Only government program is suitable for compensating the victims of contaminated milk

Dr. Charles WANG


Now the “milk scandal” is under effective control but how to tackle the damage claims from the victims is becoming a predominant issue. There is an increasingly demand of damage claim against the involved companies through legal ways; some “voluntary lawyers groups” are also actively taking part in it. Given that the victims are widespread, many suggest that the class action settlement should be used for compensating the victims. 

It is true that in US, many similar product liability cases were settled through class action. However, for this current milk scandal, I don’t think that class action is suitable. Here are the reasons:

1. Many companies are involved and their situations are quite different
The contaminated milk is not involving one product from one company, but many companies in the industry; furthermore, the situations among these involved companies are quite different. In US, a wide range class action will eventually result in the bankruptcy of the business. Launching a class action against one company will inevitably give rise to the class action against many other companies. In light of the current bearing capacity of our judicial and economic systems, class action is like coping with one crisis with another.

2. Different national situations
The class action is more found in US than in Europe. The major reason is that in US, the government has been implementing the “big market, small government” free market policy. Under this circumstance, when such incident happens, it is difficult for US consumers to receive government support. However, in countries like China or those in Europe, the consumers usually trust their government and most of them will expect to get support from the government and also entrust the government to handle such matters.

3. Class action is unable to effectively solve the problem in time and also is hard to benefit all victims
After milk scandal, the remedial measures (free treatment, free screening and the inspection of all milk products and publishing related information, etc.) taken by the government have achieved satisfactory results which are impossible to be reached by means of litigations in any form (including class action), whether in terms of timeliness or universality.

4. Rebuild the morality of the whole society
Since 1980s, the US court has been inclined to huge damage awards. This is based on the assumption that in the market economy, everything carries a price-tag and could be settled by monetary compensation. However, pure monetary compensation goes against the intuition of ordinary people in the society. In fact, not everything carries a price-tag and could be settled by monetary compensation. Such phenomena have already induced reflection in US. In dealing with the “Milk Scandal”, the government has claimed forthwith against key personnel for criminal liability. That helps to rebuild the morality of the society and class action can not do it.

5. Deficiency in legislation
The current Chinese legislation has not had concrete legal provisions on class action, such as the selection process for representative, the court jurisdiction, the mechanism for opt-in/out of the class, the rights and interests of the individuals in the class, the rights and interests of the victims who do not want be in the class, the limit of fees and profits for the representative, etc. Consequently, there are many obstacles in practice. Given that the victims are widespread in this case, theses obstacles will be insurmountable.      

6. The drawbacks of class action
In the language of Professor William Rubenstein, the expert on class action in US, the core purpose of class action is a financial transaction between the plaintiffs’ representative and the defendant about the legal rights of the plaintiffs.(1) Class action in US has already had many problems such as the high cost of attorney fees, the conflict of interests between individual members, the rights of the individual member and so on. When the attorney’s profit is much higher than the compensation received by victims, it would be in contravention of the principles for lawyer and would be a profane to the legal profession. Such issues have also induced reflection in US. The promulgation of the Class Action Fairness Act of 2005 is one of the efforts made by the US Government to regulate the class action(2).

To conclude, I think that only government program is suitable for compensating the victim of the “Tainted Milk”. Regarding the legal aspect of the contents in this program, I would suggest the following for reference to relevant agencies:

1. Moral condemnation and criminal liability  
The “involved companies” should apologize to the whole society, and the criminal liability of the key personnel in the involved companies should be pursued. Only in this way, the social morality could be fostered and greed of capital in the market economy could be regulated.

2. Government support
The government should provide support to the victims based on actual needs in a rapid, equal and comprehensive way and make the government support as the public goods with easy access like the preventive medicine.

3. Legal compensation
1) The principle of strict liability should be applied for the purpose of ensuring the safety of the products without regard to the fault of the victims.

2) Assigning professional institutions to classify and grade on behalf of the victims the actual losses borne by the victims, assessing their losses and establishing relevant compensation models.

3) Ensuring that there is no delay and no costs for the victims to receive the compensation.

4. The payment of compensation
The government could pay the compensations in advance and then be reimbursed by the “involved companies” respectively through financial arrangements. This is not only a price that the involved companies should pay, but also a warning to potential tortfeasors. They will have to pay more attention to the quality of their products based on the cost-benefit analysis.

Class action is unable or hard to achieve such results.

October 17, 2008


Dr. Charles WANG is partner of the WZW & Partners,  

© WZW & Partners, 2008 All rights reserved.

(1) Understanding of the CAFA of 2005, Williams B. Rubenstein

(2) The U.S. Class Action Fairness Act of 2005, 28 U.S.C.