Thursday 26 April 2018

Chinese bare their teeth with new laws on ads

Irish firms selling into China should note that with the rise of consumerism there, authorities are cracking down on misleading advertising, writes Steve Dempsey

A quiet puff: Tobacco advertising is one of the areas that will become more restricted under new Chinese legislation coming into force in September
A quiet puff: Tobacco advertising is one of the areas that will become more restricted under new Chinese legislation coming into force in September
Steve Dempsey

Steve Dempsey

Earlier this year, P&G's Crest toothpaste brand had an unwanted brush with the Chinese authorities. Crest was hit with a fine of 6.03m Chinese Yuan Renminbi (RMB) - just under €1m - for false advertising.

The offending ad was a TV spot where a Taiwanese talk-show host claimed her pearly whites had gotten pearlier and whiter after just one day's use of the toothpaste. The authorities, suspecting something was too good to be true, found that the whitening effect in the ad was more likely a result of Photoshop and not a dream dental product.

Authorities in China are increasingly cracking down on false or misleading advertising. So much so that the legislation on advertising, first enacted in 1994, before the influx of western brands, a consumer culture and the onset of the internet, will be changing on September 1. These changes reflect the country's evolution from communist stronghold to economic superpower.

"According to the government's statistics, back in 1995, the total advertising revenue was about RMB20bn (€2.9bn)," says Eugene Low, partner with Hogan Lovells, a Hong Kong law firm. "In 2014, the figure has gone up to RMB560bn (€81bn). With the development of the internet, smartphones and social media, one can see advertisements everywhere in China."

So with the Chinese advertising market going from a minnow to a monster, what's the new legislation going to do about it?

Well, first off, as we've seen, any advertiser that's found to run false or misleading ads can be hit with a hefty fine, have its business licence revoked, bear civil liability, and in some cases, be criminally prosecuted.

Tobacco advertising will be restricted. Given that more than a billion Chinese people are estimated to be smokers or exposed to second-hand smoke, it's no surprise that the authorities are taking this opportunity to loosen tobacco's chokehold on the Chinese people.

Ads for dairy products, drinks and foods that claim to be a substitute for breast milk will also be more highly regulated. Advertisers will no longer be able to use the Chinese flag and anthem - March of the Volunteers. The army's flag, emblem and song will also be out of bounds. Advertising in schools or on educational material will be prohibited. The new law also regulates the sending of advertisements to people's addresses and mobile devices. Spam is out.

The law also has an interesting take on endorsements. Drugs and healthcare products will be barred from using any endorsements testifying to the effects or safety of the products. Any celebrities endorsing products that make false claims can be held responsible.

"Celebrity endorsement is very popular in China," says Eugene Low. "There have been quite a few cases where the endorsed healthcare products turned out to be unsafe. Some advertisements may also be seen as 'going over the line', for example, male celebrities endorsing sanitary pads."

Child celebrity endorsements are also common, according to Low, and the new legislation also cracks down on the use of children as spokespeople or figureheads for brands. "For instance, one of the girls who performed at the opening ceremony of the 2008 Beijing Olympics received over 20 advertising jobs for products including cosmetics, paint, and healthcare food for adults," says Low. "The Chinese government probably wants to prevent kids from being commercialised, especially for products and services which kids seldom use."

So, are these changes that will bring China in line with Western markets? Or are these measures that would leave western consumers scratching their heads? "In general, the changes are in line with the false advertising laws in many western jurisdictions," Low says. "Some changes may, however, sound unfamiliar. For example, legally requiring pop-up ads on the internet to clearly display a 'close' button which would close the pop-up window by one single click."

Low feels that the new laws are widely accepted. The people of the People's Republic welcome stronger consumer protection. "Consumer rights in China are on the rise," says Low. "The new Advertising Law should be read in conjunction with the recently reformed Consumer Rights Protection Law in China, both of which enhance consumer remedies in relation to deceitful or misleading conduct of traders. Traders may face more consumer complaints under these new laws."

However, it's unclear what effect the legislation will have on the Chinese advertising market. "The new law is prescriptive, but it remains to be seen how vigorously the government will enforce it," Low says. "On the other hand, it is a global trend that there is increasing legislative control on advertising activities, so in a sense, it is up to the advertising industry to adapt to these changes."

But it does seem like advertisers that are found to make blatantly false claims will be called to task. If the example of Crest is anything to go by, the authorities are willing to bare their teeth.

Sunday Indo Business

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