In January 2022, Estée Lauder (China), the international beauty and skincare company, was fined RMB 2,381,671 (approximately USD 350,000) for false advertising in China.
The company was penalised for publishing an advertisement claiming that its product ''Advanced Night Repair Essence" featured "Youth Index + 77%" and "Softening + 17%, Smooth + 20%, translucent +15%, etc.'' This was considered false and had a lack of evidential support by the administration.
Noting that according to Chinese law, anyone has the right to file a complaint for false advertising or to report the same, being accused of false advertisement can quickly happen in China. Therefore, it is important to know the Chinese law to avoid the risk of high fines.
Below, we set out the relevant grounds, general procedure and timeline, as well as some practical tips.
1. What are the possible grounds for filing an administrative complaint in China?
The advertising law
Article 4: "No advertisement shall contain any false or misleading information, and shall not deceive or mislead consumers. Advertisers shall be held responsible for the authenticity of the contents of advertisements."
Article 28: "An advertisement will be a false advertisement if it deceives or misleads consumers with false or confusing content.
An advertisement is a false advertisement if it falls within any of the following circumstances: …(b) the information on products or services are inconsistent with the actual situations in terms of the performance, function, place of origin, purpose, quality, specification, ingredients, price, producer, valid period, sales, awards of the products or the content, provider, form, quality, price, sales and awards of the services, or in terms of any guarantee relating to the products or services, and such inconsistency has a substantial influence on purchase…"
The anti-unfair competition law
Article 2: "While carrying out production or business activities, a business operator shall follow the principles of voluntariness, equality, fairness, and good faith, abide by laws and observe business ethics.
For the purpose of this law, unfair competition refers to any business operator's act of participating in the production and operation activities in violation of the provisions herein to disrupt the competition order in the market and infringe the legitimate rights and interests of other business operators or consumers."
Article 8: "A business operator shall not conduct commercial promotions for the performance, function, quality, sales status, user evaluation, honour received concerning its products in a false or misleading manner, attempting to cheat or mislead consumers."
2. What is the general procedure and timeline for an administrative complaint in China?
The administrative agency responsible for false advertising and unfair competition is the local Administration for Market Regulation (AMR). The AMR has jurisdiction to take action against entities, grant quasi-injunctions and impose fines.
The general procedure and timeline for an administrative complaint are as follows:
- Filing a complaint;
- The AMR decides whether to accept the case - within 15 working days upon receipt of the complaint materials, the time limit may be extended by 15 working days under special circumstances. The time required for testing, inspection, quarantine and appraisal shall not be included in the time limit mentioned above;
- The AMR informs the informant who files the complaint as to whether the complaint can be accepted - within five working days from the date of the AMR's decision on whether to accept the complaint;
- The AMR investigates and decides a case - within 90 days upon the date of formal acceptance of the case, the time limit may be extended by 30 days or a longer reasonable period under special circumstances. The time limit for suspension, hearing, announcement, testing, inspection, quarantine and appraisal shall not be included in the above time limit for handling cases.
3. Key takeaways for business operators in China
- For advertisers, advertising business operators, advertising publishers:
Closely monitor Chinese law, as well as the regulations of various provinces and regions, for regulations and updates on false advertising to avoid criminal, administrative and civil legal risks. Monitor niche markets, such as the stock and securities, food and drug, and education and training industries, as well as the way advertising is placed on new media avenues such as live streaming e-commerce platforms.
For example, the "Compliance Guidelines for Live Streaming Marketing Activities in Shanghai" (promulgated in July 2022) clearly stipulate that goods and services involving medical treatment, pharmaceuticals, medical devices, pesticides, veterinary drugs, health food and special medical use formulae shall be subject to prior review for advertising publication. The above-mentioned goods and services are not suitable to be advertised in the form of live streaming on the Internet.
- For peer competitors in the market:
If other operators in the market are identified as having engaged in unfair competition, such as false advertising and commercial defamation, it is possible to consider filing a complaint to the relevant administration or initiating a civil action in a timely manner, in accordance with the above-mentioned approach.
If you have any questions on the points and practical tips discussed in this article, please contact Ivy Liang.