Preface

Since the kickoff of the 2022 Qatar World Cup, Chinese elements have been visible everywhere on the field, including Chinese corporate sponsors. While fierce matches are underway on the green pitch, advertisements from Chinese companies catch the eye along the sidelines. The most eye-catching one is undoubtedly Hisense’s advertising slogan: “No. 1 in China, No. 2 in the World.” Many voices question whether Hisense’s move is a “borderline play” (edge ball) and are hotly debating whether this advertising slogan violates China’s Advertising Law.

In fact, there is no upper limit to the market economy value derived from commercial advertising, but the regulation of advertising behavior has strict boundaries. Therefore, from the perspective of advertising compliance, this article discusses the legal issues and commercial value orientations behind advertising behavior.

I. Affirmative View: It is Illegal

First, according to Article 9 of China’s Advertising Law, words such as “national level,” “highest level,” and “best” shall not be used in advertisements. Hisense’s advertising slogan “No. 1 in China, No. 2 in the World” obviously contains extreme terms, which are prohibited by law.

Second, according to Paragraph 1 of Article 4 of China’s Advertising Law: “Advertisements shall not contain false or misleading content, and shall not deceive or mislead consumers.” And Paragraph 1 of Article 28: “Advertisements that deceive or mislead consumers with false or misleading content constitute false advertisements.” In Hisense’s advertising slogan, neither “No. 1” nor “No. 2” clearly specifies what they refer to, nor do they provide an objective factual basis, which constitutes the publication of a false advertisement.

Finally, although Hisense’s advertisement is placed overseas, as domestic television stations broadcast the World Cup matches, the advertisement will inevitably be seen by domestic audiences. Furthermore, Hisense’s use of simplified Chinese characters for the advertising slogan clearly aims at consumers in mainland China. According to Paragraph 1 of Article 2 of China’s Advertising Law: “This Law applies to commercial advertising activities within the territory of the People’s Republic of China, whereby commodity operators or service providers directly or indirectly introduce their promoted commodities or services through certain media and forms.” In reality, advertising behavior includes design, production, agency, publication, and other stages. As long as any stage occurs within the territory of China, it should be subject to the jurisdiction of China’s Advertising Law.

Therefore, Hisense’s advertising slogan obviously violates China’s Advertising Law.

II. Negative View: It is Not Illegal

First, Hisense’s advertisement was placed at the competition venues of the Qatar World Cup, which are not within the territory of China. According to the provisions of Article 2 of China’s Advertising Law, China’s advertising supervision and administration authorities have no jurisdiction over it.

Second, even though domestic television stations broadcast the World Cup matches, objectively enabling domestic consumers to see the advertisement, it is not a proactive act by Hisense, and Hisense cannot be blamed and held liable for it.

Furthermore, in addition to consumers in mainland China, countless overseas Chinese also use Chinese. Moreover, Chinese is one of the official languages of the United Nations. We cannot employ a “presumption of guilt” that Hisense is targeting domestic consumers with its advertising behavior just because it uses a simplified Chinese slogan.

More importantly, Article 22 of China’s Administrative Penalty Law has already stipulated that “administrative penalties shall be under the jurisdiction of the administrative organ in the place where the illegal act occurs. Where laws, administrative regulations, or departmental rules provide otherwise, such provisions shall prevail.” This clause determines not only the territorial jurisdiction of the administrative organ for administrative penalties but also the territorial jurisdiction for the application of law for administrative penalties, thereby establishing the principle of determining administrative penalty jurisdiction + application of law based on the “place where the illegal act occurs.” Accordingly, for advertising behaviors occurring outside the territory of China, the laws of the People’s Republic of China cannot be applied to implement administrative penalties.

Taking a step back, even if China’s Advertising Law were applied, Hisense’s promotional claim of “No. 1 in China, No. 2 in the World” has a factual basis—according to global TV brand monitoring data for January-October 2022 released by AVC Revo on November 15, 2022: Hisense TV’s global shipments reached 19.6 million units from January to October, a year-on-year increase of 18%, jumping to second place in the world. In addition, Hisense Visual Technology (600060.SH) disclosed three rankings in its 2022 semi-annual report: the company ranked second globally in shipment volume and third globally in shipment value in the second quarter of 2022 (Omdia data); it ranked first in China in retail sales for the first half of 2022 consecutively (All View Cloud data); and Hisense TV ranked first in user satisfaction in China’s industry (China Association for Quality 2021).

