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China’s Advertising Law – That fine is (chest)nuts!

In a recent decision, a Chinese court imposed a fine lower than the statutory range under the Advertising Law of the People’s Republic of China (as amended in 2015) (“Advertising Law“). This suggests that courts retain certain discretion in reducing statutory sanctions under the Advertising Law. This decision, while not binding on other courts and may be specific to the facts, may be a welcome sign to minor and small-scale violators of the Advertising Law.

The case concerns the use of superlatives in advertisements. Article 9(3) of the Advertising Law prohibits the use of superlatives such as “national”, “highest” and “best”. The list is non-exhaustive. Other superlative words, for instance “world-class”, “supreme” and “No. 1”, have been found to fall foul of the provision.

The prohibition can catch the unwary since it applies irrespective of the intention of the advertiser and whether or not the superlative can be justified by objective facts. Violation of Article 9(3) carries, among other potential sanctions, a fine ranging from RMB 200,000 to RMB 1 million (about USD 31,000 to USD 156,000).

Before the recent judgment, it has been widely perceived that neither the court nor the authorities can impose a fine lower than the minimum of this range.

In this case, a store owner selling roasted chestnuts was fined RMB 200,000 by the authorities for advertising using the phrase “Top-of-the-top store for roasted chestnuts in Hangzhou” (“杭州最优炒货店”). The store owner was unhappy about the fine and appealed to the Hangzhou Xihu Court.

The Hangzhou court gave its judgment in May 2018, reducing the fine to RMB 100,000. In affirming its power to impose a fine lower than the statutory range, the court considered the Advertising Law in conjunction with the Administrative Punishment Law. The Administrative Punishment Law provides that the imposition of administrative penalties should take into account the facts, nature and seriousness of the violations of law and the damage done to the society. It is a mitigating circumstance where a person commits a relatively minor illegal act and promptly remedies the breach.

In reducing the fine, the court considered that the roasted chestnuts shop is a small-scale individually-run business. Furthermore, given that roasted chestnuts is a very common kind of food, customers are very unlikely to be misled by the superlatives. The court therefore concluded that the violation is relatively minor and that the harm done is minimal.