Chinese authorities have imposed a fine of approximately $1
million US on consumer goods giant Proctor & Gamble (P&G)
for false advertising. The penalty is the largest-ever fine for
false advertising in China and demonstrates a desire by Chinese
authorities to improve enforcement of consumer protection laws.
P&G is a global leader in personal care products with a
significant presence in China, the world's second-largest
economy. Over the past several years, P&G has made significant
investments in new facilities in China with the aim of outpacing
its competitors and growing its share in the emerging Chinese
market for personal care products. In China, P&G competes with
rival Colgate- Palmolive and local brands Darlie and Yunnan Baiyao
in the fast growing market for toothpaste.
However, the Shanghai Administrative Bureau of Industry and
Commerce (the "Bureau") recently imposed a 6 million RMB
fine on the large multi-national company for overstating the
effects of its Crest toothpaste brand. According to the Bureau, a
Crest television advertisement, which featured a popular Taiwanese
celebrity, was digitally enhanced to portray whiter teeth after
only one day of product use and was misleading to consumers.
P&G discontinued the advertisement in mid-2014. While the
impact of this fine on Crest's market share in China is not yet
known, analysts do not anticipate that it will have any significant
long term effects on the company or its position in the Chinese
market for personal care products. In response to the fine, P&G
has asserted that it complies with Chinese laws and that all of its
products have been properly tested according to Chinese
The fine will likely have a widespread impact on the behaviour
of companies operating in China, particularly those relying on
television advertisements describing or portraying the benefits of
their products. In the past several years, a number of large
multi-national companies have been reprimanded for misleading
Chinese consumers but have avoided significant financial penalties.
The actions of the Bureau indicate Chinese authorities will no
longer ignore misleading advertisements concerning the
effectiveness of consumer products and will now impose meaningful
financial penalties on companies engaging in such behaviour.
Key Points for Canadian Companies
The P&G fine demonstrates a desire on the part of Chinese
authorities to strengthen enforcement of its consumer protection
laws. China has adopted a more aggressive approach to consumer
protection, scrutinizing both foreign and local companies operating
in a variety of industries and imposing increasingly large fines
for inappropriate conduct impacting the interests of consumers.
Canadian companies operating in China should be aware of these
developments and ensure their practices, including those relating
to sales and marketing, do not run afoul of Chinese rules and
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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