21 yuan profit selling vegetables; and several restaurants were fined 5,000 yuan for adding shredded cucumber to their Liangpi… Such incidents, which clash so sharply with everyday common sense, have left readers wondering: are these massive fines fair to ordinary farmers, street vendors, and small eateries running on a shoestring budget?
On the other hand, this controversy has sparked a positive response in regulatory revisions. The State Administration for Market Regulation (SAMR) recently revised the ‘Administrative Measures for the Licensing and Record-filing of Food Business Operations’ and the ‘Administrative Measures for the Quality and Safety Supervision of the Marketing of Edible Agricultural Products’, effectively giving the green light to previously contentious practices such as ‘smashed cucumber’ and the sale of ‘dried produce’.
Despite this, we still see farmers struggling to obtain the necessary qualifications when producing processed goods. The severity of the penalty system also means that vendors, restaurants, shops, and even online sales platforms face the constant risk of being targeted by ‘professional counterfeit hunters’—a problem that has become a major headache for both those being enforced upon and the enforcement officers themselves.
On 27 July, Foodthink, in collaboration with Tencent News’ ‘Let’s Chat Science’, invited Zhong Shuru, an anthropologist researching wet markets and sustainable food systems; Zhang Xueming, an expert lawyer and Executive Director and Deputy Secretary-General of the Beijing Food and Drug Safety Rule of Law Research Association; and Li Jie, a rural entrepreneur. Together, they explored the plight and survival strategies of smallholders, street vendors, and small eateries in the face of exorbitant fines and professional counterfeit hunting, examining the issues from the perspectives of legal regulation, professional litigation, and ecological agriculture.
This discussion is also a follow-up to our recent involvement in the revision of the ‘Administrative Measures for the Quality and Safety Supervision of the Marketing of Edible Agricultural Products’. Our suggestions for amendments were adopted, meaning that ‘dried fish, dried vegetables, and dried fruits’ can continue to be sold, making our future laws and regulations slightly more ‘friendly’ toward smallholders who produce and sell their own goods.
Roundtable Guests
Zhang Xueming
Expert lawyer, Executive Director and Deputy Secretary-General of the Beijing Food and Drug Safety Rule of Law Research Association.
Zhong Shuru
Anthropologist researching wet markets and sustainable food systems.
Li Jie
Cooperative head and rural entrepreneur who transitioned from village-based social work.
Moderator
Wang Hao
Editor at Foodthink.
I. Professional Anti-Fraudists: Whistleblowers vs. Profit-Seekers
Wang HaoFrom an elderly man in Henan being fined 110,000 yuan for making a mere 21 yuan profit selling vegetables, to a farmer in Zhejiang being fined 50,000 yuan for selling 700 yuan worth of pork from his own livestock, it is clear that there is a disconnect between current food safety regulations and everyday lived experience. Both of these cases were eventually rectified. In fact, if regulators lack a deep understanding of producers, errors and biases can arise during actual enforcement. Food safety enforcement does not just affect street vendors; it also impacts many small-scale farmers. Li Jie is the head of a rural cooperative. We have invited her to discuss the practical challenges small-scale producers may face in the field of food safety.Li Jie: One of our own experiences involved being targeted by professional anti-fraudists. Green plums are a traditional crop in our area. Many villagers make green plum wine at home, and local restaurants and agritourism farmhouses also sell it in bulk. Our cooperative used to produce this wine too; we drank it ourselves, and there were no food safety issues. However, a partner who helped us sell on online platforms was later reported by a professional anti-fraudist. After the town’s industrial and commercial administration conducted an investigation, our partner was heavily fined. Although we, as the producers, were not fined, the people in the cooperative were frightened and worried. Producing green plum wine is classified as agricultural processing; doing so without a licence is illegal. We asked the investigators how we could improve, only to find that in Guangdong, small-workshop licences are only available for distilled baijiu. For infused wines like ours, no such licence exists. To get certified, we would need to build a factory, which could cost nearly a million yuan—far beyond our means. The town officials suggested we partner with existing small workshops to invest in upgrading to a full distillery, but the cost was still too high for us.