Therefore, the above advertising slogan of Hisense does not violate China’s Advertising Law.

III. The Purpose of Advertising Compliance

Before discussing whether Hisense’s advertisement violates China’s Advertising Law, the author believes we should first understand the original intention of advertising compliance, which is: what exactly is our purpose in conducting compliance reviews for advertisements?

Based on the author’s practical experience in providing advertising compliance services for enterprises, I personally believe: Sometimes, rather than arguing about whether it is “illegal or not,” it is better to consider whether it is “profitable or not.” The author has always conveyed a value to clients with advertising compliance needs: advertising compliance is not a stubborn pursuit of “zero risk,” but rather an expectation to maximize the “retention of creativity” and “preservation of benefits” while “reducing legal risks” as much as possible. Otherwise, if the products do not sell, what is the use of the advertisement? For example, if an advertising copy is modified during the review process to be “completely compliant but totally uncreative,” when the advertisement loses its marketing and communication effect, it naturally cannot generate economic benefits, which betrays the original intention of publishing the advertisement. Therefore, any advertising compliance work that does not talk about commercial purposes is just “making trouble out of nothing.”

In addition, advertising compliance is not a once-and-for-all action, but a dynamic compliance process. On the one hand, regulatory authorities, enterprises, and consumers have different understandings of legal norms. From the perspective of enterprises, the law has boundaries, but creativity has no upper limit. Between the enterprise’s advertising creativity and the consumer’s personal perspective lies the “brain of a normal person.” Even if an advertisement has moderate exaggeration, consumers can reasonably distinguish that it is where creativity lies, rather than the legally prohibited circumstances of “deception and misleading.” However, for the same behavior and the same legal provision, regulatory authorities often have different understandings and hold negative evaluation attitudes.

On the other hand, the enforcement scales of regulatory authorities in different periods are also slightly different. This destines us to maintain long-term attention to advertising compliance work and adjust the final implemented advertising plans according to the times. For example, enterprises are like a flock of sheep on the grassland, and regulatory authorities are like a majestic lion chasing from behind. For any sheep, maintaining high-speed running at the front of the flock consumes too much physical strength (costs), while neglecting it and falling to the back of the flock makes it easy to be eaten (punished)—so considering the position and grasping the scale is very critical. In advertising compliance practice, in order to reduce the legal risks brought by extreme words in the early days, we once suggested that enterprises use “playful” terms such as “boss” (kangbazi), “ceiling” (tianhuaban), and “crush” (diaoda). After receiving good marketing effects for a long time, we found that local market supervision departments had begun to warn or investigate such advertising terms. So, we quickly suggested that enterprises optimize and upgrade the advertising copy to “Iteration 2.0”. This also reflects the dynamism and systematicness of advertising compliance work.

Just like this Hisense advertising incident, the short copy “No. 1 in China, No. 2 in the World” seems simple, but what lies behind it is by no means as simple as the application of a single legal provision.

IV. Consideration of the Benefits of Hisense’s Advertisement

Therefore, we should look at Hisense’s advertisement “No. 1 in China, No. 2 in the World” from a more commercial perspective.

First, because the advertisement was placed overseas, there are certain jurisdictional disputes and a vacuum for domestic regulatory authorities, which the company must have considered beforehand.

Second, just looking at the eight words “No. 1 in China, No. 2 in the World,” the author can at first glance think of multiple “reasonable explanations” from aspects such as “referred content” and “actual meaning.” I believe Hisense’s legal department had also made full preparations for this in advance. In practice, the author also frequently advises enterprises to take similar precautionary measures beforehand to cope with potential risks of complaints or penalties afterwards.

Moreover, China’s State Administration for Market Regulation issued a public notice on December 7, 2022, seeking comments on the “Law Enforcement Guidelines for Absolute Terms in Advertising (Draft for Comment).” Even though this notice is still in the stage of seeking comments, it reflects future regulatory attitudes and trends to a certain extent. That is, if absolute terms are used but do not refer to the target commodity (e.g., if explained as referring only to “service attitude,” “business philosophy,” “corporate culture,” “target pursuit,” etc.), it is not a violation. This also confirms the practicality of the idea that “reasonable explanation helps avoid punishment”—to use an inappropriate example, just like an explanation to a girlfriend after a conflict, “it may not necessarily make sense, but it works.”

