Mstand Coffee Heavily Fined for Supplier Using Fake Qualifications to Produce Unauthorized Products

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MStand Fined Nearly 500,000 RMB for Illegal Production of Ice Pops

Recently, according to an administrative penalty decision issued by the Shanghai Xuhui District Market Supervision Administration, on October 11, 2021, market supervision law enforcement officers - acting on a report from the legal representative of a Guangzhou company - investigated Shanghai Ai Qia Catering Service Co., Ltd., which operates stores in Shanghai, Guangzhou, Shenzhen, and other cities providing coffee and other catering services (i.e., MStand).

Since September 2021, the ice pops used as ingredients in four floating-ice drinks - including the Floating Ice Berry Americano - offered by MStand had carried packaging printed with information about a certain Guangzhou company that did not match reality. Investigation by the Shanghai Xuhui District Market Supervision Administration found that in August 2021, MStand signed a commission-processing contract with that Guangzhou company, which agreed to supply MStand with 80,000 pieces of the "Woodside Binhe Fruit" series ice pops (in mulberry-berry, passion-fruit-granule-orange, grapefruit-lemon, and kiwi-green-grape flavors). Since August 2021, MStand had gradually sold four floating-ice coffee products in stores nationwide, all using these ice pops as ingredients. Upon investigation, the ice pops were produced at the company's premises without a food production license.

MStand had already paid the commissioned company, which actually delivered 62,800 pieces. When MStand received the shipment through third-party logistics, it rejected 2,340 pieces, leaving 60,460 pieces to enter the warehouse. Of those, 15,400 pieces were sent to the defective-product warehouse, and 25,860 pieces were distributed to stores. As of the investigation, MStand stores had used 15,169 ice pops, which formed the basis of the sales figures below. The value of the products was calculated from the raw-material payment made, with illegal income amounting to 127,116.22 RMB. On August 15, 2022, the Shanghai Xuhui District Market Supervision Administration penalized MStand under Article 33, Paragraph 1 of the "Shanghai Food Safety Regulations," which states: "When food producers and operators commission food production, they must commission enterprises that have obtained food production licenses and have the corresponding production conditions and capabilities." Because consumers could choose takeout when buying MStand's floating-ice drinks, the ice pops counted as separately packaged products: the sale consisted of an ordinary Americano that could be sold on its own plus an ice pop, and the ice pop's sales amount could be calculated separately. The illegal income in this case was therefore calculated from the actual sales amount of the ice pops, which was 127,116.2 RMB.

After recognizing the problem, MStand immediately halted the products in question and proactively provided relevant materials. The unlicensed production occurred in the Guangzhou area, and MStand also submitted inspection reports showing that food safety was under control.

After the market supervision investigation, it was determined that although the production company did lack production qualifications, MStand may not have been aware of this and showed no obvious subjective intent. Considering these factors, a reduced penalty was imposed under the relevant provisions of the "Administrative Penalty Law."

Nevertheless, under Article 95, Paragraph 1 of the "Shanghai Food Safety Regulations" and Article 28, Paragraph 1 and Article 32, Item (1) of the "Administrative Penalty Law of the People's Republic of China," the party was ordered to immediately correct the violation, illegal income of 127,116.2 RMB was confiscated, and a fine of 360,000 RMB was imposed - a total of 487,116.2 RMB in fines and confiscated funds.

Reflections on Food Production Qualification Issues

According to the penalty notice, this incident was triggered by a food manufacturer fraudulently using a third party's qualifications. Why do such violations keep occurring despite today's food safety supervision? The heavy penalty imposed on MStand may owe precisely to the fact that the owner of a compliant factory discovered that its production qualifications had been misused - and angrily reported it.

The food production license is the entry threshold for food processing enterprises, yet many small food enterprises - including some small coffee brands - are unwilling to invest in building a compliant factory of their own.

Even MStand found itself in this situation, and smaller brands or stores may find it even harder to obtain food and coffee-bean production qualifications. In that case they commission third-party factories to process their own-brand products. The more reckless ones may directly borrow a third party's qualifications to produce food in their own stores, or simply steal them.

The Problem of "Three-No Products"

In earlier years, we often heard about "three-no products" (goods with no production date, no quality certificate, and no manufacturer information). As market supervision has grown stricter, such products have gradually disappeared from the market, and even ordinary retail goods now usually carry fairly standardized labels.

Sometimes, however, products bought online list manufacturer information and a production license, yet the production address and the shipping location are clearly two places very far apart - and the parcel ships on the same day as the stated production date.

Such cases are very likely another instance of fraudulently borrowed production qualifications, like the one described here. They can bring enormous legal risk, and once discovered, heavy penalties inevitably follow. This case deserves everyone's attention.

Image source: Internet

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