SelfRegulation in China Edward Lehman LEHMAN LEE XU

Self-Regulation in China Edward Lehman LEHMAN, LEE & XU 16 November 2007

Overview of China’s Advertising Regulatory Structure

Before & Now

Business Revenue of China’s Advertising from 1990 -2006 [Unit: one hundred million Yuan (RMB)] [Source: State Administration of Industry & Commerce]

Global Advertising Market Share 2004 [Source: i. Reserach. Group]

Functions of Advertising Administrative Organs

Formulate Administrative Rules Qualification Examination and Approval of Operation of Advertising Guide Organizations within the Industry Administration, Law Execution and Supervision Administrative Investigation and Disposal of Illegal Advertising Development Planning for the Advertising Industry Prior Examination of Special Advertising

Advertising Administrative Structure State Administration for Industry and Commerce (SAIC) AIC of Provinces and Municipalities directly under Central Government Prefecture AIC County AIC Dept. of AIC Dept. of AIC

Prior Examination of Ads By Chinese Governmental Departments Ministry of Health State Administration for Industry & Commerce General Admin. of Press & Publication Food & Drug Administration Ministry of Info. Industry Administration of Radio, Film & TV Ministry of Agriculture Local AIC Supervision over Advertising Industry

Roles & Functions of AICs n Department of Advertising Regulation of SAIC is the competent authority directly under the State Council in charge of drafting and enforcing regulations and the implementation rules thereof. n AICs are in charge of market supervision/regulation and related law enforcement through administrative means.

n Any person, either natural or legal, who alleges that the advertising operators have infringed their legitimate rights and caused damages to their properties or other rights may report the case to the competent AIC who will grant an administrative decision upon the case. Either party may appeal to the AIC at the next higher level or bring a suit directly to the people’s court if they are not happy with the decisions.

Additional Approvals for Special Products n Approvals are needed for the advertisements of health foods, pharmaceuticals and medical equipment from the Administration of Foods and Pharmaceuticals. n Approvals are needed for the advertisements of tobaccos and outdoor advertisements from the AIC. n Approvals are needed for the advertisements of pesticides and animal drugs from the government agencies of agriculture.

Self-Regulation in China

China Advertising Association (CAA) n It is a self-regulatory entity, but to a certain extent, supervised by SAIC n Its main mission is to provide consultation and legal opinions to advertising operators and agencies set up under supervision of SAIC n Their opinions are not final but are accepted by competent government agencies more often than not in view of their experience and connection with SAIC

Advertising Consultation Procedure Advertising Agency, Media, Advertiser Certifying Documents Advertisement Production Agreement to produce & Notice of Prelim. Exam. Advertisement Presentation Examination of characters & images Idea Product Notice of Preliminary Examination & comments Certificate of Substantial Examination

Advantages of Consultation Process n CAA has close connection with Department of Advertising Regulation of SAIC and is abreast of legal development and new guidelines n Consultation process is voluntary n CAA adopts a two-pronged examination process n CAA is responsible for rectifying problems that arise after consultation & authentication

Ways To Improve Efficiency of Advertising Self-Regulation n Entrust more powers and responsibilities to Legal Consultative Commission of CAA n Extend the scope of self-regulation n Increase transparency and awareness of self-regulation n Establish advertising dispute settlement and complaint resolution mechanisms

Edward E. Lehman Lee & Xu Chinese Law Firm with a Global Perspective Beijing, China elehman@lehmanlaw. com www. lehmanlaw. com