Rules for advertising language and responses to penalties

By Zhou Le and Zhou Yeli, Tiantai Law Firm
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With the development of the internet and multimedia, enterprises have, in an effort to increase their brand influence, placed increasing weight on their advertising and publicity outlays. However, big data on market regulation in recent years reveal that the number of cases of adverting law violations has doubled. Additionally, the abuse by professional whistleblowers of their rights presents a serious test for enterprises in their compliant operations.

Basic rules

Prohibition on a limited number of words and the indicated connection principle. The Advertising Law only expressly bans the use of the words “national/state level”, “top class” and “best” in advertising. However, from the examples of advertising law violation cases, a limited number of adjectives that express superlatives are also commonly deemed by the competent administrative authorities to be words banned under article 9 of the Advertising Law.

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Zhou Le
Associate
Tiantai Law Firm

These limited words are also required to point to the business operator itself, or the products or services it is publicizing. If a limited word is used only to describe an objective phenomenon or method, e.g., “our hotel is in a state-level scenic area”, then it is not deemed illegal advertising language.

Disparagement and misleading principle. To prevent the elimination of legitimate competition from competitors in the same industry, and the misleading of consumers, the law does not permit advertisers or advertisement publishers to compare their products or services directly with those of competitors. “Most favoured by consumers”, “leading by far in sales volume” are common illegal advertising phrases subject to investigation in practice.

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Zhou Yeli
Associate
Tiantai Law Firm

Cited information is required to be complete, true and accurate. The law does not prohibit the citing of third-party data or information in advertising language. However, the third-party data cited are required to be complete, true and accurate. In practice, there has been one illegal advertising case in which the advertiser cited the true sales ranking of its product, but was investigated and penalized for failing to indicate the year of compilation of the data. Furthermore, objectively citing a title or honour lawfully bestowed on an enterprise, e.g., “recipient of a national technical advancement prize”, is not prohibited by law.

Certain goods are required to comply with the review rules of special laws. In addition to applying with the Advertising Law, advertisers and advertisement publishers that market special goods in China are required to pay attention to special regulations. Taking medical devices, health foods or pharmaceuticals as examples, the advertising activities for these products are additionally subject to the Administrative Measures for the Review and Publication of “Three Product One Device” Advertisements.

The advertising language for such products may not contain assertions or guarantees as to the efficacy of the product, may not describe the product’s effective rate or cure rate, and may not contain content that runs counter to scientific laws, or scientific content, that cannot be substantiated.

Some defences

Expressions of subjective vision/business philosophy not deemed illegal advertising language. The reason that the law bans absolute wording and prohibits false publicity is to prevent consumers being deceived and misled. If the advertising wording only expresses the advertiser’s pursuit of its business philosophy, or the acclamation of its corporate culture, it does not violate the law. Phrases such as “pursuit of ultimate safety”, etc., used by a number of retail enterprises in their advertising language, do not constitute a description of the attributes or features of their products and/or services, and even though some of the limited wording appears, the same is not usually penalized as an illegal act.

Internal comparison not deemed illegal advertising language. If comparative words such as newest appear in advertising language, and are used to compare old and new lines of products of an enterprise or brand, the technical standards used, etc., they do not seek to eliminate the same type of product or service and do not constitute prohibited advertising language, e.g., “fully equipped vehicle model”.

The jurisdiction defence. The Advertising Law applies to advertising activities in China. However, due to the special nature of the transmission of advertisements published in online media, it is difficult to distinguish whether they constitute an advertising activity in China. From current judicial practice, with respect to illegal advertisements published on websites not registered with the Ministry of Industry and Information Technology, and whose IP servers, advertisers and advertisement publishers are all located abroad, the competent authorities will generally not treat China as the place where the illegal act occurred, and assess penalties, even if the illegal advertisements are transmitted into China.

Defence against complaints lodged by professional whistleblowers. The State Administration for Market Regulation expressly proposes the seeking of opinions in the Measures for the Handling of Market Regulation Related Complaints and Tip Offs (Draft for Comment). Professional whistleblowers are not consumers who purchase and use goods or services for purposes of personal consumption, and the regulators will not accept their complaints.

If an enterprise encounters a professional whistleblower maliciously reporting an illegal advertisement for profit, it may use phone recordings or other means to attain relevant evidence, and with this substantiate that the complainant is not a genuine consumer, and raise an objection with the regulator.

Argument for exemption from penalties. If an enterprise genuinely violates regulations in its advertising activities, but such violation satisfies the criteria for the circumstances being minor, or the harmful consequences being insignificant, the competent administrative authority will usually reduce or even not assess penalties. Particularly for advertisements published on the internet, the number of clicks on, and the number of times an advertisement is accessed, are usually key factors that the competent administrative authority will consider when determining the seriousness of a violation.

Taking Shanghai as an example, when issuing the List of Minor Illegal Business Acts in the Market for Which Penalties Are Exempted, the Shanghai Municipal Administration for Market Regulation specifically provided for the circumstances under which penalties can be exempted for different types of illegal advertisements, which serves as a tolerance mechanism for “minor” violations by enterprises. If an enterprise’s illegal advertisement falls within the minor violations specified, it should pay attention to rectifying the matter as soon as possible, and actively present its case to the competent administrative authority.

Zhou Le and Zhou Yeli are associates at Tiantai Law Firm

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E-mail:
zhoule@tiantailaw.com
zhouyeli@tiantailaw.com

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