In addition, according to relevant reports, investors asked on the investor interactive platform—what does the so-called “No. 2 in the World, No. 1 in China” refer to: revenue, profit, sales volume, white goods, or black goods? From which year or time period is the data? On November 25, 2022, the Secretary of the Board of Hisense Visual Technology responded: according to the report data released by AVC Revo, the shipment volume of Hisense TV reached 19.6 million units from January to October 2022, a year-on-year increase of 18%, and its market share ranked second in the world and first in China.

This verifies once again that for this “destined” controversial advertising slogan, Hisense’s “reasonable explanation” was well-prepared, whether from the intangible level of cultural vision or the pragmatic level of marketing data.

Furthermore, Hisense’s subsequent “copywriting correction” action was also a highly meaningful measure. During the third round of the group stage match between Qatar and the Netherlands on November 30, 2022, Hisense changed its sideline slogan to “Made in China, Let’s Work Hard Together.” Immediately, on December 1, Hisense responded to relevant media, stating: this change of advertising slogan is not actually a replacement; the previous advertising slogan still exists. “Made in China, Let’s Work Hard Together” are merely added fence words. The new content added this time aims to express the attitude Hisense wants to convey behind “No. 1 in China, No. 2 in the World.”

The author personally believes that Hisense’s move is also a continuous compliance measure, mainly based on two considerations: (1) “Proactively eliminating or mitigating the harmful consequences of illegal acts” is a circumstance for lighter or mitigated punishment explicitly stipulated in China’s Administrative Penalty Law, and similar circumstances for lighter or mitigated punishment such as “voluntary rectification” are mentioned in the “Implementation Rules on Discretion in Administrative Penalties” of various provinces and cities, which cannot be said to not “embolden” them; (2) The outside world thought the advertising slogan was “replaced,” while Hisense argued it was “added.” The purpose was to explain it as a “holistic advertising behavior,” where the so-called “No. 1, No. 2” both point to the visionary goal of “Let’s Work Hard Together.”

In addition, it is worth noting that to optimize the business environment, current market supervision trends favor inclusive and prudent supervision for minor illegal acts, reducing or exempting penalties according to the law. Therefore, market supervision departments across the country have issued various lists of “Minor Illegal Acts Exempted from Punishment or Given Mitigated Punishment.” Behaviors such as using words like “national level,” “highest level,” or “best,” or using cited content such as data, statistical materials, survey results, abstracts, and quotations without indicating the source, are generally classified as minor illegal acts subject to “no penalty for the first offense” or even “no penalty at all.”

Finally, what the author wants to say is that the advertising slogan “No. 1 in China, No. 2 in the World” has spread from overseas to home, from online discussions to the industry, and has earned enough eyeballs for Hisense. The enterprise and brand have obviously enjoyed huge economic benefits, and the “economic accounting” in it cannot, I believe, be measured by the temporary cost of advertising sponsorship.

Therefore, the author believes that any one of the above reasons is sufficient to support the enterprise in making the decision to place the advertisement during the approval process of the advertising copy. But it must be emphasized that the author’s opinions in this article are personal and do not constitute specific legal advice, and it is not recommended for enterprises to “administer the medicine” on their own. Advertising compliance is never as simple as “copying homework,” but should result in specific solutions for specific problems under the guidance of professional lawyers. Especially in the strict domestic advertising regulatory environment, any advertisement expecting to use creativity as leverage to pry open economic benefits requires a comprehensive assessment of “exemption elements” such as the source of citation, restrictive conditions, and the time of information formation, in order to adopt more scientific and rigorous compliance measures.

Conclusion: When we explore the compliance boundaries of corporate advertising behavior, we should actually take into account the commercial purpose of the advertisement, otherwise, an advertisement that loses its commercial value has no compliance meaning. In addition, the author noted that during this Qatar World Cup, besides Hisense, other Chinese enterprises and brands also “went global,” meaning that the “Chinese business card” frequently appeared internationally. General Secretary Xi Jinping once pointed out, “Promote the transformation from ‘Made in China’ to ‘Created in China,’ from ‘Chinese Speed’ to ‘Chinese Quality,’ and from ‘Chinese Products’ to ‘Chinese Brands’” and “Achieve scientific and technological self-reliance and self-improvement, and strengthen and expand national brands.” From this significant macro-level proposition, perhaps it can better point out the direction for Chinese corporate advertisements going global, and even for national enterprises and brands going global.