China: Legal Risks In Promotion and Advertising: Q&A

Last Updated: 10 April 2017
Article by Watson & Band Law Offices

The identification and regulation of false advertising

The 2015 amendment to the Advertising Law incorporated the following additions in an effort to further the crackdown on false advertising:

(1) The first clear definition of the term "false advertising", four common scenarios constituting false advertising, and miscellaneous provisions, altogether providing a clearer foundation for law enforcement by the AIC;

(2) A specific definition of the legal responsibilities of advertising clients, agents, publishers and spokespersons. Those who commit serious violations will be subject to various punishments including revocation of their business license, revocation of their advertising registration certificate, and a fine that has increased from 100 to 300 percent of advertising expenses to 300 to 500 percent; and

(3) A definition of the responsibility of the AIC and related departments in administering the advertising market, which details and strengthens their specific functions and powers.

Does a photoshopped image in an advertisement constitute false advertising?

Crest was fined 6.03 million RMB by the AIC in March 2015, because the advertising for one of its toothpaste products was determined to be false. So far, this is the largest fine for false advertising in Chinese history. In this TV advertisement the celebrity spokesperson stated, "My teeth really whitened within only 24 hours after using Crest Double-Effect Whitening Toothpaste." This advertisement was considered false because the whitening effect highlighted in the advertisement was not the actual result of using the toothpaste, but was created using Photoshop software during processing.

In the creation of advertisements, exaggeration or photoshopping to attract the consumer's attention is allowed in presenting supporting content that is not the object of the advertisement. The 24-hour tooth whitening depicted in above advertisement, however, apparently violated the principle of authenticity that the Advertising Law imposes on the object of an advertisement.

How to avoid false advertising

It is necessary to strengthen legal compliance review during the advertisement design phase and before the release of an advertisement by an advertising enterprise or an advertising agent, celebrity spokesperson or other stakeholder. Before cooperating with any advertising agent or publisher, an enterprise should verify its qualifications or credentials. When signing an endorsement contract with an enterprise, a celebrity should retain a professional to provide a risk assessment of the product and the content of the advertisement, in order to avoid transgressing legal boundaries due to inadequate review of related materials and lack of knowledge or understanding of the law.

How to understand "absolute advertising language"

"Absolute advertising language" refers to words indicating "national level, A-grade or the best" as defined by the third paragraph of Article 9 of the Advertising Law. Actually, the 1994 version of the Advertising Law included exactly the same provision, and it remains unchanged in the latest amendment.

The ban on absolute language imposed by the Advertising Law represents an acknowledgement by the legislature of a common form of illegal advertising: before the first version of the 1994 Advertising Law came out, the market was full of advertisements exaggerating the effects of various products, dubious performance claims and even fabricated facts in absolute terms. This practice not only misled consumers, but also disrupted normal market order in the industry. To address this, the Advertising Law listed examples of "false + unfair competition" advertisements in Article 7 (Article 9 in the amended version), which effectively improved the situation. It can be seen from the announcement published by the State Administration for Industry and Commerce (regarding typical cases of illegal advertising) that business entities that are punished by a law enforcement agency for "absolute language" can also be found to present false promotional statements or unfair competitive acts in the same advertisement; in other words, they are conducting false advertising or unfair competition using "absolute language". Consequently, "absolute language" is really just another way of the describing the heart of the problem: false advertising and unfair competition.

Does mentioning an international award during promotional activities violate the Advertising Law?

The new amendment to the Advertising Law abandons the previous draconian practice of banning advertisements that mention domestic or international awards won by the product. Now it adopts the regulatory method of defining "false advertising" and entrusting consumers, who are becoming increasingly sophisticated, with the responsibility of evaluating such claims. Article 28 of the Advertising Law stipulates that "An advertisement will be considered false if it deceives or misleads consumers with false or confusing content. An advertisement is false if any of the following apply to it: ...(ii) information on products or services is inconsistent with the truth in terms of the performance, function, ... awards won by the product or the content, provider, ... awards for services, or in terms of any guarantee relating to the products or services, and such inconsistency exerts a substantial influence on purchasing; ..."

It is safe to conclude that only when the information about the award won by the item advertised (i) is false, i.e. does not correspond with the truth; and (ii) aims to deceive or mislead the consumer, i.e. has a substantial influence over the consumer's purchasing behavior, can it be asserted that such information constitutes false advertising. If the product has indeed won an award, mentioning it will not result in false advertising. In other words, the new Advertising Law relaxes the limitation on publicizing an award that a product has actually won.

(Source: the New Advertising Law Draws a Red Line for "False Advertising" by Zhong Shan)

(Source: Does an Advertisement Violate the Law by Asserting "This Product is So Good that Advertising it Violates the Advertising Law"? by Jin Yiwen)

(Source: Does International Award-Winning Wine Violate the Advertising Law by Jin Yiwen)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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