Intellectual Property China Client Alert China: New Advertising Law Toughens Up on False Advertising On April 24, 2015, the Standing Committee of China’s National People’s Congress enacted the first set of revisions to the 1994 Advertising Law of the People’s Republic of China “Advertising Law”. The revised law came into effect on September 1, 2015. The revisions to the Advertising Law are wide-ranging and they impose stricter controls on advertising to strengthen consumer protection. A review of advertising practices in China is essential to ensure compliance with the new law, limiting potential exposure to regulatory enforcement and consumer complaints. Highlights of the changes are summarized below. Endorsements Subject to Tighter Regulation Endorsers must have used the product or service themselves before making endorsements. Endorsements or testimonials on medical treatment, pharmaceuticals, medical devices or health food are prohibited. Endorsers of a product or service may be liable if they know, or ought to know that the advertisement amounts to false advertising. Endorsers liable for endorsing a false advertisement are banned from making endorsements for three years. Minors under the age of 10 must not be engaged as endorsers. More Stringent Controls on Advertisements for Specific Products The new Advertising Law specifically regulates advertisements for certain classes of products and services:- • Medical treatment, pharmaceuticals and medical devices No assertions, guarantees for efficacy and safety, endorsements or testimonials are allowed in the advertisements for medical treatment, pharmaceutical products and medical devices. Advertisements for prescription drugs must indicate “the advertisement is intended for medical and pharmaceutical professionals only” conspicuously, and advertisements for non-prescription drugs must indicate “please October 2015 Beijing Suite 3401, China World Office 2 China World Trade Centre 1 Jianguomenwai Dajie Beijing 100004, PRC T: +86 10 6535 3800 F: +86 10 6505 2309 Hong Kong 14/F Hutchison House 10 Harcourt Road Central, Hong Kong T: +852 2846 1888 F: +852 2845 0476 Shanghai Unit 1601, Jin Mao Tower 88 Century Avenue, Pudong Shanghai 200121, PRC T: +86 21 6105 8558 F: +86 21 5047 0020 2 Baker & McKenzie | October 2015 follow the instructions or purchase and use the medicine according to a pharmacist’s suggestions” conspicuously. • Health food The new law prohibits the advertising of health food in broadcast media such as TV programs, printed media or on the Internet. Advertisements for health food must not contain medical-treatment claims • Infant food The new law introduces a ban in mass media and public places advertisements for infant dairy products, soft drinks and other food that claim full or partial substitute for breast milk. • Agricultural pesticides, veterinary drugs, feed and feed additives Advertisements for agricultural pesticides, veterinary medicines, feed and feed additives must not contain any assertion or guarantee for efficacy and safety. The new law also prohibits the citing of medical or research institutions, industry associations or professionals and users, including recommendations and testimonials. • Seeds, planting and breeding Advertisements for crop seeds, forest seeds, grass seeds, breeding animals, aquatic fingerlings, planting, and breeding must provide authentic, clear, and explicit expressions in terms of the variety name, production performance, increment or output, quality, resistance, special use value, economic value, scope, and conditions within which it is suitable for planting or breeding. Any assertion that cannot be proven in science; any assertion or guarantee for efficacy; the use of the names or images or recommendations of research or academic institutions, industry associations, professionals or users are prohibited. • Tobacco The amended law strengthens control over tobacco advertising, prohibiting:- (a) advertisements for tobacco in mass communication media, public places, public transportation or outdoors; (b) the delivery of advertisements for tobacco in any form to minors; (c) the use of advertisements for other products or services or public service advertisements to publicize the names, trademarks, packages, decorations and similar content of tobacco products; (d) the announcement of relocation, name change or recruitment, etc., by a tobacco producer or seller. October 2015 | Baker & McKenzie 3 • Alcoholic drinks Advertisements for alcohol must not seduce or instigate drinking or promote excessive drinking; contain the act of drinking; indicate conducting activities such as driving a car, or steering a boat or airplane. Any express or implied statement that drinking has the efficacy of eliminating stress and anxiety or enhancing strength is prohibited. • Education and training Education or training advertisements have been clarified in the amended law, which forbids any promise relating to progression, passing examinations, or obtaining a degree or qualification certificate, or any express or implied guaranteed promise relating to education or training results; express or implied statement that the relevant examination agency or its personnel or any examination/test designer will be involved in the education or training. The use of the names or images or recommendations of research or academic institutions, educational institutions, industry associations, professionals or beneficiaries is prohibited. • Products or services with anticipated investment returns Advertisements for a product or service with anticipated investment returns must provide a reasonable prompt or warning of any possible risk and the assumption of the responsibility for any involved risk. Such advertisements must not contain any guaranteed promise of any future results, proceeds