China Just Overhauled Its Advertising Law: Here's What You Need to Know

There Are Signs China Might Get Tougher on Enforcement, Too

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A poster for PepsiCo Inc. products in Kunming in Yunnan Province, China, in 2013.
A poster for PepsiCo Inc. products in Kunming in Yunnan Province, China, in 2013. Credit: Nelson Ching/Bloomberg

Chinese legislators just updated the country's advertising law, which hadn't been overhauled since 1994 -- well before the arrival of many Western brands, and before the internet took off.

The legislation, which goes into effect Sept. 1, will affect everything from brands' use of celebrity endorsers to how baby formula can be promoted. It bans the use of China's flag in ads. It says people must be able to close online pop-up ads with a single click (intrusive ads are still ubiquitous on China's internet). And in a country of more than 300 million smokers, the law cracks down harder on tobacco advertising.

The updated legislation fits into a general trend of strengthening consumer protections in China, where food-safety scandals and quality issues are common, and it increases fines for false advertising.

Many advertising regulations have not been strictly enforced in the past, and there are questions about what will happen this time. But regulators recently fined P&G's Crest brand a record $963,000 for false advertising because it used computer software to whiten a celebrity endorser's teeth.

That suggests "enforcement authorities are not afraid of using this kind of fine, especially once the new law has come into effect," said Eugene Low, partner at the Hong Kong office of Hogan Lovells law firm. "And apart from financial implications, it can also cause reputation implications for companies, because their name gets put on a web site, sending a message to the public that the Chinese government doesn't tolerate this kind of advertisement."

Here are some takeaways from the updated law:

Celebrities

Under the new law, celebrity endorsers can be held responsible for false claims in ads. And children under age 10 cannot endorse products at all.

The tiny stars of hit show "Where Are We Going, Dad?", featuring famous dads and their kids traveling to far-flung locations, have won endorsement deals on milk, travel and educational products.

But China apparently wants child celebs to have a real childhood.

Brands rely heavily on celebrities in China because they're a quick way to connect with consumers who are overwhelmed by brand choices. But the market is maturing, consumers are getting more skeptical of that tactic and the government apparently wants to send advertisers a signal.
"Reading between the lines, it's probably not so much about banning the use of celebrity kids, but more to get us thinking about how we use celebrities in general," said Chenghua Yang, CEO of Publicis Shanghai and Guangzhou. Celebs "are a good trick to arouse attention, but more important is what's the issue or proposition you want to bring to the consumer."

Baby formula

China's government wants to encourage breastfeeding, since less than 16% of urban Chinese women exclusively breastfeed their infants for six months. Soon before the draft law was approved, legislators added language restricting advertising for baby formula, which is a big and growing business in China, reaching $21.8 billion in 2014, up 17.9% from 2013, according to Mintel.

The updated law says baby formula, drinks and food cannot "claim to replace a mother's milk, fully or partially." (Some reports had suggested there would be an outright ban on formula advertising.)

Western companies are already careful about how they advertise baby milk in China -- they don't show infants in their ads, just babies over 12 months old, said Publicis' Mr. Yang. The new regulation shouldn't actually change advertising strategies much, he said, though it may affect some promotions in lower-tier cities.

Tobacco

About one in three cigarettes smoked in the world is consumed in China, the World Health Organization, says. And 1 million deaths every year in China are caused by tobacco. Cracking down on the industry has been complicated in China, since the tobacco monopoly is state-owned.

The amended advertising law bans tobacco ads aimed at underage consumers and says ads cannot appear in mass media or in public places. "We particularly welcome the acknowledgement in the law of the importance of protecting young people from tobacco advertising," said Angela Pratt, who leads WHO's tobacco-control efforts in China. Marketing targeted toward children has been a big issue in a country where tobacco companies have even sponsored schools.