Citations in advertising: compliance and legal liability

By Xie Yang, Zhilin Law Firm
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Enterprises generally use experimental data, statistics, survey results, quotations or other citations in their advertisements, and it is common to see advertisers punished for improper advertisements. In practice, clients often request relevant legal advice.

According to article 11(2) of the Advertising Law, when using data, statistics, survey results, excerpts, quotations or other citations in advertisements, the following conditions must be met. First, the cited content must be true and accurate, without any falsification or deception. Second, the source of cited content must be clearly indicated. Finally, the scope of application and validity period of cited content must be stated.

TRUE AND ACCURATE CITATIONS

True and accurate citations mean the data, statistics, survey results, excerpts, quotations and other citations used in an advertisement shall be objective, accurate and exist in reality.

Sometimes the citation, even if true, may mislead consumers due to its inaccuracy or improperness. When examining a citation, the market regulator not only examines the form but also comprehensively checks whether the advertisement is substantively legitimate; whether it accurately cites data; and whether there are any excessive, abusive, biased or out-of-context citations.

INDICATING DATA SOURCES

Xie Yang, Zhilin Law Firm
Xie Yang
Senior Partner
Zhilin Law Firm

Some companies that display cumulative sales and production capacity of their products or services on their websites have faced investigations and penalties from market regulators.

There is ongoing debate about whether advertisers should indicate the sources of their own statistics. One view holds that advertisers do not need to indicate sources for data obtained through their own experiments or surveys. Another view holds that article 11 of the Advertising Law clearly stipulates identification of sources whenever any form of citation is used in an advertisement, without any exceptions.

While the first view prevails in practice, there are still advertisers penalised for using their own experimental data without indicating their sources. Enterprises are therefore advised to deal with compliance of advertising citations pursuant to the second view.

No matter whether citations come from external sources or advertisers themselves, their sources should be indicated.

THE REASONS ARE:

  1. Article 11 of the Advertising Law does not distinguish sources of citations. Any advertisement that uses data, statistics, survey results, excerpts or quotations must indicate the sources;
  2. The Requirements for Examination of “Citations” in Advertisements, issued by the former Shanghai Administration for Industry & Commerce, may be of no reference value outside Shanghai. There are no known similar documented rules of market regulators in any regions beyond Shanghai;
  3. Indicating sources of citations is a simple task for advertisers. It serves the purpose of granting consumers the right to information, enabling them to make objective judgments and decisions without being misled. Citing advertisers’ own data without indicating its source obviously contradicts the original intent of article 11 of the Advertising Law;
  4. Article 11 of the Advertising Law requires citations to be true and accurate. Identifying sources helps verify the truthfulness and accuracy of the cited content.

INDICATING SCOPE, VALIDITY

If the data, statistics and survey results stated in an advertisement are applicable only under specific space/time conditions, the scope or period of application should be indicated when they are cited.

For example, if the advertiser publicises its ranking or award in an advertisement without specifying the year of ranking or award, the advertiser is deemed to have failed to indicate the term of validity of citations under the Advertising Law. For another example, if the experimental data of a product is derived from a specific experimental situation, it should be stated in the advertisement. Otherwise, consumers may wrongly assume the product will perform as advertised under normal usage conditions.

LEGAL LIABILITY

Where content cited in an advertisement violates the law and deceives consumers into any loss, the consumers may – in accordance with article 55 of the Law on the Protection of Consumer Rights and Interests – demand additional compensation for the loss, equivalent to three times the payment made by the consumer for the commodity purchased or service received. Note that for non-consumers (consumers refer to those who purchase, use or receive commodities or services for personal consumption), the threefold compensation is not applicable.

Where content cited in an advertisement violates the law and deceives consumers into any loss, the consumers may – in accordance with article 55 of the Law on the Protection of Consumer Rights and Interests – demand additional compensation for the loss, equivalent to three times the payment made by the consumer for the commodity purchased or service received. Note that for non-consumers (consumers refer to those who purchase, use or receive commodities or services for personal consumption), the threefold compensation is not applicable.

SUGGESTIONS ON COMPLIANCE

Advertisers and advertising agencies should carefully examine citations in an advertisement for legality and compliance before publishing, and ensure that:

  1. Cited data should be true and accurate, with evidence proving the truthfulness of citations kept in case of future investigation and litigation. If the advertiser entrusts a third party with the survey or experiment, it should sign a written service agreement and retain the original survey report sealed by the third party;
  2. The source of citations should always be indicated, even if they are from the advertiser itself; and
  3. The scope and period of application (if any) of the citations should be indicated. If the advertiser is investigated by the market regulator for any irregularities in citations, it should take timely corrective action and submit proof of the truthfulness and accuracy of the citations to the regulator. If relevant, advertisers can also cite local government authority rules that grant exemption for minor illegalities, maximising the opportunity of having penalties reduced or exempted.

Xie Yang is a senior partner at Zhilin Law Firm

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