China Media & Entertainment Law Report : China Media Lawyer & Attorney : Reed Smith Law Firm : Entertainment, Sports & Consumer Rights Law

In the interest of social harmony, Beijing’s government has recently promulgated new restrictions on the content of outdoor advertisements. The restrictions, issued in a Beijing Municipal Government Bulletin on the Work of Rectifying Outdoor Advertising, prohibit advertisers from using language that promotes “an unhealthy political culture” in their descriptions of properties, products and services. 

The categories of content discouraged include luxurious, hedonistic, and elitist language including words like "supreme," "royal," and "high class," coarse language, and xenophilic material. According to the Bulletin, advertisers running afoul of the new restrictions can be hit with a fine of up to RMB 30,000 and be compelled to remove the offending advertisement. 

Advertisers have until April 15th to rectify their outdoor ads, but it is as yet unclear how stringently the Bulletin’s provisions will be enforced. The definition of objectionable content as provided in the Bulletin is vague and leaves each marginal and potentially offending advertisement subject to interpretation by regulators. The subjectivity inherent to these decisions empowers regulators and will challenge companies as they develop their ad campaigns.

If the regulations are rigorously enforced, the advertising landscape for luxury items will drastically change as companies learn to overcompensate with increasingly innocuous ads; however, the Beijing municipal government has not indicated a willingness to convey the kind of antagonistic message that stringent enforcement of these advertising rules would send to high-end businesses, especially foreign businesses. More likely the Bulletin will serve as a reminder of the Beijing government’s agenda-setting power and its policy priorities, namely social harmony and income equality, and give luxury advertisers an incentive to keep their advertisements relatively conservative. 

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On November 15, 2009, the Beijing Consumer Association issued an open letter to celebrities and movie stars as a follow-up to recent false-advertisement issues surrounding well-known Chinese media personalities Hou Yaohua, Zhao Zhongxiang and Tang Jiezhong. This is the fourth time that the Association has issued an open letter to celebrities and movie stars on controversial advertising practices. The letter points out four main issues associated with celebrity advertising: lack of knowledge of the products; exaggeration of the curative effects of medical services and/or drugs; illegal promotion of the efficacy of health-related products; and/or possessing the intent to 'trap' consumers through advertisements. This final category sounds a little broad. Please let us know if you know of any specific examples of ads that don't intend on "trapping" us. This may be a new innovation in the advertising marketplace of which we are not aware.

On November 11, the Professional Committee of Media Shopping, which is affiliated with the China General Chamber of Commerce, identified 20 commercials that it considers to be either in violation of applicable laws or an exaggeration of the relevant product's qualities. Zhao Zhongxiang, a 67-year-old veteran host for China's national TV station CCTV, starred in two of the identified advertisements, which promoted medicine curing coughs and heart diseases. On November 18, Zhao apologized for starring in these commercials.

Earlier in November, the China Advertisement Association identified 10 fake or unregistered medicine-related commercials in which famous cross-talk star Hou Yaohua starred. On November 6, Hou announced on his blog that he was sorry for his actions.

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The State Administration of Radio Film and Television recently issued The Measures on Radio and Television Advertisement Broadcasting ("Measures"), which are applicable to all television or radio broadcasting entities. The Measures, which become effective as of January 1, 2010, restrict the length of advertisements during radio and television programs to no more than 12 minutes per hour for every program. IN any episode of a TV show, there will only be two commercial advertisements allowed, neither of which shall exceed 90 seconds.  An exception allows shows aired between 7-9 pm to have up to 18 minutes of advertisements per hour.  

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Effective May 20, 2009, China’s State Administration of Industry and Commerce (“SAIC”), the Ministry of Health (MOH), and the State Food & Drug Administration (“SFDA”) jointly issued “Measures for the Examination of Medical Device Advertisements” (“Measures”) and “Standards for the Examination and Release of Medical Device Advertisements” (“Standards”), both of which are relevant to medical device manufacturers and distributors advertising medical devices and diagnostic products within China. 

According to the Measures, provincial Food and Drug Administrations (“FDAs”) are responsible for examining medical device advertisements, while local Administrations for Industry and Commerce (“AICs”) are responsible for monitoring public advertising of medical devices. Applicants seeking approval for medical device advertisements are required to be qualified medical device manufacturers or medical device distributors. In instances where the distributor is the applicant, medical device distributors require approval from the medical device manufacturer, valid for one year. If the content of the approved medical device advertisement is determined to be false or fraudulent, the supervising authority is required to withdraw the advertisement, cancel the corresponding advertisement’s approval number, and refuse to accept advertising applications related to the relevant medical device from the infringing company for one year. If medical device advertisements aimed at individuals exaggerate the benefits of the medical device or include any overly misleading claims, the supervisory drug authority at the Provincial-level or higher may prohibit sales of the medical device. If the advertiser refrains from using the improper advertisement, the company will be eligible to resume sales.

According to the Standards, advertisements are prohibited for medical devices whose production, sale, and use are subject to legal prohibition by SFDA, and for devices developed by medical institutions for internal use. Medical device advertisements are required to be accurate in describing the applicable scope and effectiveness of medical devices, and shall not use the names or images of medical research entities, academic organizations, medical organizations, experts, doctors, or patients as testimony to the effectiveness of the medical device being promoted. Chinese agencies with enforcement authority retain significant discretion in how to apply these new rules and interpretation may vary from region to region. The new rules encourage careful attention to all forms of advertising and close coordination with the relevant Chinese agencies.

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In the past year, there has been extensive media coverage surrounding complaints from the general public against substandard products endorsed by celebrities. A high profile case in 2008 involved endorsements by celebrities of milk products tainted with melamine. The Chinese government imposed severe penalties on the milk manufacturer, including the imprisonment of its executives which led, in part, to the company’s bankruptcy. However, celebrities that endorsed the milk products were not subject to penalties, due to the lack of any clear legal foundation for litigation. This year, the scrutiny and public outrage over the role of celebrities in the advertising industry and the lack of adequate food safety regulation resulted in three significant legal developments affecting celebrity advertising in China. Celebrities and others engaged in advertising for food and/or pharmaceutical products can now face criminal liability (in the case of drug advertisements) and civil liability (in the case of food products) if the products they are advertising are fake, substandard or if the advertisements are misleading.

On May 27, the Supreme People’s Court and Supreme People’s Procuratorate issued "Interpretations on Several Issues Regarding the Application of Law on Criminal Cases Concerning the Production and/or Sale of Fake and Substandard Drugs" to address the manufacture and sale of counterfeit and/or substandard pharmaceutical products in China. Pursuant to Article 5 of these new rules, individuals or companies providing advertising can be found liable as accomplices for the crime of creating, manufacturing or selling fake and/or substandard drugs if they know or should have known that the drugs were fake and/or substandard at the time of the advertisement. In June and July, revisions to the "Food Safety Law" and the newly issued "Measures for the Supervision and Administration of Food Safety in Circulation" established a basis for finding celebrity advertisers liable if they recommend food products to consumers in false or misleading advertisements.
 

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