Browse topics

  • Governing law
    NameLaw or Code?
    Anti-Unfair Competition Law of the People's Republic of China 1993
    (反不正当竞争法)
    Law
    Certain Regulations on Prohibiting Unfair Competition in Prize-offering Sales 1993
    (关于禁止有奖销售活动中不正当竞争行为的若干规定)
    Code by the State Administration for Industry and Commerce
    Certain Regulations on Anti-unfair Competition in Pharmaceutical Industry 1993
    (医药行业关于反不正当竞争的若干规定)
    Code by the State Pharmaceutical Administration
    Reply of the State Administration of Industry and Commerce to Issues concerning the Determination of Acts of Unfair Competition in Prize Promotions 1999 (国家工商行政管理局关于有奖促销
    中不正当竞争行为认定问题的答复)
    Code by the State Administration for Industry and Commerce
    Reply of the State Administration of Industry and Commerce on Issues concerning the Identification of Prize-offering Sales by Lottery Draw and the Interpretation Power of Anti-Unfair Competition Law 1998
    (国家工商行政管理局关于抽奖式有奖销售认定及国家工商行政管理局对
    反不正当竞争法》具体应用解释权问题的答复)
    Code by the State Administration for Industry and Commerce
    Law of the People's Republic of China on the Protection of Consumer Rights and Interests 2013
    (消费者权益保护法)
    Law
    Advertising Law of the People's Republic of China 2015
    (广告法)
    Law
    Measures for the Administration on Sales Promotion Acts of Retailers 2006
    (零售商促销行为管理办法)
    Code jointly issued by the State Administration of Taxation, State Administration for Industry and Commerce, Ministry of Commerce, Ministry of Public Security and National Development and Reform Commission
    Decision on Internet Information Protection 2012 (and data protection provisions scattered in various laws and regulations)
    (全国人民代表大会常务委员会关于加强网络信息保护的决定)
    Laws and Codes

    Last modified 10 Feb 2017

  • Extra-territoriality

    In relation to prize promotions which are operated purely online and outside China, Chinese regulators, such as the Ministry of Finance, The State Administration for Industry and Commerce, State Administration of Taxation, Ministry of Commerce, Ministry of Public Security and National Development and Reform Commission etc. normally do not consider Chinese laws/rules to be applicable to such promotions, and in practice, generally do not enforce those rules on such promotions.

    If the promotion targets Chinese consumers, but is promoted from a non-Chinese website or through direct marketing from outside China, the regulators will do what they can to take action, but in current practice enforcement is very much limited to actions against illegal lotteries, mainly by blocking the offending foreign websites. So far, there have not been any actual cases of other enforcements against offshore operators which have no physical nexus with, or presence in China.

    Last modified 10 Feb 2017

  • Skills competitions

    Yes, but promoter/organizers should ensure the winner is determined on the basis of skill and not chance, particularly if the entrant needs to pay to enter. If the level of skill is not met, it could be categorized as a promotion judged on the basis of chance, and as such if payment is required, this could be considered a lottery, and may give rise to criminal liability.

    There is no detailed guidance under the laws and regulations as to the level of skill, knowledge or judgement the entrants should exercise in a skill competition. The common practice in China is that the requirement for entrants to exercise skill or judgement or to display knowledge should either prevent a significant proportion of potential entrants from taking part or prevent a significant proportion of entrants from receiving a prize.

    Last modified 10 Feb 2017

  • Prize draws

    Unlawful (potentially deemed an illegal lottery, fraud and/or violation of the relevant anti-unfair competition laws and regulations), unless participants do not pay to enter or to claim/receive prize. China does not allow companies to conduct lotteries, although it does operate a couple of 'state' operated lotteries).

    The laws and regulations are not clear or specific about 'payment'. However, according to the relevant cases and professional opinions, it can be inferred that in the following situations payment is required:

    • Where the only route of entry is a premium rate phone line

    • Paying more than usual rates for delivery of the prize

    • Paying to discover whether a prize has been won or to collect a prize, and

    • Paying for goods and services at an inflated rate in order to take part in the promotion

    Under the current practice (which could change in the future), the provision of data does not amount to payment.

    Last modified 10 Feb 2017

  • Selection of winners

    Promoters should provide participants with information regarding the:

    • Prize type

    • Probability of winning

    • Value of prize or variety of prize, and

    • Time and method to award the prize

    If the prizes are not awarded instantly, additional information including the time, location and method to reveal winners as well as the time and method to inform the winners must be provided to participants. If the prizes are awarded instantly, for prizes above ¥500 (approx. US$70), details of how the prize is to be awarded must be provided to participants.

