Focus for real estate developers on understanding new Advertising Law

By Kevin Shao, City Development Law Firm
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The new Advertising Law was implemented on 1 September this year. However, many mistaken interpretations of the new law have been making the rounds in relevant media and online, which have tagged it with such labels as “strictly prohibiting the use of superlatives”, the “strictest in history”, etc. This column mainly proposes to explore how real estate developers should understand relevant provisions of the new law that have been misconstrued in the media.

邵万权 Kevin Shao 建纬律师事务所 副主任、高级合伙人 Deputy Director, Senior Partner City Development Law Firm
邵万权
Kevin Shao
建纬律师事务所
副主任、高级合伙人
Deputy Director,
Senior Partner
City Development Law Firm

No new provisions on superlatives

The greatest misunderstanding of the new Advertising Law is the belief that it sets forth new provisions on the use of superlatives, requiring that, henceforth, the use of such superlatives as “number one, the greatest, the cheapest, the newest, the best selling nationwide, the most popular, the top seller”, etc. is prohibited.

If one consults the new Advertising Law, one will discover that the provision on superlatives is found in item (3) of the first paragraph of article 9, i.e. such terms as “state-level”, “top-level”, “the best”, etc. may not be used in advertisements. However, comparing this to the Advertising Law implemented on 1 February 1995, one will find that item (3) of the second paragraph of article 7 contains the exact same phrasing.

Furthermore, in addition to the former Advertising Law, article 29 of the Advertisement Review Standards, implemented on 1 June 1994, also specifies that such superlative adjectives as “the best”, “number one”, “the first of its kind”, etc. may not be used in advertisements. Document No. 380 of the State Administration for Industry and Commerce dated 26 November 1996 also expressly specifies that the word “top class” constitutes an absolute term that may not be used in advertisements.

Accordingly, the provision on superlatives is not original to the new Advertising Law, but has been a consistent requirement of Chinese laws and regulations concerning the administration of advertising, and should not be mistakenly seen as a new provision. The new Advertising Law has not imposed stricter limits on or requirements in respect of superlatives.

As to the question of whether superlatives are absolutely forbidden in advertisements, it is the author’s opinion that the reason that the Advertising Law prohibits superlatives is, on the one hand, to avoid exaggerated publicity that deceives and misleads consumers and harms their interests, and, on the other hand, to avoid the denigration of other enterprises’ products, constituting unfair competition. Accordingly, if there is no means of substantiating a superlative or absolute, it should fall within the scope of terms the use of which is prohibited.

However, with respect to the citation of a fact that objectively can be verified, the appearance of such terms as “the greatest”, “the highest”, etc. should not fall within this restrictive scope if the source is indicated. Article 11 of the new Advertising Law specifies that “cited content, such as data, statistical information, survey results, abstracts, quotations, etc., used in advertisements shall be true and accurate, and the source thereof shall be indicated. If cited content has a scope of application and a term of validity, the same shall be expressly indicated.” Although this provision is not solely addressed at superlatives, if it complies with this provision, a superlative can nonetheless be used.

Reiteration of past provisions

Article 26 of the new Advertising Law specifies that advertisements for real estate may not: (1) give an undertaking of an increase in value or a return on investment; (2) use the time required for a project to reach a specific reference model to indicate the location of the project; (3) violate state regulations on the administration of pricing; or (4) give misleading publicity on the transportation, commercial, cultural or educational facilities or the conditions of utilities planned or under construction. These provisions have also been misconstrued by certain media as new provisions on real estate advertising. However, provisions similar to the foregoing can be found in articles 10, 11, 12 and 16 of the Interim Provisions for the Publication of Real Estate Advertisements implemented on 3 December 1998.

Additionally, pursuant to relevant provisions of the interim provisions, advertisements for real estate may not: (1) contain beliefs of a feudalistic or superstitious nature, such as feng shui, divination, etc.; (2) run counter to good social practices in the description of, and publicity for, the project; (3) exploit the image or environment of another project as the effect of the project in question; or (4) contain undertakings of the advertiser to the effect that it can handle such matters as residency permits, employment, moving up to the next level of schooling, etc. for new occupants.

From this it can be seen that the new Advertising Law does not set forth new requirements regarding the publication of real estate advertisements. Rather, it reiterates certain of the requirements in the interim provisions.

Care required for spokesperson

Article 38 of the new Advertising Law specifies: “When an advertising spokesperson recommends or gives a testimonial about a product or service, he or she shall do so on the basis of fact, comply with this law and related laws and administrative statutes and may not recommend or give testimonials for a product or service that he or she has not used. A minor of less than 10 years of age may not be used as an advertising spokesperson.” Furthermore, article 56 sets out circumstances where joint and several liability will be borne for acting as spokesperson in false advertising.

Accordingly, after the implementation of the new Advertising Law, acting as spokesperson for real estate needs to be handled with care. A spokesperson can only act as spokesperson for premises that he or she has used. In practice, it is also necessary to pay attention to the difference between serving as a spokesperson and acting.

The fifth paragraph of article 2 of the new Advertising Law defines a spokesperson as follows: “For the purposes of this law, the term ‘advertising spokesperson’ means a natural person, legal person or another organization, other than the advertiser, that recommends and/or provides testimonial for a product or service in an advertisement in his, her or its name or by use of his, her or its image.” Accordingly, if a celebrity does not use his or her name or image in an advertisement to recommend or provide a testimonial for the product, instead just acting in the advertisement, he or she is not acting as spokesperson.

Kevin Shao is the deputy director and a senior partner of City Development Law Firm

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