By Huang Jianwen  King & Wood Mallesons’ Investment Group

huang_jianwenOn April 24, 2015, the PRC Advertising Law was amended for the first time since its promulgation in 1994 (the “New Advertising Law”) and will take effect on September 1, 2015.

The New Advertising Law clarifies the definition of false advertisement, regulates online advertisement, advertisement targeting minors, and advertising endorsers. It reflects the government’s thoughts on deepening the reform, adjusting functions of government agencies, as well as strengthening market supervision.

The New Advertising Law has stronger regulation on advertisements of healthcare, medications, medical devices, and health food (“Health-related Advertisements”). It also defines the functions of the government agencies such as the administration for industry and commerce and the food and drug administration, increases penalties for violators, and promotes public awareness of participating in the regulatory process.

Selected highlights of the New Advertising Law include:

The scope of prohibited advertisements is enlarged.

Chemicals in medications which are easily used to make drugs, medications, medical devices, and treatment for drug detoxification have been added to the prohibited category for medication advertisement. Previously, this category only included narcotic medications, psychotropic substance, toxic medication, and radioactive medication. In addition, public media targeting minors now prohibits publishing Health-related Advertisements.

Advertisement of medication must be consistent with the medication’s instructions.

According to the New Advertising Law, advertisement of medication must be consistent with the medication’s instructions, contraindications, and adverse reactions must be obviously labeled. An advertisement of a medical device must obviously refer to the instructions for contraindications or cautions if the registration certificate of the medical device contains such content.

The use of endorsers is prohibited in Health-related Advertisements.

Celebrities’ endorsement in advertisements may mislead consumers. In an attempt to reduce false advertisement, the New Advertising Law prohibits the use of any endorser to prove the effectiveness of the product or to recommend the product in Health-related Advertisement.

Health-related Advertisements may not be published through health regime programs.

The New Advertising Law states that radio stations, TV stations, newspaper, audio publishers, and Internet information service providers may not publish Health-related Advertisements with the disguise of introducing health regime knowledge. Violators may not only be subject to penalties imposed by the administration for industry and commerce, but if the violation is severe enough, the violator’s advertisement publication business may be suspended.

Advertisements of health food may not refer to disease prevention and treatment.

The New Advertising Law has been made consistent with the recently amended food safety law—both distinguish health food from medications. The New Advertising Law states that health food advertisement may not: (1) contain assertions or undertakings of functions and safety; (2) refer to the functions of disease prevention and treatment; (3) claim or hint that the advertised commodity is necessary for health protection; and (4) compare with medications or other health food. In addition, a health food advertisement must clearly state that the advertised product is not a substitute of medications.

A medical institution’s practicing license may be revoked for false advertisement.

The New Advertising Law states that for a medical institution whose false advertisement is considered to be a severe legal violation, the administration for industry and commerce may impose administrative penalty, and the health administration may opt to revoke subjects of diagnosis and treatment or the practicing license of the medical institution. The dual penalty mechanism reflects the government’s determination to regulate healthcare advertising.

Stricter regulation on and harsher penalties for false Health-related Advertisement.

The New Advertising Law remains the mechanism of prior review and approval of Health-related Advertisement by the advertisement review authority and additionally requires the advertisement review authority to forward the approval document to the administration for industry and commerce at the same level. In addition, the approving authorities must notify the public of the approved advertisements in a timely manner. Such a systematic design will likely promote coordination between government agencies and increase public awareness of the regulatory process.

The fine for false advertising has been increased to 3 to 5 times of the original advertising costs. If the costs are hard to be calculated, the maximum fine can be as high as 2 million RMB. If a false advertisement is for a commodity or service related to the consumers’ life and health, and causes damage to consumers, then the advertisement operator, the publisher, the endorser, and the owner will be jointly and severally liable.

Whether the New Advertising Law will play the role of protecting consumers’ legal rights, regulating advertisements, or promoting self-discipline within the industry depends on the actual implementation. Time and industry practice need to be factored in when evaluating the effectiveness of the New Advertising Law.

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