On June 29, 2020, the Chongqing Administration for Market Regulation issued a “Negative List of Advertising Activities” (“the Negative List”), which lists 257 types of advertising violations, covering 23 categories of commodities such as foodstuffs, pharmaceuticals, real estate, education and training, and internet finance on outdoor billboards, internet, and other forms of media. In contrast to a similar negative list issued by Yunnan Province in 2008, the current negative list issued by the Chongqing Administration for Market Regulation is a more comprehensive one, which covers all types of prohibited acts in existing advertising-related laws and regulations, providing enterprises with an operable checklist for self-inspection.
In the face of these 257 prohibitions, market players may feel “ambushed”. However, a careful reading of the Negative List will show particular priorities in the enforcement practices of these advertising violations.
I. The Negative List: Focus on What Matters, and Make Full Use of Leeway
A. Focus on What Matters: Priorities in the Advertising Enforcement
1. The Question of Orientation Cannot be Ignored
The Negative List lists a total of 29 prohibitions which applies to all types of advertisings, 8 of which relate to advertising orientation. Since 2016, when President Xi Jinping gave an important instruction at the Forum on Public Opinion Work that “advertising should also be oriented”, the issue of orientation has become a key focus in advertising regulation in recent years. In administrative enforcement so far, many advertising campaigns have even faced severe consequences in the form of maximum penalties for orientation issues. To give advertisers clearer guidance, the Negative List has comprehensively enumerated the prohibitions on orientation issues. However, we would like to remind operators that the issue of orientation can be displayed in much more complex forms during the process of strict enforcement.
a. Use of National and Military Symbols
Article 9 (1) of the Advertising Law clearly states that the national flag, national emblem, national anthem, military flag, military emblem and military anthem of China shall not be used. In addition, care should be taken not to use or disguisedly use the Party flag, the Party emblem, the regimental flag, the regimental emblem, the Tiananmen Square, the Monument to the Peoples’ Heroes, the Great Hall of the People and other political symbols. In practice, there have been cases in which the use of symbols such as the red scarf of the Young Pioneers and the honor guard of the Armed Forces has also been punished.
Not only are national and military symbols of China prohibited, but symbols of foreign countries and armies with strong political connotations are also inappropriate in advertising campaigns, such as the Japanese military flag used during World War II, and the Qingtianbairi flag used in Taiwan.
b. Use of Language Relating to the Personal Character of State Agency Personnel
Concerning the prohibition on use of the name or image of state agency personnel, while the more familiar extension may be the prohibition against the use of photographs, paintings and names, in current practice, it may also include language relating to the personal character of state agency personnel, and in particular representative language of national leaders.
From August to December 2019, the State Administration for Market Regulation (SAMR) launched a nationwide enforcement campaign against companies who took advantage of the thematic educational phrase, “Never Forget the Beginning, Remember the Mission” and engaged in unscrupulous business. Companies have been punished for displaying Xibaipo(西柏坡) graphics, the poem written by national leaders, the catch-up 1949 propaganda words and “Never forget, don't forget the original intention, move forward” on alcohol packaging and promotional leaflets inside wine boxes.
c. Advertising that is Detrimental to the Dignity or Interests of the State
There has been a recent proliferation of cases that undermine the dignity or interest of the State and neglecting such issues will result in maximum penalties. At present, the most typical manifestations of this issue are the use of misprinted maps, regional classification, etc., among which the map problem is particularly serious. On the one hand, the advertisers may have downloaded maps from suspicious and unreliable internet platforms and photo material websites, where errors and omissions are quite common, on the other, it is indeed difficult to check errors such as the exact location of the Aksai Chin boundary line, Diaoyu Island, and Chikao Island. In order to avoid such risks, operators should use authoritative map service websites such as the National Administration of Surveying, Mapping and Geoinformation of China (NASG) or the National Platform for Common Geospatial Information Services, “Map World”, to download accurate maps of China for advertising design and production.
