Why Brands and Endorsers Should Both Understand the Law on Endorsements in China

In May 2022, Chinese actress Jing Tian received the largest fine ever issued under China’s Advertising Law to date - RMB 7.22 million ($1.08 million). This fine was in connection with her endorsement of Infinite Free, which is a local brand that makes “fruit and vegetable pressed candy”. In one ad, Jing was shown claiming that the product would prevent absorption of sugar, oil and fat. This was deemed to be a violation of China’s Advertising Law, which stipulates that advertisements for regular food products are not allowed to make health claims. The law further provides that if an endorser knows or should have known that the advertisement is false but still makes the endorsement, then the market regulator may confiscate the endorser’s illegal income and impose a fine of up to double the amount of such illegal income (Art. 61, Advertising Law). As a result of this violation, Jing’s income of RMB 2.58 million earned from the endorsement was confiscated and she was fined an additional RMB 4.64 million, totaling RMB 7.22 million. Jing was also banned from being endorser for the next three years, per Art. 38 of the Advertising Law, causing many of her other brand partners, such as Dior, to quickly remove her as endorser/ambassador and retract ads she had appeared in. The company Infinite Free was also penalized, and its products have been removed from major e-commerce platforms.

Legal Requirements

This case is an alert that both brands and endorsers must be aware of the legal requirements for endorsements in China. The State Administration for Market Regulation has emphasized enforcement of these issues in recent years, including by reiterating that local market regulators should continue to strictly supervise the culture and entertainment industry and strengthen oversight of celebrity endorsements. As such, brands and endorsers can expect a heightened enforcement environment in the near future, and should remain vigilant to any compliance issues, especially the following:

• No advertisement shall contain any false or misleading information, and shall not deceive or mislead consumers;
• No advertisement shall assert any therapeutic functions for products and using medical wordings or wordings that may easily cause confusion between the products promoted and pharmaceuticals and medical devices, except advertisements for pharmaceuticals, medical devices and medical treatments;
• Endorsers shall make endorsements or testimonials for products or services based on facts and in compliance with the laws and regulations, and shall not make endorsements or testimonials for products or services that they have never used. If an endorser knows or should have known that the advertisement is false but still makes the endorsement or testimonial, then the market regulator shall confiscate such endorser’s illegal income and impose a fine of up to double the amount of such illegal income;
• Any individual or organization that has received an administrative penalty for making a false endorsement or testimonial shall not act as an advertisement endorser for three years;
• Minors under the age of ten may not serve as advertising endorsers;
• Advertisements for medical treatment, pharmaceuticals, medical devices, or healthcare food shall not use advertisement endorsers;
• Advertisements for agricultural pesticides, veterinary medicines, feed and feed additives, crop seeds, forest seeds, grass seeds, breeding animals, aquatic fingerlings, planting, and breeding shall not use the name or image of research institutes, academic institutes, technology promotion institutes, industry associations or professionals in order to recommend or assert a product’s effectiveness;
• Advertisements for education, training, or a product/service with anticipated investment returns, shall not use the name or image of research institutes, academic institutes, educational institutes, industry associations, professionals or beneficiaries in order to recommend or try to prove efficacy.

Takeaway

With the above in mind, brands and endorsers should always check the legality of what they are advertising, and ensure that they are cognizant of any risks that may arise from the actions of their partners. In this respect: 

Endorsers:

endorsers may wish to make special note of the following for any projects they are engaged on:

• Whether the product/service he/she is being asked to endorse is subject to any legal prohibition or restriction.
• The reputation of the brand and the product/service, and whether there are any negative associations;
• Whether the brand has obtained all qualifications for its business and whether the signing party has obtained authorization from the brand to sign the agreement;
• Whether the endorsement agreement has fully addressed the endorser's rights and interests.
• Whether the endorser is comfortable providing testimonials after using the product.

Brands: 

Brands may have a different set of concerns for endorsement projects, including:

• Whether the endorser is qualified (not younger than ten; no administrative penalties for false advertisement in the past three years and not involved in illegal or improper public behavior);
• Whether the product/service has actually been used by the endorser; and
• Whether the agency has obtained authorization of the endorser, and whether there is any potential agent dispute between the endorser and agency.
• Whether the endorsement agreement has fully addressed its rights and interests.
• Whether the testimonials that the endorser is going to provide comply with advertising laws.

In sum, while celebrity endorsements can help sales, legal violations can damage the reputation of both the brand and celebrity. Jing’s case is becoming more typical, and is good reminder that China’s advertising and cultural authorities are strengthening enforcement around celebrity endorsements. Both brands and celebrities would be advised to enhance compliance efforts.