Some had previously suggested we outsource the processing to external plants. We consulted many distilleries, but after careful consideration, we decided to process it ourselves. Firstly, there was the cost. Fresh green plums are very cheap to source locally; in the last two years, they have been only 0.8 to 0.9 yuan per jin—not even a single yuan. Our cooperative pays a slightly higher price for the plums and then processes them ourselves. Outsourcing to a factory would not necessarily be cost-effective. Furthermore, we wanted to keep the processing in the village so that the labour income would stay within the community. Moreover, as we practice ecological farming, we wanted to use ecological processing methods—approaches that are friendlier to the environment—rather than simply handing everything over to a factory.
But for various reasons, we have eventually been forced to use a factory for contract production.
Wang HaoIn Li Jie’s story, the cooperative’s products eventually caught the eye of “professional anti-fraudists”. Many of these “fraud-fighters” are becoming increasingly professionalised. How should we view them? Some see them as whistleblowers within the food safety mechanism, while others believe they are simply nitpicking to extort high compensation payments.Zhang Xueming: Whether from an academic or a practical perspective, the issue of professional fraud-hunting in food safety is highly controversial. The rise of professional fraud-hunting stems primarily from the introduction of punitive damages into our legislation. Before such laws were enacted, all compensation claims under our legal system followed the principle of restitution. For instance, if a piece of level ground were turned into a pit through a tortious act, the compensation would simply be to fill that pit; the payout would cover the cost of repair without allowing for any profit.
Following the introduction of punitive damages in the Law of the People’s Republic of China on the Protection of Consumer Rights and Interests in the 1990s, three-fold compensation was mandated. In other words, for every unit of loss, a claimant could receive three, netting a profit of two. This financial incentive gave rise to fraud-hunting as a profession.
With the enactment of the Food Safety Law of the People’s Republic of China in 2009, the three-fold compensation set out in the Consumer Rights Law was increased to ten-fold, further widening the profit margins for such claims. After the second revision of the Food Safety Law in 2014, the minimum compensation was raised from 500 yuan to 1,000 yuan. This meant that while a ten-fold payout for a single packet of fraudulent instant noodles would normally be negligible, the minimum threshold ensured a payout of at least 1,000 yuan. Consequently, the food sector—previously an unattractive target for profit—saw an influx of professional fraud-hunters, leading to a surge in food safety litigation. This has caused significant distress for businesses, particularly those dealing in imported foods; a single successful claim can result in a product being removed from the domestic market, even if the issue was merely a minor flaw on the label.
● Professional fraud hunters target food products from overseas personal shoppers. Source: Beijing Evening News● Professional fraud hunters target food products from overseas personal shoppers. Source: Beijing Evening NewsIn all fairness, professional fake-fighting has played a role in standardising how food companies operate. However, the way these cases are handled has often been excessive or repetitive. The high volume of cases drains significant energy and judicial resources, leaving both the courts and the companies exhausted. Furthermore, some claimants engage in a practice of creating the very fakes they report, which has seriously harmed the food industry. For instance, they might find a product nearing its expiry date and hide it in a remote corner of the shelf where the supermarket staff cannot find it. Once the date passes, they retrieve it, purchase it, and demand compensation. This breed of fake-fighter is widely loathed—even by their own peers—for their utter lack of fair play. That said, if food companies want to address the issue of professional fake-fighting, they must first look inward: strengthening self-discipline, standardising their operations, and ensuring they operate strictly within the law. At the same time, when dealing with those who manufacture fakes to report them, companies should report them to the police immediately and take a firm stand, letting the authorities intervene and treat such actions as fraud.