The severity of the penalties is reflected not only in the breadth of their discretion, but also in their broad applications. Certain non-traditional advertisements are also subject to penalties under the Advertising Law where they are detrimental to the dignity and interests of the State. For example, the foreign language logo on the product, product launch, and other aspects may be considered as advertising violations. MUJI from japan, for instance, was fined 200,000 RMB (US$ 28,563.67)for printing “MADEINTAIWAN Country of origin: Taiwan” on the outer packaging of its imported products, since it was considered to have advertised against the dignity or interests of the nation. In addition, operators should also be aware of the risks associated with regional classifications in the official websites and the global distribution in marketing brochures.
d. Value Orientation under the Social Good Morals
At present, “value-oriented” issues are also a focus of investigations and punishments. Whether the content contains obscenity, pornography, gambling, superstition, terrorism, violence, or ethnic, racial, religious or gender discrimination, or violates social good morals or obstructs public order, in the end, they are all be reviewed value-oriented issues. Value-oriented problems are usually obscurely hidden in subtleties and hints, and operators may easily go astray if they lack the compliance framework. For example, a deli company was fined 600,000 RMB (85691.02 USD) for publishing posters on its online store that read: “Fresh, tender and juicy, want it?”, “irresistible temptation”, along with images of female posing with indecent gestures, making the advert sexually suggestive.
2. Focus on Major Industries
The Negative List summarizes the prohibitions on advertising activities specific to 23 types of goods and services, and combines the Advertising Law and the special advertising regulations for different industries. In fact, the risk of advertising violations also differs by industry. The “Focus on What Matters” approach is also reflected in the fact that, for industries that have a bearing on people’s health and property safety, such as health food, medical, pharmaceutical, real estate and financial investment, advertising violations are investigated and punished more severely than more general industries. During the prevention and control of the coronavirus pandemic, law enforcement agencies have grown more concerned with industries related to protective gear, epidemic prevention and control, with the enforcement being carried out more swiftly and strictly.
B. Make Full Use of Leeway: Room for Error in the Advertising Practices of Commercial Entities
1. “Exemption List” Offers Chance for Minor Offenses
Although the Negative List has more than 200 prohibited items, there is still room for errors and behaviors that are less harmful due to their futility. Many localities have introduced the so-called “Exemption List” for minor violations, and some minor advertising violations corrected in a timely manner may be exempted from punishment according to these lists. Therefore, operators should actively communicate with law enforcement agencies to understand the local policy requirements, and actively correct violations to seek exemptions where such lists apply.
In Shanghai, for example, according to the Exemption List for Minor Illegal Business Practices in the Market, the minor advertising violations that are exempt from penalties include:
- Publishing pharmaceuticals, medical devices, pesticides, veterinary drugs and other advertisements required by law to obtain an advertising review and approval number, or have actually obtained the approval number but have not clearly so-indicated in the advertisement.
- Advertisements relating to patented products or patented methods, without indicating the patent number and type of patent, but with proof of a legally valid patent.
- The content of the citation in the advertisement is legal and documented but the source is not indicated in the advertisement.
- Advertisements published through mass media and are not marked with the word “advertisement” but are identifiable to consumers as such.
2. Room for “absolute language”
It is difficult to determine the boundary to the using of absolute terms in advertisements, but the negative lists still make attempts to balance the scale. If an advertisement containing absolute terms appears on business premises, or if it is an advertisement of the advertiser’s own goods or services published through proprietary media and are discovered for the first time, they are generally considered as minor offenses and free from punishment when corrected in a timely manner before any harmful consequences.
In addition, not all words such as “most” or “first” are deemed illegal, and in certain circumstances, certain words with extreme meanings do not constitutes absolute language prohibited by the Advertising Law, such as:
- Accepted fact. For example, in an advertisement describing the world’s highest peak, Mount Everest.
- A term that expresses a subjective wish of the operator. For example, the phrase “strive for perfect quality” is used to express the management philosophy and pursuit, and would not be considered as misleading consumers.
- A term used to classify proprietary products. For example, top-of-the-line models are common in the mobile phone industry today.
- Grades that are recognized by relevant standards in the industry or have been widely accepted by the public. For example, under the grading standard of Fine, Premium, First Grade and Second Grade for Anji white tea products, the fine grade is expressed as “the highest grade”.