or other relevant situations, and express or implied promise for break-even, zero risk or assured proceeds, unless provided by the State. The use of the names or images or recommendations of academic institutions, industry associations, professionals or beneficiaries is prohibited. • Real estate Advertisements for real estate must not violate any of the relevant national provisions on price administration or contain misleading publicity on any traffic, commercial, cultural and education facilities, and other municipal amenities that are planned or under construction. Prohibitions on Advertisements Targeting Minors Advertisements for medical treatment, pharmaceuticals, health food, medical devices, cosmetics, alcohol, beauty products and online games detrimental to the physical and mental health of minors in mass media targeting minors are banned. Definition of False Advertising Broadened with Hefty Sanctions The new law broadens the definition of false advertising, exposing false and misleading advertising contents to a number of sanctions: 4 Baker & McKenzie | October 2015 • Civil liability An advertising agent or publisher who fails to provide true contact information of the advertiser(s), may bear civil liability to consumers. Advertisers, advertising agents, publishers or endorsers may be jointly liable for misleading advertisements for products or services capable of affecting the life and health of consumers. • Administrative liability Administrative fines of not less than three times but not more than five times the amount of the advertising expenses may be imposed for deceitful or misleading advertisements. Where the amount of advertising expenses is difficult to calculate or is obviously low, a statutory fine of not less than RMB 200,000 but not more than RMB 1 million may be imposed. Where there are more than three violations of the law within two years or other serious circumstances, a fine of not less than five times but not more than 10 times the amount of the advertising expenses may be imposed. Where the legal representative of a company or enterprise whose business license is revoked for false advertising, the new law prohibits the legal representative to hold directorships, supervisory or senior role of the company or enterprise for three years from the date on which the business license is revoked. An advertising agent or advertisement publisher, who knows or ought to know that an advertisement is false, but still designs, produces, acts as agent and publishes the advertisement, may bear the same penalty as the advertiser. The advertiser may have its business license revoked or be criminally liable for serious violations. In addition, any medical institution running false advertisements leading to serious consequences may have its license revoked. Use of Superlatives Forbidden The new law reiterates the prohibition on the use of superlatives, as well as references to the State e.g. “state-level” or the national flag etc. More Restrictions on Advertising through the Internet Advertisements sent in electronic format must indicate the sender’s true identity and contact details, as well as methods for unsubscribing from the advertisements. Such advertisements sent without the consent of the recipient are prohibited. The new law expressly applies to Internet advertisements. Such advertisements must not interfere with the normal use of the network by users. Pop-up advertisements must allow users to close it with a single mouse click. October 2015 | Baker & McKenzie 5 www.bakermckenzie.com Should you wish to obtain further information or want to discuss any issues raised in this alert with us, please contact: Isabella Liu +852 2846 1689 email@example.com Clement Ngai +86 21 6105 5960 firstname.lastname@example.org Andrew Sim +86 10 6535 3916 email@example.com This publication has been prepared for clients and professional associates of Baker & McKenzie. Whilst every effort has been made to ensure accuracy, this publication is not an exhaustive analysis of the area of law discussed. Baker & McKenzie cannot accept responsibility for any loss incurred by any person acting or refraining from action as a result of the material in this publication. If you require any advice concerning individual problems or other expert assistance, we recommend that you consult a competent professional adviser. Unsubscribe To unsubscribe from our mailing list or to change your communication preferences, please contact firstname.lastname@example.org. © 2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. Internet service providers are obliged to monitor and shut down illegal advertisements shown on their platforms. Increased Enforcement Powers of the AIC The State Administration for Industry and Commerce (“SAIC”) and its local branches are empowered to supervise the advertising industry and to enforce the new law. The new law provides that any entity or individual may file a complaint against an advertisement to the AIC and the AIC will be required to investigate violations of the new law and notify relevant parties within seven working days. Conclusion The new Advertising Law is applicable to all forms of commercial advertisements with the aim of rooting out undesirable advertising activities. Many of the prohibitions serve to clarify, consolidate and expand pre-existing advertising restrictions under specific regulations for the relevant product categories, but with more severe penalties. The updated law is in tune with the general trend of strengthening consumer protection and recent incidents suggest active enforcement by regulators. Although to what extent the new law will be enforced and how they will be interpreted remain to be seen, brand owners are recommended to review their advertising activities in China to ensure compliance with the new law.