China: The People's Republic of China Advertising Law - Substantial Revisions Under Way

Last Updated: 6 July 2012
Article by Richard Wageman and Belinda Tang

LEGISLATIVE BACKGROUND

The advertising industry in China has grown rapidly over the past decade. New types of advertising products have been developed, such as pop-up advertisements on websites and viral marketing on Weibo. However, the existing People's Republic of China (PRC) Advertising Law (中华人民共和国广告法) (enacted in 1994 and brought into effect on 1 February 1995) is lagging behind current practices. This lag is evidenced by an increasing number of non-compliant advertisements being released on new media in China, with consumers suffering the consequences.

In 2000, representatives to the National People's Congress submitted a proposal to revise the PRC Advertising Law. However, it took until 2004 for the State Administration for Industry and Commerce (SAIC), the regulatory authority that oversees the Chinese advertising industry, to initiate a review of the PRC Advertising Law and for the Chinese Government to list it for revision in the legislation strategic plan of the 11th Standing Committee of the National People's Congress.

In 2009, the SAIC circulated a Draft Revised PRC Advertising Law (Draft Revised Law) to various industry organisations to solicit feedback. To date, the PRC State Council has not issued any formal notification indicating when a further revised PRC Advertising Law will be issued, although it is anticipated that this will occur in 2013 or 2014.

Based upon provisions covered in the 2009 Draft Revised Law, it seems likely that any revised advertising law will address the issues discussed below.

JOINT LIABILITY OF OTHER PARTICIPANTS IN THE ADVERTISEMENT

In recent years, it has been common to see entertainers or celebrities being invited to recommend certain products or services in advertisements. A number of such advertisements have contained false information or exaggerated the effects of the products or services being advertised. This has seriously misled and caused material damage to consumers.

To address this issue, the Draft Revised Law applies to individuals or entities that certify, recommend or verify content in advertisements, who are referred to as "Other Participants".

The Draft Revised Law requires Other Participants to verify the content of the advertisement, make recommendations based on factual evidence and not recommend any products or services that they have not used themselves. In addition, the Draft Revised Law specifically prohibits any individual or entity from making recommendations or verifying a claim when advertising medicines, medical equipment, food, health food, medical services or financing services. If an Other Participant in an advertisement violates these requirements, they are subject to fines and can be held jointly liable for any damage caused to consumers.

COMPARATIVE ADVERTISING

The Draft Revised Law also includes detailed provisions on comparative advertising. In addition to the general principle that comparative advertising should not damage a third party's reputation or goodwill, it also requires that comparative advertising be based on factual evidence and not adopt any unfair or non-scientific comparative methods. Furthermore, the Draft Revised Law stipulates that advertisers of certain products and services, including medicines, medical equipment, health food, food additives, tobacco, wine, pesticide, veterinary drugs and medical services, will be prohibited from making any comparative advertising claims.

FALSE ADVERTISING

In the existing PRC Advertising Law, the definition of false advertising is very general and vague, which has caused great difficulties for advertisers. The Draft Revised Law addresses this issue by providing a list of examples of what authorities would deem to be false advertising, including:

  • Material inconsistency between the representations made in the advertisement and actual facts, especially in relation to factors that have a major impact on a consumer's determination of whether or not to purchase the products or services, such as the product's function, composition, quality and purpose, where it was manufactured and expiry date
  • Concealing key information or providing misleading information about the products or services
  • False statements concerning the prizes or rewards that may be obtained upon purchasing a product or service
  • Fabricating the experience of Other Participants with the products or services in the advertisement
  • False statements that the products are out of stock or part of a significant sale.

The Draft Revised Law also increases the penalties for false advertising to three to five times the advertising fee received by the advertiser and provides that the advertiser, the advertising operator, the advertising publisher and Other Participants to the advertisement can be held jointly liable for damage caused to consumers as a result of the false advertisement.

ADVERTISING FOR SPECIAL PRODUCTS OR SERVICES

Due to the special nature of certain products and services, such as healthcare products, tobacco, wine and investmentrewarding services, the Draft Revised Law introduces more stringent and detailed rules to regulate advertising in these areas. These include:

  • Healthcare: The Draft Revised Law contains several new provisions on healthcare advertising, including a detailed list of prohibited advertising content for prescribed and nonprescribed medicines, medical equipment, medical services and other healthcare products that are not deemed to be medication, including cosmetics, healthcare food, sterilising products, sanitising products and beauty services.
  • Tobacco and wine: In addition to traditional advertising channels, the Draft Revised Law prohibits tobacco advertising from being published through or using the internet, telecommunications, audio and video. It also imposes restrictions on the advertising of wine products. Hospitals and schools have been added to the list of venues where tobacco advertising would be prohibited.
  • Investment-rewarding products and services: In recent years, advertisements promoting financial investment in the recruitment, real estate, financial management, sale of collections, securities investment, consultancy and loan consultancy business sectors have increased dramatically in China. The Draft Revised Law prohibits these advertisements from containing forecasts of rewards, risk-free commitments and/or recommendations by specialists or beneficial parties.

OBSERVATION

With the rapid and diversified development of the advertising industry in China, advertisements impact every aspect of people's dayto-day lives. From the actions of the Chinese regulatory authorities over the past several years, it is clear that there is an effort being made to address current advertising issues. However, this is a difficult task that will take a few more years to finalise. Therefore, advertisers and mass media organisations should carefully monitor the Chinese Government legislative process to ensure that their long-term advertising strategies are in line with new advertising requirements.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.


DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com

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