Wang HaoFrom an enforcement perspective, grassroots market regulators also struggle when facing ‘professional fake-fighters’, which has led to a culture of ‘no report, no investigation’. This brings to mind a recent news story about small restaurants that lacked the specific licence required for serving cold foods; because they served smashed cucumber salad, they were targeted. A plate of smashed cucumber is worth pennies, yet the fine was several thousand yuan. This is where professional fake-fighters come into play. Does this kind of targeting of small vendors and eateries lead to a disconnect between the penalty and the actual gravity of the fault? How should we view the discretionary standards applied in such law enforcement?Zhang Xueming: Regulation should indeed be differentiated when it comes to small vendors. Firstly, such cases should generally fall under the ‘Three Smalls’ management framework established by provincial authorities. Generally speaking, once brought under ‘Three Smalls’ management, penalties are typically more lenient. Secondly, the Market Supervision Administrations in each province have established discretionary standards for the Food Administrative Penalty Law, which include specific provisions for mitigating, reducing, or waiving penalties; provinces have issued corresponding documents and policies to this effect.
The current issue of ‘severe penalties for minor infractions’ among small vendors may be due, on one hand, to the fact that individuals may need to confirm whether they have applied for recognition as a small vendor and whether they have been included in the ‘Three Smalls’ management system. On the other hand, from a macro-management perspective, these leniency policies and regulations have not been effectively utilised or implemented. I believe these issues can be resolved.
II. What is the future for small farmers, small vendors, and small catering businesses?
Wang HaoSimilar to Li Jie’s story, I have heard of several cases in the past. For instance, some farmer cooperatives wanted to process their fresh Sichuan peppercorns into peppercorn oil; one path was contract manufacturing, and the other was building their own factory. In the case of contract manufacturing, there were no suitable factories locally, while building their own factory required too much capital. Consequently, the plans simply fell through. Teacher Zhong, you come into contact with many farmers during your anthropological fieldwork; have you paid much attention to these kinds of issues?Zhong Shuru: This is actually a fairly common situation. For those engaged in ecological agriculture today, selling raw vegetables is the least profitable part. From the perspective of consumer price expectations, people might feel that vegetables should cost three or four yuan per jin at most; when the price suddenly jumps to ten or fifteen yuan, they simply cannot accept it. Furthermore, vegetables are prone to spoilage, making it even harder to turn a profit. That is why I completely understand why people like Li Jie, who practice eco-farming, seek to increase the added value of their produce through processing in order to survive. Selling green plums might only fetch a few cents per jin, and they are difficult to preserve, meaning there is basically no profit; however, turning them into plum wine increases the added value and generates some income. But processing is indeed a major hurdle, as small-scale farmers lack the necessary certifications and capital to operate. For example, selling flour is very cheap, but to process it into biscuits, one would need to build a factory, which requires an investment of one or two million yuan. How could a small farmer possibly produce that much capital at once? Even if they use white-labeling at another factory, they face various requirements, such as whether the volume is sufficient or whether the raw material specifications meet the standard. Because the factory is processing the goods under their own brand, they are essentially assuming a portion of the risk. This introduces a great deal of complexity regarding trust, funding, and quality coordination.
At present, the overall production environment is not very friendly to ecological agriculture, particularly regarding processing. Simple, crude processing—such as selling home-cured bacon—usually doesn’t pose a problem. This is because such crudely processed products are found in almost every market, and they are even more common in markets in rural areas or on the urban-rural fringe. If the law were strictly enforced even in these cases, the scope of enforcement would become overly broad. I believe a key dividing line is whether the processing has altered the original nature of the product. Zhang Xueming: Article 36, Paragraph 3 of the Food Safety Law of the People’s Republic of China explicitly stipulates that specific management measures for small food production workshops, food stall vendors, etc., shall be formulated by provinces, autonomous regions, and municipalities directly under the Central Government. In practice, the entry requirements and specific penalty measures for these “three smalls” (small workshops, small merchants, and small vendors) vary according to the characteristics of each province.
Some regions have already formulated specific management measures for these “three smalls”, while others have not kept pace. Furthermore, there are different interpretations across regions regarding the scope and applicable conditions of the “three smalls”. For instance, in some places, home-brewed alcohol or alcohol brewed in small restaurants is not included in the “three smalls” category; consequently, they are required to obtain a production licence under the Food Safety Law, which involves a relatively higher threshold and harsher penalties.
