China’s Advertising Law isn’t a Paper Tiger! How to Stay Creative and in Compliance

Since its introduction in 2015, China’s Advertising Law has been gaining greater “bite” with the most recent revision in 2018 expanding the coverage and potential penalties of the relevant statutes for false and misleading advertisements. Against this backdrop, companies need to pay greater attention to their advertising copy to avoid incurring sky-high penalties and the associated negative brand impact.

On November 15, 2018, Beijing Bureau of Industry and Commerce (Haidian branch) penalized “Guazi”, a digital marketplace specializing in second-hand cars, for making a false advertising claim, “One year after establishment, our transaction volume is leading the market” and imposed a fine of 12.5 million yuan.

In another update, the General Administration of Market Supervision and Administration issued a public announcement on January 17, 2019. In response to the public response to potential violations of the “CCTV National Brand Plan”, this announcement states that it is a violation of Advertising Law for companies to use terms that invoke China’s national image to promote their products.

According to the official statistics, the top five violations of Advertising Law involve false advertisements, absolute terms, investment assurances, medical efficacy assurances, and misleading consumers. When enterprises falsely promote their products or services, apart from violation of Advertising Law, they may also be in violation of the Fair Competition Protection Law, the Consumer Rights Protection Law, the Copyright Law, the Anti-monopoly Law and the General Principles of Civil Law. Advertising Law regulates advertisers, publishers, spokespersons, digital information service providers, demand-side platforms, media platforms, and advertising information exchange platforms. With so many stakeholders involved, it is clear that the complexity of staying in compliance with the relevant regulations is an urgent priority and companies need to enhance their procedures if they haven’t done so yet.

Avoiding false advertisements

Let’s discuss a few of the top violations of Advertising Law. So what’s a “false advertisement”? False advertisements are flagged by relevant authorities when they assess “whether there is an intention to mislead consumers or cause a substantial impact on rational consumers”.

In an actual example, a company states in its product range documentation that its washing powder products are not suitable for washing silk and down clothing, but in the promotion of a new washing powder product, the label indicates this product “meets all the daily needs of laundry”. The relevant authorities indicated that this is a false claim in relation to the product performance and usage which is likely to mislead consumers and levied a fine of 150,000 yuan on this company.

Absolute terms are legal minefields

Advertising Law stipulates that advertisement copy shall not use terms such as “National level”, “Highest level”, “Best” when describing a company’s product.

To stay in compliance, marketers should seek to avoid using such absolute language. If it is unavoidable, the description of the subject matter should be specific, and marketers must be prepared to defend such claims. For example, when a company says that it is the “largest” company in the industry, the relevant authorities may question whether “the largest” refers to “the largest volume of business” or “the largest number of customers”. Questions may also be asked what data is used when making such a claim and whether this data is recognized as being authoritative and objective. If a company cannot defend such claims, it is deemed to have used absolute terms in violation of Advertising Law and will face a fine of over 200,000 yuan.

Some companies handle the usage of absolute terms more skilfully by adding “possibly” before the use of “best” terms. When Carlsberg Beer initially launched its slogan “Probably the best beer in the world” and subsequently changed to “Spending 170 years to create better beer”. The low-key and precise wording highlights the long heritage of Carlsberg’s brand while underlining its commitment to a superior product. In our opinion, this is a fine example of carefully thought-out and effective advertising copy.

Absolute investment assurances are a big no-no

Article 25 of the Advertising Law stipulates that advertisements for investment products with non-guaranteed returns must include reasonable warnings about possible risks, and must not contain guarantees on future returns, nor shall they make references or recommendations in relation to academic institutions, trade associations, and investment professionals.

For example, the financial institutions that describe their product as providing a “yield of more than 10%”, or real estate companies whose brochures indicate “good annualized return rate of more than 6%”, have made specific promises on investment returns. This is a violation of Advertising Law and companies should describe their products objectively and carefully when doing such promotion to stay in compliance with the relevant regulations.

Medical efficacy assurances invite unnecessary regulatory scrutiny

In an actual example, a local medical organization carried the following text on its website: “The success rate of this treatment is 95%, requiring a one-time dosage of our natural and safe prescription. Our patients face no recurrence, no drug resistance, and few side effects”. It was ordered to stop publishing such text and fined over 200,000 yuan for violating many provisions of the Advertising Law.

Pharmaceutical and health products companies should not exaggerate their promotions. Marketers in these companies should review their own content – If there are any guarantees of efficacy and safety in articles, describing the success rate or efficiency, comparing the efficacy and safety of drugs, or using spokespersons, patients, research institutions, to make product recommendations, then you should be making immediate rectifications!

Press releases are a common way for companies to publish and publicize news about themselves. The essence of a press release is “news”, sticking to the classic 5W1H (Who, What, When, Where, Why and How) to impart news elements and timeliness. In our opinion, it should not be written like an advertisement, with an obvious promotional intent or worse, incorporating absolute terms. If a press release incorporates absolute terms, it will be subject to the Advertising Law, which may lead to large fines and negatively impact brand reputation, and even implicate a company’s press release service providers.

We suggest that companies make data or research-based product claims, review the appropriateness of their content, the accuracy of expression, and whether product claims can withstand the scrutiny of the relevant authorities to avoid unintentionally violating the Advertising Law.

To ensure that your press release is in compliance with the Advertising Law, the Editorial Department of PR Newswire has compiled a checklist for easy reference:

• Does your release invoke the national image to promote your company, such as the national flag, national anthem, and international organizations?
• Does your release contain absolute terms, such as “national level”, “highest level”, “best”?
• Does your release contain too many superlatives to describe your products?
• Does your release contain content that may be detrimental to the public interest, social stability, and social norms?
• Does your release contain content that may violate personal property rights or privacy?
• Does your release contain content that may involve pornography, superstition, terror, and violence?
• Does your release describe situations that involve discrimination?
• Does your release describe situations that are harmful to the environment?
• Does your release describe situations that are prohibited by China’s laws and regulations?

Taking a step back, China’s Advertising Law is not unique as other nations such as the U.S also seek to protect consumers from fraud and deception in the marketplace. Compliance with this law provides a legal framework for companies in China to promote themselves and facilitate fair competition. With a combination of creativity, careful verification, and objective wording, companies may tell their stories in a personalized, sincere and appealing manner.