When we discuss the food and beverage (F&B) industry in Mainland China, we are looking at a huge market. Specifically, China’s imported F&B market posted US$72.47 billion in 2018. Overall, the growth of per capita disposable income, the ever-improving logistics system, the continued societal concerns for food safety, and the preference for imported food and beverages together constitute the four driving forces driving the growth of the industry.
Demographics analysis reveals that the majority of F&B consumers are in the range of 25-44 years old. This demographic consists mainly of young professionals or graduate students, who are more inclined to use online platforms or mobile phone apps, and pay closer attention to taste and food safety.
The current legal framework of the F&B industry in China mainly consists of the Food Safety Law, Advertising Law, Consumer Protection Law, Anti-Unfair Competition Law, E-Commerce Law as well as the two five-year plans to strengthen food and drug safety.
The operation of the legal system cannot be separated from the efficient operation of administrative law enforcement agencies. The 13th National People’s Congress in 2018 approved the institutional reform plan of the State Council, in which the former State Administration for Industry and Commerce, the former State Food and Drug Administration and the former State Administration of Quality Supervision, Inspection and Quarantine were reorganized and merged into the State Administration of Market Supervision (SAMR).
The National IP Administration will be in charge of matters in relation to trademarks, patents and geographical indicators, and serve as a part of the SAMR. This institutional restructuring plan seeks to improve the efficiency of administrative law enforcement in the long run.
Compliance issues of food labelling and food advertising should be the focus in practice. According to a report by PRC General Administration of Customs, labelling issues constitute 16% of the reasons for non-compliant imported food – the third most common reason for non-compliance.
The requirements of food labelling are mainly stipulated in the Administrative Measures of Food Labelling and National Standards on Pre-packaged food labelling. The core requirement for food labelling is that it must be true and objective: namely, the labelling information shall not contain any false or exaggerated descriptions. In terms of the content of the label, the regulations and national standards provide for mandatory labelling information, such as food names, ingredients list and shelf life.
Regulations and national standards also provide for the prohibition of certain labelling contents, such as food labels may not be labelled “express or implied to have the effect of prevention, treatment of disease” (such as claiming to have the effect of “lowering blood pressure”), or describe the food as “organic” or “Green Food” without obtaining the relevant certificates.
Food advertising is mainly regulated by the Advertisement Law and the Food Safety Law. Article 2 of the Advertisement Law provides a broad definition of advertisement, and commercial advertising activities in which product operators or service providers introduce their own goods or services directly or indirectly fall within the scope of advertising. Any promotional materials – whether on products, the brand owner’s or distributor's own websites, online stores or social media accounts, third party's websites, online stores or social medial accounts – fall within this broad scope.
The current legal system also puts forward requirements for the content of advertisements, which should be true and should not contain false or misleading content. Laws and regulations have specific advertising requirements for food products that require additional attention: e.g., health food shall not contain claims of any assertion or guarantee for efficacy and safety, any involvement of functions of disease prevention or treatment, any claim or hint that the product advertised is necessary to safeguard health, or comparison with pharmaceuticals or other health food.
In terms of endorsement, the Advertising Law requires the genuine use experience of endorsers, and minors under the age of 10 cannot act as endorsers. Health food advertising is not allowed to use endorsers.
When looking at the legal issues in Mainland China’s F&B industry, “professional anti-counterfeiters” must be given special attention. Professional anti-counterfeiters purchase products when they are aware of counterfeiting or non-compliance issues, and then claim compensation from the brand owner or distributor. If the brand owner or distributor does not agree to the professional anti-counterfeiter’s demands, the latter will further file administrative complaints or even civil litigation. The vast majority of these professional anti-counterfeiters will disclose the issues to the public media at the same time, so as to create a negative impact.
The most popular targets for professional anti-counterfeiters are non-compliant food labels, such as improper use of the registered trademark symbol, shelf life marks, and missing Nutrient Reference Values. Large supermarkets and retail stores are more likely to be targeted by professional anti-counterfeiters than brands because they are less equipped to handle disputes and are more willing to settle. In addition to label issues, professional anti-counterfeiters are now also focused on advertising issues, especially the use of absolute descriptors such as “most” or “top” in online marketing materials.
Finally, let’s talk about the e-commerce market. The rapid development of e-commerce in Mainland China has made consumers more interested in buying imported food and beverages online. After five years of research and consultation, the E-Commerce Law came into force on January 1, 2019. The E-Commerce Law covers almost all goods and services provided by all subjects on various e-commerce platforms, including e-commerce platform operators (e.g. Alibaba, JD.com), in-platform operators (e.g. Taobao stores), and operators using their own websites or other online channels (like WeChat’s Mini Programmes).
In view of problems such as the difficulty of identifying the responsible subject in the past, malicious repeated infringement, and the time-consuming complexity of the complaint process, the E-Commerce Law provides corresponding solutions such as the compulsory registration of operators, preservation of taxation records and transaction history, and the construction of a faster and easier notice-and-takedown mechanism. The joint liability of the e-commerce platform operator is also confirmed in the E-Commerce Law.
Mainland China has established a relatively integrated legal framework to regulate business in the F&B area, and continues to introduce new laws and regulations in response to new issues arising in the industry. At the same time, food safety has always been the most important concern of the Chinese government. In this case, brands should be fully aware of all relevant local laws and regulations, and comply with the local provisions.