Additionally, I hope more channels can be created to allow small farmers, small merchants, and ordinary citizens to participate in legislation and the revision of laws and regulations. We know that in the realm of law and legislative participation, large enterprises generally operate through associations or lawyers. However, cooperatives like Li Jie’s, or other smaller-scale enterprises, have relatively fewer opportunities.
Firstly, local governments or enterprises could consider initiating associations—for example, establishing mass organisations such as a Small Workshop Association, or strengthening ties with industry associations like the Consumers’ Association to actively participate in the legislative process when relevant departments are drafting laws.
Secondly, I suggest paying close attention to the legislative and standardisation plans published by government departments. This includes monitoring the websites of the Market Supervision Administration, the People’s Congress, the government, and various standard-setting bodies to provide timely feedback and suggestions for the revision and improvement of relevant regulations.
Furthermore, one should follow relevant media reports to stay informed about changes in laws and regulations, in order to better manage food safety issues.
Wang HaoFoodthink has previously researched examples of food safety management in other countries. For instance, in US law, small-scale farming and operations are defined as “cottage food operations”, and the corresponding standards are much lower than those for commercial sales. As long as the total annual sales of food are $50,000 or less, individuals can produce specific foods, such as baked goods, canned jams, or jellies, at home and sell them directly to consumers. Although national conditions differ and we cannot simply copy this model, is it possible for China to draw inspiration from similar management methods?Zhong Shuru: Yes, certainly. For example, Li Jie’s cooperative deals directly with consumers; in many cases, they produce their own wine and sell it themselves, bypassing middlemen. Ecological agriculture is still in its infancy here, but abroad it has already formed a vast system known as Alternative Food Networks. This is a separate network established outside the mainstream systems of supermarkets, wet markets, and e-commerce, advocating for direct links between consumers and producers. The more intermediaries involved, the greater the food safety risks we face. Produce from market stalls or supermarkets typically passes through at least three to six different levels from origin to point of sale. The more levels and the longer the chain, the more obscured and easily hidden the information becomes, leaving the end consumer trapped in an “information black box”. For instance, if I have scrambled eggs with tomatoes tonight and bought the tomatoes from a supermarket, I would know very little about where they were grown. But if I bought them directly from a farmer I know, the information is far clearer. This is why we should encourage various forms of short-chain sales; the shorter the chain, the more transparent the information tends to be.
However, short-chain sales currently account for a small share of the overall market. One reason is that many consumers are unaware of the channels available to purchase such healthy food; another is that the cultivation requirements for ecological agriculture are high, and yields and scale are insufficient, leading to a low market share. In Europe and the US, this can account for around 5%, but in China, it may not even reach 1%.
There is a contradiction here: short-chain production is inherently based on trust between the producer and the consumer; often, there are no defined standards to frame it, nor labels to provide endorsement. When this informal system—based on trust between people and between people and produce—must also comply with numerous market regulations and legal rules, conflicts easily arise.
How can we enable these small-scale, informal operations to collaborate with formal channels such as supermarkets and e-commerce? Given the complete mismatch in trust mechanisms, this linkage remains a problem that has not been solved in either academia or practice.
Li Jie: As a small-scale farmer, I don’t actually know much about the legalities of regulatory systems. From our perspective, I believe a tiered management system would be much more appropriate, as there is a vast difference between small-scale family production and large-scale factory production. Provided that basic hygiene and safety conditions can be guaranteed, I hope more friendly standards and requirements can be developed for small-scale operations like small farmers and workshops, helping us overcome the difficulty of obtaining certifications. For example, the US cottage food laws mentioned earlier have regulations and requirements that are more attuned to the reality of small-scale farming, rather than applying a one-size-fits-all approach to management.
Compiled by: Hu YunwenUnless otherwise stated, images are courtesy of Foodthink
This article was first published in the ‘Let’s Talk Science’ column of Tencent News
Reprints on the Foodthink WeChat official account are authorised
Zhang Xueming
Zhong Shuru
