China adopted a new advertising law in September 2015 which impose stricter controls on advertisers wanting to promote their goods or services within the People’s Republic.
These advertising laws apply equally to Chinese companies as they do to foreign companies operating within China.
The advertising law consists of the Advertising Law of the People’s Republic of China. This was initially adopted in 1994 but restated in September 2015. The restated law is twice as long as the 1994 original. It was implemented to strengthen consumer protection and impose tougher rules on advertisers.
What are the major aspects of the 2015 Advertising Law?
First, the Advertising Law prohibits false or misleading content. Advertisements featuring a commodity or service that does not exist or one that contains incorrect information in relation to function, origin, usage, quality, ingredients or price are all deemed misleading by the Advertising Law.
The Advertising Law also prohibits superlatives such as “the most” and “the best”. Minimum fines for false or misleading advertising are AUD$40,000.00 or UK£20,000.00. A large Chinese electrical company, Xiaomi Inc was investigated by the Beijing Ministry of Industry and Commerce for using superlatives phrases such as “the best” and “the most advanced” on its website. This investigation took place even though Xiaomi was the fourth largest smart phone maker globally.
Online advertising is also regulated by the Advertising Law. Internet advertisements must not interfere with the users “normal use of the internet”.
In relation to “pop-up” advertisements, a user must be given clear instructions how to close a pop-up advertisement which can be achieved by one-click only. Furthermore, electronically sent advertisements such as emails must include the sender’s true identity and the contact details of the sender. The recipient must also be provided with the option to reject continuing receiving the advertisement – in other words – the opt out button.
The Advertising Law does allow comparative advertising in China so long as there are no direct comparisons between advertisements. The Advertising Law bans advertisements which make direct comparisons with specifically named product or services. Comparative advertising must also adhere to the other applicable advertising laws.
The Advertising Law will not allow, either overtly or covertly, the use of the Chinese national flag or national anthem in advertising. The Advertising Law also prohibits advertisements which contain anything causing detriment to national dignity or national interests. The Advertising Law also prohibits advertisements interfering with social stability, causing detriment to social and public interests, or interfering with social public order or going against good social norms.
Advertisers, particularly foreign companies, would be well advised to consider the cultural context of advertising in the People’s Republic of China and ensure that an advertisement or a website will not violate references to the Chinese State.
Product endorsements by celebrities are also now regulated. Celebrity endorsers can be held responsible if they endorse a product or service in an advertisement that contains false claims and breaches the new Advertising Law. This liability will arise if the celebrity was aware or should reasonably have been aware that the product or service contained the false claims. Such a celebrity can be banned from endorsing products or services for three years. The Advertising Law imposes harsher penalties on false advertisements relating to life and health products whereby a celebrity endorser can be found guilty regardless of whether or not they were aware or even if they should have been aware of the false claims.
The Advertising Law prohibits anyone endorsing a product that she or he has never used and also children aged under ten cannot endorse any product. No endorsers can feature in advertisements for medicines or medicinal devices or for any product claiming to have health or other benefits.
In relation to children, the Advertising Law introduced a range of regulations aimed at advertisements targeted at children. Advertising in kindergartens or primary or middle schools are now banned as are advertisements in text books or on school uniforms and school buses.
Whilst tobacco advertising was prohibited in the Advertising Law in 2015, the Chinese Government wants to encourage breast feeding. Companies are now restricted as to how they can advertise baby formula. An example is that it is now prohibited for an advertisement to claim that it is a full or partial substitute for breast milk.
Penalties have also been overhauled in the 2015 Advertising Law.
If an advertisement is found to be misleading, industry and commerce ministries can demand that its publication be ceased and demand the advertisers take steps to mitigate the influence of the misleading advertisement. Fines ranging from three to five times of the advertising costs can be imposed.
If the advertising costs cannot be established, then a fine between 200,000 RMB and 1,000,000 RMB (or somewhere between AUD$40,000.00 and AUD$220,000.00) may be issued.
More importantly, a business’s license can be revoked as a penalty for falling foul of Chinese Advertising Law if the breach is serious.
Businesses marketing their goods by way of advertising need to pay close attention to the Advertising Law.
Additionally, advertisers will need to consider Chinese trade mark law as well as laws relating to specific goods and industries. This consideration needs to begin at the earliest stage of the marketing process.
Notwithstanding tougher advertising laws, China remains one of the world’s most lucrative and vibrant consumer markets. Nevertheless, businesses need to take care that they do not receive catastrophic penalties as a result of breaching the advertising regulations.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from De Marco Lawyers and other relevant experts.