China’s growing middle class and greater consumer awareness about the origins and safety of food have driven demand for higher quality products. At the same time, Chinese authorities are implementing higher standards in a broad range of products and specifications, including beverages, food additives, detergents, contaminants, and test methods.
A crisis in food confidence began in China when, in 2008, melamine was found in locally produced baby formula, sickening over 300,000 infants, and causing the death of three. Since then, numerous other cases of food safety have been recorded in the country.
More recently, a “double standards” scandal erupted when it was found that food company Haitian’s soy sauce sold overseas had fewer additives and preservatives than its domestic counterpart.
In July 2022, the National Health Commission (NHC) announced the issuance of 36 new National Food Safety Standards and 3 revised National Food Safety Standards. This is the first batch of national food safety standards issued by the NHC since September 2021.
Food advertising has as well been impacted by the new regulatory measures, with authorities targeting campaigns and ads endorsing products that claim therapeutic effects. Companies marketing food products in China should avoid any misleading or false content in their campaigns.
China is the largest consumer market in the world, with retail sales worth 44.08 trillion yuan (US$7 trillion) last year, according to the National Bureau of Statistics. Its middle class reached 400 million people in 2021, accounting for nearly 30 per cent of the total population.
Heavy fines have been issued against food companies that claimed false information on their labels or called their products “organic” without obtaining the proper authorization from the Certification and Accreditation Administration (CAA).
According to the Chinese Advertising and Consumer Laws, an advertisement is deemed a false if it deceives or misleads consumers with incorrect or confusing content, such as if the product does not exist, the information is inconsistent with reality, if scientific or statistic information is false or cannot be verified, or any other circumstances in which the consumers are deceived or misled by false content.
The penalty could be valued at three-to-five times the advertising fees, or, if the advertising fees cannot be calculated or are significantly low, a fine of RMB200,000 to RMB1 million. If the illegal activities have been committed more than three times within two years or there are other serious circumstances, the advertiser may incur a fine of five-to-ten times the advertising fees, or a fine of RMB1 million to RMB2 million, and the business licenses may be revoked.
National symbols are taken seriously in China and cannot be used in advertising of food products. A coffee brand was fined for using the phrase “Same as the Prime Minister’s Coffee” and hanging the photo of state leader at its stores.
The law states that an advertisement may not use any form of the National Flag, the National Anthem or the National Emblem, or the Army Flag, Anthem, or Emblem; or use the names or images of state organs or their functionaries.
The advertiser may incur a fine of RMB200,000 to RMB1 million; the business licenses may be revoked, and the authorities shall revoke the approval documents for advertisement review and shall not accept the relevant entity's application for advertisement review for one year.
Regarding advertising agents and advertisement publishers, authorities may confiscate the advertising fees and impose a fine of RMB200,000 to RMB1 million, and where the circumstance is serious, business licenses may be revoked.
The use of minors under the age of ten as advertisement endorsers is also prohibited in China. In 2018, a2 Milk engaged Chinese actress Hu Ke and her son, who was younger than 10 at that time, as endorsers for their milk powder on their official website and social media accounts. As a result, the company was fined RMB 100,000 by the Shanghai AMR (the “Administration for Market Regulation”).
The fines for this violations can amount to the equivalent to three times the amount of the advertising fees, or, RMB 100,000 to RMB 200,000.
Another important rule to follow is not to claim disease prevention or therapeutic effects of food products. In May 2022, actress Jing Tian claimed, as endorser of a fruit and vegetable pressed candy, that such candy could prevent absorption of sugar, oil and fat. As a result, she was fined RMB 7.22 million and banned from being an endorser for three years.
The manufacturer of the candy was also penalized, and its products removed from major e-commerce platforms.
Regular food advertisements are not permitted to claim therapeutic effects or use medical language or language that easily causes confusion between the products promoted and pharmaceuticals or medical devices.
Manufacturers of baby formula and other milk products are not allowed to claim full or partial substitution for breast milk. In 2022, Yashili published advertisements claiming that its products are “the most like breast milk” and purchased search engine optimization services to list its product at the top. Yashili was fined RMB 200,000 by the Huangpu Branch of the Guangzhou AMR.
The law states that it is prohibited to publish, in mass media or public places, advertisements for infant dairy products, beverages and other foods that claim full or partial substitution of breast milk.
Healthcare food or food formulated for special medical purpose must have an official approval before appearing in publishing advertisements. In 2020, Abbott published a short video for its product PediaSure, which is formulated for special medical purposes, before obtaining approval, and was fined RMB 1.94 million.
No advertisement for any medicine, medical device, healthcare food or food formulated for special medical purposes may be published without prior review and approval by the competent authority, according to Chinses regulations.
Advertisements for healthcare food, medicine, medical treatment, or medical devices shall not use advertisement endorsers to make endorsements or testimonials.
More and more multinational corporations in the food industry from the United States and Europe are raising their stakes in China, as they believe in the massive market potential of the country. However, these companies should be informed of the possible risks regarding false or misleading advertising, and the relevant legislations regulating the sector.
To learn more about our services in China, contact our Head of Business Advisory - Ms. Kristina Koehler-Coluccia at email@example.com.
DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.