1 Food Fraud Investigation Draft: broad scope, new layer of sanctions The draft of the “Food Fraud Investigation Regulation” (the “Regulation”) has been published for public comments on February 13, 2017 until March 14, 2017; after this date, the Regulation will undergo final review by the legislator before its entry into force. We reviewed the draft Regulation and – despite this being only a preliminary draft – we found some interesting content. Despite the direct reference to “fraud”, this Regulation belongs to civil law, and it does not consider food fraud from a criminal perspective. The 31 articles of the draft Regulation are almost equally split between (i) identification of fraudulent behavior (articles 7-16) and (ii) sanctions (articles 17-26). The draft Regulation provides a general definition for “food safety fraud” (食品安全欺诈) which can be summarized as intentional provision of false information or intentional concealment of true circumstances within the activities of food production, food storage, food transportation, food sale, food catering etc . This definition – which seems rather broad (and limited to describing a conduct, without narrowing down such conduct to – at least – a potential effect of food safety risk) – is then declined into several types sub-categories of food safety fraud depending on the behavior: product fraud, food production and business operations fraud; label and instructions fraud; food advertising fraud; information fraud; food inspection and certification fraud; license application fraud; record filing fraud; report information fraud; management information fraud. Many fraudulent conducts regulated by the Draft are already described and punished by other pieces of legislations; however in this regard the novelty of the Draft seems staying in adding a layer of sanctions to those conducts. 2 Product fraud – in the current draft – encompasses five conducts including – for instance – the use in food production of non-food (or expired, or recycled) ingredients, the use of chemical substances other than additives, the use of non-edible animal carcasses. Production of non-compliant food for infants, children and other specific groups is treated as food fraud, while this is apparently not the case for other kinds of food. Interestingly, the list of conducts constituting product fraud is open as it includes also “Other production and operation, by adulterating, by using fake food as real, by selling bad quality inferior food. production operators with the manufacture and sale of food as good quality food or by passing unqualified food as qualified food”. Amongst the food production frauds we see conducts such as concealing the truth/keeping false records about food operations (i.e. food production, purchase inspection, factory inspection, storage and transportation, substandard food handling, food safety accident handling and “other activities”), use forbidden substances in the operation premises (factory, warehouse, stores), using fake licenses or certificates. We highlight the provision whereby “providing food production operators with the technology of manufacturing and selling counterfeit or inferior food constitutes fraud”. For technology or equipment companies, a due-diligence on potential customers seems necessary to avoid liabilities for fraud. Again, “other food production and operation fraud” allow courts/authorities a certain freedom to apply the scope of these frauds. Let us move to the labeling frauds (which also apply to fraud in the instruction leaflets): article 9 of the draft mentions the false labeling of mandatory labeling content (i.e. food name, specifications, net content, composition or ingredients table, product standard code, storage conditions, enterprise name, product registration number, production license number, origin, production address, contact information, production date, shelf life and other information). 3 Non-certified products claiming to be organic food, hazard-free food, or green food configure a specific – and clear – case of fraud. At the same time, products marked with claims such as "brewed" ,"pure grain" , "solid fermentation" "freshly squeezed" " squeezed" (yes, the list is open … “and other words”) are also fraudulent if these claims are fake. Another case of labeling fraud is the nutritional labeling which does not match the real nutritional content of the food product. Food advertising fraud includes – for instance – promotion (by means of internet, telephone, television, radio, lectures, meetings, etc) of food whose properties , function, place of origin, specifications, composition, producer, product standard, shelf life, inspection reports and other key information do not match the reality; use of fake or even just not verifiable scientific research, statistics, surveys, literature; use – for ordinary food products – of expressions claiming or referring to medical treatment efficacy or special medical use, or even just the use of terms such as "can treat", "can cure" and similar. The scope of this provision seems very similar to the conducts defined as false advertising under article 28 of the Advertising Law. Using expressions such as "pure green", "without pollution" (and, of course… “others exaggerated propaganda words”) also constitutes fraud. The draft Regulation keeps an eye also on illicit conducts happening on the other side of the table. Consumers (as well as any entity) commit information fraud whenever they spread (on internet, via mobile, through social platforms) false food safety information; same for media whenever they invented facts, broadcast deliberately distorted news (which includes for instance fake figures/data, but also alteration of images and videos). Some comments The most interesting aspect of this Draft is its detailed identification of several fraudulent conducts. We do see some critical issues such as: 4 - General definition of food safety fraud still remains rather vague; - not clear distinction between what constitutes a simple labeling mistake and what constitutes food fraud. For example, while the Draft includes a provision expressly excluding the fraud in case of “traditional food/drink names different from the common name of their raw materials, …. which would not cause confusion for the public“, no such disclaimer appears with referrals to other labeling items: at what level – for example – a mistake (for example a rounding interval in the nutritional label) can be considered labeling fraud? What about voluntary claims (the fraudulent list in the Draft is open, leaving uncertainty for some voluntary claims … how about, for example, “natural” claims?) - Among the most relevant novelties carried by the Draft, we see some specific sanctions against legal representatives or responsible persons for the entities committing food fraud. For instance, in case of product fraud (use of illegal ingredients in food production, etc..) the Draft punishes the legal representative and the persons directly responsible for the fraud with fines up to 10,000 RMB. - We also notice that the Draft seems adding new penalties to conducts already punished under other pieces of legislation (mainly: the Food Safety Law and the Advertising Law). This is the case – for example – for false advertising, which is punished both under article 55 of the Advertising Law (fines issued by AIC) and under article 20 of the Draft (fines issues by the FDA).