    Promoters must not engage in any of the following prize-offering sales:

    • Conduct prize-offering sales by deceptive means, such as falsely declaring to have prizes or making false representation regarding the prize type, probability of winning, the value of the highest prize, total prize value, prize volume, prize quality, or method of prize awarding etc

    • Use unfair means to ensure a designated insider wins the prize

    • Intentionally keep the goods or lottery tickets with winning marks from being released to the market, or not release them simultaneously with the other goods and lottery tickets

    • Intentionally release the goods or lottery tickets with different prize values or prize marks at different times

    • Conduct prize-offering sales employed as a means to sell goods of low quality at a high price

    • Conduct prize-offering sales in the form of lucky draw (on the basis of chance) where the highest prize exceeds ¥5,000 (approx. US$700), or

    • Conduct other fraudulent acts of prize-offering sales

    Last modified 10 Feb 2017

  • Judges

    No.

    Note: This is a broad comment in relation to general commercial prize promotions and does not apply to all skill competitions such as large-scale competitions including sports competitions and singing contests on TV which may have specific rules for judges and/or judging.

    Last modified 10 Feb 2017

  • Prizes

    For any kind of lucky draw or prize promotion based on chance, the highest prize cannot exceed the value of ¥5,000 (approx. US$700), including but not limited to:

    • The right to use a commodity whose price exceeds ¥5,000 (approx. US$700), regardless of the period of time of such use right

    • Job opportunity which offers more than ¥5,000 (approx. US$700) salary or other interests, regardless of whether the winner has to fulfil any obligations, and

    • Social welfare lotteries and sports lotteries which offer any prize exceeding ¥5,000 (approx. US$700) 

    Last modified 10 Feb 2017

  • Registration requirements and fees

    Registration Requirements

    For retail stores conducting promotions in relation to a store opening, festival celebration or store anniversary celebration etc, unless the retails store's premises is less than 3,000m2, the promotion must be filed with the Administration for Industry and Commerce within 15 days after the promotion is finished.

    Fees / Taxes Payable

    There are no fees payable.

    The grant of prizes is generally deemed as sales of goods for PRC enterprise income tax (EIT) and value-added tax (VAT) purposes, and therefore may subject the enterprise promoter to PRC EIT and VAT.

    The individual winner is generally liable to PRC individual income tax (IIT) (normally at the tax rate of 20%) if the winner receives the prizes for free. Such IIT should be withheld by the enterprise promoter.

    If the tangible prize needs to be brought into China from overseas, it may trigger additional PRC import taxes (such as import VAT, consumption tax, and customs duties).

    The above PRC tax implications may vary depending on each case.

    Note: This is a broad comment in relation to general commercial prize promotions and does not apply to all skill competitions such as large-scale competitions including sports competitions and singing contests on TV which may require additional registration and/or fees.

    Last modified 10 Feb 2017

  • Other local requirements
    • Medical products cannot be promoted with prizes.

    • Promoters must not use un-qualified or low quality products as prizes, or compromise the after-sale services (if applicable).

    • The advertising and other marketing communications regarding the promotion must be real, legal, clear, easy to understand, as opposed to ambiguous or vague. Retailers (as promoters) must not infringe consumers' interests by reserving their rights to interpret the advertising and other marketing communications. It's common practice in China that operators reserve their rights to interpret the rules of promotions. The laws and regulations do not prohibit such reservation provided they do not infringe consumers' right/interests or violate laws/regulations.

    Last modified 10 Feb 2017

  • Timing

    No, although time should be allowed to deal with data protection issues (eg ensuring an appropriate privacy policy is in place and including appropriate tick box functionality for consents).

    Last modified 10 Feb 2017

  • Translations

    The laws and regulations are not specific or clear on whether the terms and conditions have to be translated into simplified Chinese. However translation of the terms and conditions into simplified Chinese is the preferred approach to avoid misunderstanding between promoters and participants. Also translation is recommended if:

    • The terms and conditions work as a privacy policy for personal data processing, they are required to be easily understood, and

    • There is any dispute, local courts/arbitral tribunals would require evidence in simplified Chinese and the terms and conditions may be used as evidence 

    Last modified 10 Feb 2017

  • Penalties for non-compliance

    Violation of Anti-Unfair Completion Law, Law on the Protection of Consumer Rights and Interests and related regulations

    Sanctions are proportionate to the breach and routinely commence with requests to amend or terminate the non-compliant promotions. Fines ranging from ¥10,000 (approx. US$1,400) to ¥100,000 (approx. US$14,000) can be imposed against the promoter in breach. Also consumers who suffered from an infringement arising from an unfair competition can sue the promoter for compensation. Promoters who engage in fraudulent practice in the provision of goods or services must, on the demand of the consumers, compensate the consumers for their losses and damages (three times the value of the goods/services paid by the consumers but not less than ¥500 (approx. US$70)).

