This year, the issue of “professional store closers” engaging in prepayment business closures and evading debts, which harms consumer rights, has garnered significant attention across society. On October 22, the Beijing Municipal Market Supervision Administration and the Economic Investigation Division of the Beijing Municipal Public Security Bureau jointly announced measures to combat the activities of these professional store closers that infringe on consumer rights. Beijing has reinforced credit punishment measures; those identified as directly responsible for false registrations within the store closure chain will be barred from applying for market entity registration for three years after the revocation of the false registration status.
According to reports, two art training institutions—Beijing Xiao Fan Qie Education Consulting Co., Ltd. (known as “Art Umbrella”) and Beijing Mu Yi Chuang Xiang Technology Development Co., Ltd. (known as “Wood Art”)—have been implicated in professional store closure practices following preliminary investigations by the police. Upon receiving tips from law enforcement, market regulators immediately launched investigations into the two closed businesses, three related debt mediation firms, and two involved closure agents. They uncovered violations such as false registration and assisting in false registration, resulting in a total confiscation of fines amounting to 655,800 yuan, marking a significant breakthrough as China’s first case against professional store closers.
Once the registration is revoked, those responsible will not be able to apply for market entity registration for three years. The reported cases involve not only the two cultural and arts education training organizations but also the colluding professional store closers, debt mediation agents, and debtors.
Beijing’s police, market supervision, and cultural and tourism departments collaborated closely during the investigation of these cases to form a comprehensive deterrent against the professional store closure community. Their coordinated efforts included:
1. The police conducting an economic investigation into the involved entities and individuals, transferring evidence to market regulators after ruling out criminal suspicions.
2. Market supervision enforcing administrative penalties in accordance with China’s Company Law and other relevant regulations, legally revoking the false change registration of the implicated businesses.
3. The cultural and tourism department ensuring that the two art training institutions fulfill their responsibilities and that former legal representatives and shareholders are held accountable for their debts.
4. Strengthening credit penalty measures, whereby individuals linked to the store closures are recognized as directly responsible for false registrations and barred from future market entity applications for a three-year period following the revocation of the false registration.
Addressing prepayment practices
Prepayment consumption has emerged as a convenient payment method in response to market demand and is widely applied across various sectors. To enhance regulation of prepaid consumption, Beijing introduced the “Regulations on the Management of Single-Purpose Prepaid Cards” on November 26, 2021. After approval from the Beijing Municipal People’s Congress, it took effect on June 1, 2022. These regulations clarify the responsibilities of city and district governments, with the market supervision department overseeing implementation and industry regulators managing their respective sectors.
Over the past two years of implementing these regulations, 28 areas across 14 industries have been incorporated into the purview of prepaid card regulation. Industry regulators have actively developed supporting systems, including contract templates and financial supervision mechanisms.
For instance, the education department has introduced management guidelines for compulsory prepayments by off-campus training institutions, mandating that all advance payments must be deposited into designated tuition accounts strictly for that institution. Similarly, the sports department issued regulations that require 40% of pre-received funds from prepaid cards with a validity of three months to be set aside as managed funds, with increasing percentages for longer durations.
Furthermore, the commerce department specified that retail, catering, and residential service industry players issuing single-purpose prepaid cards—if their pre-received fund balances exceed 500,000 yuan—must establish specialized escrow accounts with a local bank to ensure consumer protections.
Additionally, various other sectors dealing with vocational training, technical exam preparations, cultural arts training, bike rentals, and childcare have put in place similar financial regulations. These efforts aim to ensure compliance with the overarching regulatory framework and safeguard consumer rights.