- There is no objective misleading possibility that the use of words in a harmonic or variant form, or foreign characters, is misleading. For example, “enchantingly beautiful” (“醉美” is pronounced as the phrase The Most Beautiful “最美”in Chinese) is used to describe rape blossom scenery, and “Yao Yao leading” (“姚姚领先”is pronounced as the phrase The Farthest Ahead “姚姚领先” in Chinese) is used for products endorsed by the famous basketball player Yao Ming.
3. “Use” by the Advertising Spokespersons can be Reasonably Extended
The utilization of spokesperson in advertising is an important area of frequent controversy. Article 38 of the Advertising Law requires that an advertising spokesperson shall not recommend or prove products or services that the spokesperson has not used or received. In practice, the term “use” can be interpreted broadly. It is sufficient if there are acts of exploitation, such as pet food. In addition, if the spokesperson of the advertisement knows or should know that the advertisement is false, but still recommends or endorses the goods or services in the advertisement, the spokesperson may be held liable for administrative and civil liability.
II. How to Deal with Advertising Compliance under the Negative List
With the increase in advertising enforcement, we recommend that companies integrate advertising compliance into their compliance systems to prevent legal and goodwill risks. Especially for operators in key industries such as health food, medical, pharmaceuticals, real estate, financial investment and wealth management, close attention needs to be paid to enforcement trends. The advertising compliance requirements of the industry in which the business operates in must also be clearly and properly understood. Compliance programs should also be designed according to the relevant systematic compliance program most suited to the industry that businesses operate in. Specifically:
- Correctly assess the risks of advertising law violations common to the industries in which you operate, and other common violations within the process of operation, and focus on what matters according to the Negative List.
- Establish sound advertising compliance policies and procedures, including but not limited to, a review process for the content and form of advertising, with particular attention to reviewing prohibited items in the Negative List; compliance policies such as a process for promptly resolving of problems after they are discovered should also be set up.
- Strengthening advertising law training for employees to increase their awareness of advertising law compliance and in particular, to draw employee focus and attention to orientation issues.
- For relevant statements in advertisements involving citations of specific honors, data, statistics, findings, abstracts, quotations, patents or patented methods, and other such information, keep and record corresponding supporting documents for reference in the process of advertising design and production.
- Implement third-party compliance management in the advertising area. In practice, some companies will have business ties with third-party advertising companies. To avoid the risk of advertising incompliance due to third parties, it is therefore important to find out if the third-party advertising company has ever been penalized for advertising violations, whether it has a comprehensive vetting process for ad production and distribution and so on.
- Adjust and update the advertising compliance policy in accordance with relevant regulatory policies and enforcement developments.
In addition, when faced with a government investigations, one should respond and communicate with law enforcement agencies proactively to understand the compliance requirement and corrective measures, and make the best efforts to promptly correct the violations and abate the impact. Additionally, if the particular situation falls within the scope of the Exemption List, seek for non-punitive treatment. If the punishment become unavoidable, companies should strive to reduce or mitigate the penalties.
- http://scjgj.cq.gov.cn/ ↩
- http://www.ynws.gov.cn/ ↩
- Shanghai Zhenhai Industrial Co., Ltd. illegal advertising case, Hu Jian Guan Pu Chu Zi (2018) No. 152018012183. ↩
- Henan Xuchang Aier Eye Hospital Co., Ltd. illegal advertising case, see “The State Administration for Market Regulation announced the first batch of typical false illegal advertising cases in 2019”, http://www.samr.gov.cn/ ↩
- Shi yu Shi Jian Chu Zi〔2019〕No. 043. ↩
- China Fortune Land Development CO., LTD. illegal advertising case Hu Jian Guan Jing An Chu Zi  No. 062018000405, Shanghai Huayuhua Marketing Consulting Co., Ltd. illegal advertising case Jing shi Jian Chu Zi  No. 060201711018. ↩
- Can Essence, Medicinal Diet, and Ozone Machine Prevent New Coronavirus? This city exposed a batch of typical cases of illegal advertising, https://mp.weixin.qq.com/ ↩
- Main points of the 2020 inter-ministerial joint meeting to rectify false and illegal advertisements, http://gkml.samr.gov.cn/ ↩
- http://sfj.sh.gov.cn/ ↩