    In addition, the penalties for non-compliance with certain requirements can be subject to a public announcement by the relevant authorities which can lead to brand and reputational damage.

    Illegal lottery

    If the promotion is deemed an illegal lottery, sanctions include criminal detention (1-6 months) or a prison term of up to 5 years, and/or a fine of up to 5 times the value of the illegal gains. In extremely serious cases, the sanctions will be a prison term of not less than 5 years plus a fine of up to 5 times of the illegal gains or confiscation of property.

    Data privacy breaches

    Sanctions in relation to data privacy breaches are scattered in different laws and regulations. Typically it would be a graded approach - warning and requirement to comply, then possibly fines of up to approx. ¥500,000 (approx. US$70,000) and confiscation of unlawful income. In severe cases, it could, for example, be higher fines, revocation of license, and the closure of a website. Persons held responsible could be prohibited from engaging in relevant businesses and their conduct could be recorded in their social credit files. For illegal provision of personal data to third parties, the responsible person could be subject to administrative detention or up to 7 years of imprisonment, and potentially a concurrent fine on the organization if applicable.

    Last modified 10 Feb 2017

  • Restrictiveness of regulations

    The existing rules set out some basic requirements, which are based on common sense and are not unduly onerous. There are no registration or other formality requirements, except for promotions conducted by retail stores 3,000m2 or larger. Most prize promotion mechanics are allowed so long as:

    • It is not a lottery, and

    • The highest prize is not more than ¥5,000 (approx. US$700) for prize promotions based on chance

    The rules are not overly burdensome for promoters. The standard to distinguish between prize-offering and lottery is not very clear and in practice prize promotions are rarely considered as lotteries.

    Last modified 10 Feb 2017

  • Regularity of sanctions

    Prison sentences are rarely imposed.

    On the other hand, it is not uncommon to see fines imposed on promoters, mainly for violation of the Anti-Unfair Completion Law, Law on the Protection of Consumer Rights and Interests and related regulations. In particular, there are a number of cases where well known promoters were fined for offering prizes exceeding ¥5,000 (approx. US$700) in lucky draws.

    Last modified 10 Feb 2017

  • Key contacts
    Horace Lam
    Horace Lam
    Partner DLA Piper UK LLP [email protected] T +86 10 8520 0690 View bio
    Paula Cao
    Paula Cao
    Associate DLA Piper UK LLP [email protected] T +86 10 8520 0669

Governing law

What are the applicable governing laws or codes for prize promotions?

China

China

NameLaw or Code?
Anti-Unfair Competition Law of the People's Republic of China 1993
(反不正当竞争法)
Law
Certain Regulations on Prohibiting Unfair Competition in Prize-offering Sales 1993
(关于禁止有奖销售活动中不正当竞争行为的若干规定)
Code by the State Administration for Industry and Commerce
Certain Regulations on Anti-unfair Competition in Pharmaceutical Industry 1993
(医药行业关于反不正当竞争的若干规定)
Code by the State Pharmaceutical Administration
Reply of the State Administration of Industry and Commerce to Issues concerning the Determination of Acts of Unfair Competition in Prize Promotions 1999 (国家工商行政管理局关于有奖促销
中不正当竞争行为认定问题的答复)
Code by the State Administration for Industry and Commerce
Reply of the State Administration of Industry and Commerce on Issues concerning the Identification of Prize-offering Sales by Lottery Draw and the Interpretation Power of Anti-Unfair Competition Law 1998
(国家工商行政管理局关于抽奖式有奖销售认定及国家工商行政管理局对
反不正当竞争法》具体应用解释权问题的答复)
Code by the State Administration for Industry and Commerce
Law of the People's Republic of China on the Protection of Consumer Rights and Interests 2013
(消费者权益保护法)
Law
Advertising Law of the People's Republic of China 2015
(广告法)
Law
Measures for the Administration on Sales Promotion Acts of Retailers 2006
(零售商促销行为管理办法)
Code jointly issued by the State Administration of Taxation, State Administration for Industry and Commerce, Ministry of Commerce, Ministry of Public Security and National Development and Reform Commission
Decision on Internet Information Protection 2012 (and data protection provisions scattered in various laws and regulations)
(全国人民代表大会常务委员会关于加强网络信息保护的决定)
Laws and Codes