Applicability Study Of Punitive Damages In Automobile Sales Fraud

Article 55 of China’s Consumer Rights and Interests Protection Law provides for punitive damages,allowing consumers to claim "three times the amount of compensation" for fraudulent acts committed by business operators.However,in the context of automobile sales fraud disputes,there is much debate surrounding the application of punitive damages in such cases due to the unique nature of the product.This can be summarized into three main issues:whether punitive damages apply to automobile sales fraud,how to identify fraudulent behavior by automobile dealers,and how to reasonably determine the amount of punitive damages.Many discussions on the above issues are often limited by a "post-loss" perspective of"filling losses" and are trapped in the moral dilemma of whether punitive damages are fair or not.From the perspective of law and economics,the function and purpose of civil liability,whether compensatory or punitive,in addition to providing post-loss relief,also focuses on guiding behavior in advance.Civil liability(whether compensatory or punitive)should be able to provide appropriate incentives for the actor and guide people to take reasonable preventive measures in advance to prevent possible losses and disputes.The legitimacy of punitive damages lies in the fact that in specific situations,they can overcome the shortcomings of compensatory liability and provide effective incentives for the actor.Whether punitive damages apply to automobile sales fraud should take into account factors such as the possibility of the defendant escaping liability and the size of the prevention cost.This will not only achieve the best deterrent effect of the law at a reasonable cost,but also avoid excessive deterrence.This paper takes a functionalist perspective and uses the deterrence theory of punitive damages for analysis.It concludes that when there is a high possibility of automobile dealers escaping liability and at the same time,the cost of preventing fraud is very low,then punitive damages are legitimate.This will help guide dealers to take reasonable preventive measures in advance.If the dealer does not have the possibility of escaping liability,or has to pay a high cost to avoid fraud,then applying punitive damages will lead to excessive deterrence.In the issue of identifying automobile dealer fraud,the scope of the dealer’s obligation to inform is a key problem,which is considered difficult to define clearly in legislation and can only be left to judicial case-by-case judgment.From an economic analysis perspective,to minimize social costs,the potential risk of errors should be borne by the party who can prevent errors at a lower cost,that is,the party who can obtain information at a lower cost should fulfill the obligation to disclose information.At the same time,the dimension of prevention cost helps us better understand and judge the actor’s intent and negligence.In addition to intent,gross negligence with low prevention costs can also be considered fraud,and punitive damages may apply.This is not only because when there is gross negligence,the cost of avoiding fraud is extremely low,but also usually means that the operator has a high probability of escaping liability,so it is necessary to recognize gross negligence as fraud.The application of punitive damages is to internalize the external costs of dealer fraud as their own costs.This will not only have a sufficient deterrent effect on the dealer to prevent future fraudulent behavior,but also not lead to excessive deterrence.The determination of the amount of punitive damages should aim to achieve this goal and follow the principles of optimal deterrence and necessity.The application of economic analysis theory can construct an ideal model for calculating punitive damages,which is based on compensatory damages H as the base and multiplied by(1-P)/P as a multiple,resulting in the final amount of punitive damages.In China’s judicial practice,the determination of the amount of punitive damages for businesses may refer to this theoretical model,taking into account factors such as the probability of the defendant evading liability and the actual losses suffered by consumers,and interpreting the term "price of goods" differently.When the "partial defects" of such goods are relatively obvious and the consumer’s interests are not greatly affected,the "partial price" can be interpreted as the "price of goods." When the "partial defects" of goods are very concealed and cause significant damage to the consumer’s interests,the "overall price" can be interpreted as the "price of goods." When it is difficult to distinguish between local and overall defects and the consumer’s interests are severely damaged,the cost of making such distinctions may be high,and the "partial price" can be interpreted as the "price of goods."...