In today’s commercialised society the role of advertising has become hugely important for companies.

Increased globalisation means that advertisements as sales stimulants play a crucial role in delivering information cross border. With more and more foreign companies now wanting to promote their products within the Chinese market, it is more important than ever to know and understand the PRC Advertisement law, says Carlo Diego D’Andrea of D’Andrea and Partners.

Following on the heels of economic reform the first regulation on advertising was introduced in China in 1982. The Provisional Regulations on Control of Advertising was issued by the State Council to promote the smooth development of the advertising industry. The current Advertisement Law of People’s Republic of China came into effect on 1^st February, 1995, and has not been amended for nearly 20 years.

China now is a complete different country compared to when the first Advertisement Law was promulgated, so it has become important for the authorities to issue a new amendment adapted to the needs of contemporary Chinese society. Many new problems emerged in recent years which the legislators could not have foreseen when the law was first promulgated, such as endless junk calls, mailings, text messages and emails. Some articles of the original law also conflict with World Trade Organisation (WTO) rules, which has helped to push the modification of the Advertisement Law firmly back on the agenda.

In February 2014, the State Council Legislative Affairs Office (SCLAO) started to solicit opinions from the general public on the consultation draft of the Advertisement Law of the People’s Republic of China (Revised Draft) (the Amendment). It is understood that the content of the Amendment is almost double the length of the original law, with many articles being added, amended and improved, and detailed guidelines being provided.

Below we introduce and analyse several important points from the Amendment which are essential for businesses to understand.

Medicines and medical apparatus

The Amendment emphasises that the content of advertisements for medicine or medical apparatus should be based on factual information and in accordance with certified documentation approved by the public health administration department. Specific requirements have been placed on advertisements for prescription medicine, over-the-counter (OTC) medicine and medical apparatus (Article 16 of the Amendment).

In order to protect the health and safety of consumers, it is clearly defined in the Amendment that except for the medicines, medical apparatus and medical advertising which have been approved by the authorities, advertisements for other products shall not in any way be related to disease treatment functions; the use of medical terminology or wording is strictly prohibited, so as to avoid these products being confused with genuine medical products. (Article 26 of the Amendment)

Protection for minors

The Amendment has added articles to protect underage people. It stipulates that advertising in middle schools, primary schools and kindergartens is forbidden. It is also forbidden to advertise in the textbooks, supplementary materials and exercise books, on school uniforms and on or inside school buses. Furthermore, it is now forbidden to publish advertisements for medicines, medical treatments, medical apparatus, online games and alcoholic beverages in any media that is specifically targeted at minors. (Article 20 of the Amendment)

Deceptive advertising

The Amendment confirms that any advertisement containing any kind of information that could potentially mislead consumers is deceptive advertising. The punishment for anyone found guilty of deceptive advertising is more severe than in the original law. Previously, a fine ranging from twice to less than five times the total cost of the advertisement was handed down for deceptive advertising infractions. Now, according to Article 56 of the Amendment, for cases of deceptive advertising, advertising supervision and administrative organisations will order the responsible advertisers, advertising agents or publishers to cease advertising. Advertising expenses will be confiscated and a concurrent fine of between RMB 200,000 and RMB 1 million will be imposed.

In addition, the Amendment states that the advertising endorser—the person acting in the advertisement—is not allowed to promote and/or authenticate products or services that he/she has not actually used before. It also clarifies that the advertising endorser will bear joint and several liabilities when recommending commodities or services through deceptive advertisements that cause damages to the legitimate rights and interests of consumers. (Article 60 of the Amendment)

Telecom operators and network service providers

Advertising through mobile communication networks and the Internet is now governed by the Amendment. Any network service provider who provides technical support to publish deceptive advertisements shall bear the corresponding legal responsibilities, if it is fully aware of them. (Article 46 of the Amendment)

The amendment to the liability of telecom operators and network service providers also brings it in line with the Tort Law and the Regulation on the Protection of the Right to Network Dissemination of Information. In accordance with Article 23 of this regulation, where a network service provider provides any searching or linking service to its service objects or cuts off the link to any infringing work, performance, or audio-visual product after receiving notice from the rightful owner, it is not required to assume the liabilities of compensation.

However, when someone is fully aware or should have known that any of the works, performances or audio-visual products it has linked to constitutes any infringement, it shall be subject to the liabilities of joint infringement. In accordance with Article 36 of the Tort Law, a network user or network service provider who infringes upon the civil rights or interests of another person through a network shall assume the tort liability.

Other major amendments

The Amendment stipulates that any organisation or individual shall not send advertisements or make advertising phone calls to customers’ telephone, mobile or email accounts without the customers’ consent or request, or after the customer has expressed a wish to cease receiving such advertisements. (Article 45 of the Amendment)

Furthermore, the Amendment also strengthens the power and responsibilities of Administrations for Industry and Commerce (AIC) and its related advertising supervision departments. (Article 7 of the Amendment)

In addition to the amendment to the Advertisement Law, we also believe that the Measures for the Administration of Internet Advertising will be published shortly, and that the Measures for the Administration of Advertising Business Licenses and the Measures for the Inspection of Advertising Business Qualification will also be modified within the year. As all the former measures are issued by the State AIC, their legal hierarchies rank below the Advertisement Law, and therefore they will only be modified or issued after the Amendment is promulgated.

Conclusion

In general, the foundations of the Amendment are grounded in the actual development of the advertising industry. It increases punishments for any deceptive and illegal advertising which addresses the public’s major concern. It will also improve and refine the behaviour of advertising publishers and operators and clarifies the legal obligations and responsibilities of advertising endorsers.

However, there is room for further improvement. For example, the term ‘advertisement’ used in this law refers to commercial advertisements but does not include public service advertisements, such as campaigns focussed on environmental protection or those promoting anti-drug messages.

Currently, the soliciting of public opinion on the Amendment has already been completed and the executive meeting of the State Council discussed and passed it in June 2014. It will be submitted to the Standing Committee of the National People’s Congress after further amendments, and it is anticipated that the new law will be issued within this year.

With offices in China in Shanghai, Nanjing and Zhuhai and a network of professionals around the world, D’Andrea & Partners assists European companies in China as well as Chinese companies wishing to enter the global market through the establishment of foreign-invested enterprises or by mergers and acquisitions. The team is composed of both Chinese and European professionals, many of whom have experience of legal practice outside their home country.