To attract business, beauty centres often offer concessions or discounts to entice consumers to prepay for different types of package deals which include a specified number of service sessions or treatments within a designated time frame. However, the pandemic has caused operational difficulties for many industries including the beauty industry, which had to close down completely at one point according to anti-epidemic measures. After this “ice age”, some beauty centres had to change hands as they could not make ends meet, raising concerns among consumers about whether the new operators would honour prepaid but unused packages and continue to provide services originally contracted with previous operators. In fact, as beauty services are “personal services”, previous operators are not absolved from legal responsibility through the transfer of business. In case of failure to provide the purchased services, consumers have the right to seek redress for the remaining balance against the previous operators. Moreover, according to the law, new operators are responsible for the legal obligations and debts arising out of the business of the previous operators, and consumers can request refunds from the new operators within a specified time frame. The Consumer Council reminds businesses that they should continue to provide the remaining services or arrange refunds in accordance with customers’ wishes after transfer of the business. They should not take advantage of the situation to ask for additional expenses from consumers or unilaterally modify the terms and conditions of service, nor to attempt to evade their legal responsibilities, or else they will not only suffer serious damage to their reputation, but also face the risk of litigation.
Consumers Have the Right to Seek Refund for Unconsumed Balance from Both Previous and New Operators
In the past, the Council has from time to time received complaints about beauty services, including disputes between consumers and operators after the transfer of business. A complainant had purchased facial beauty, detoxification, and eyeliner tattoo treatments from a beauty centre. Later the centre changed hands and the new operator claimed that they did not have the detoxification equipment used by the previous operator and recommended additionally purchasing and switching to other beauty care packages instead. Not wishing to spend extra money, the complainant requested switching the remaining balance to basic beauty care services but the operator denied her request. The staff finally suggested the complainant to pay an extra $3,000 and write off 18 existing treatment sessions in exchange for more advanced treatment services, or no further appointments would be arranged for the complainant. After conciliation by the Council, the new operator offered to refund $3,000 but would no longer provide the complainant with any services. The complainant, after careful consideration, considered the process of seeking legal redress difficult and given further that she no longer wished to patronise the new operator, reluctantly compromised and accepted the offer.
In previous litigation, the courts have established that beauty services fall under the category of “personal services” and previous operators, even after transferring business ownership, are still liable to provide services purchased by consumers and cannot evade legal obligations through such transfer. Therefore, the new operator cannot insist on continuing to perform a contract entered into between the previous operator and the consumer without the consumer’s consent. In addition, under the Transfer of Business (Protection of Creditors) Ordinance (the Ordinance), the new operator is also liable for the debts and obligations incurred by the previous operator’s business, and consumers have the right to recover outstanding payments from both the previous operator and the new operator. Therefore, even if the new operator offers to continue provide the contracted services, consumers should first find out whether there are additional conditions attached and whether the services offered are equivalent to what was originally purchased before deciding whether or not to accept such offer or to exercise their right to a refund.
Legislation Provides for Time Limitation for Litigation Which
Consumers Should Not Miss
Beauty service packages often come with service periods measured in years, and it is not uncommon for operators to transfer their business during this period. However, consumers may not notice the change in ownership as the original employees may continue to service patrons, and beauty centres may not take the initiative to announce the change of ownership. Although according to the Ordinance, consumers have the right to claim a refund for unused balance from new operators, the Ordinance also specifies that consumers have to take legal action to recover the unused balance within 1 year from the date of transfer of business. If the new and the old operators choose to publish a “notice of transfer” in the Gazette and in both Chinese and English newspapers, the consumer is then required to take legal action against the new operator or the old operator (as the case may be) within 1 month from the date of issue of the notice of transfer, failing which the new operator’s obligations under the Ordinance will cease. Due to the short time frame for litigation, as consumers in general seldom have the habit of checking the Gazette or newspapers for “notices of transfer” and would not be able to learn about the transfer of business quickly, they may miss the opportunity to seek redress from the new operator. However, the previous operator's liability does not end with a “notice of transfer”.
In addition, some operators may engage in actions that, on the surface appear to be a transfer of business, but in reality the new and old operators are still the same entity. This practice may involve defrauding creditors, who have the right to apply to the court for setting aside the transfer in accordance with the Conveyancing and Property Ordinance. However, the legal procedures, burden of proof, and litigation costs involved in the whole process are often beyond the means or willingness of the average consumer.
Both Old and New Operators Must Protect Privacy of Customers
When an operator transfers their business, it is common for the personal data of customers to be transferred to the new operator so that the new operator can contact customers to arrange for provision of the originally purchased services. However, as beauty services are “personal services”, the previous operator should obtain consent from the customers before transferring their personal data to the new operator. In addition, if the new operator’s intention is to market other services and products instead of making arrangement for provision of the originally purchased services, this may constitute direct marketing. Under the Personal Data (Privacy) Ordinance, the customer’s prior consent must be obtained in relation to the use of personal data for direct marketing purposes.
There is a wide variety of beauty services and package deals offered in the market. Some tips for consumers when purchasing and using such services and packages to protect their consumer rights:
- Prepayments should be made in accordance with actual needs and refrain from excessive prepayment. It is also advisable to take into consideration the integrity of the operator and avoid impulsive, high-value prepayments when offered discounts, free gifts and other concessions;
- After purchasing services, use service and check records regularly, and pay attention to the operator’s business status and operations;
- In case of business transfer, first get to know the rights and time frame for recourse from the new operator, including checking the online Gazette to see if operators have issued relevant “notice of transfer”, before negotiating with the new operator on the arrangements for continuation of contracted services;
- During the course of negotiation, fully understand whether the new operator is able to satisfactorily provide the remaining services, whether such services are equivalent to that under the original agreement, and whether there are new conditions including additional charges;
- In case consumers do not want to receive the contracted services by the new operator, they can request a refund from the new or previous operator, or consider applying to the credit card issuer for a refund from the operator’s bank on the consumer’s behalf. However, successful recovery depends on a number of factors, such as whether the refund is requested within stipulated time limit, and whether evidence to substantiate that the operator has violated the contract can be provided.
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