What do China brand owners need to do protect their brand against lower quality competitors and counterfeiters?
Hand sanitisers have quickly become one of the world’s hottest commodities as COVID-19 continues to cross borders and there has been a surge in demand in mainland China and Hong Kong as employees begin to return to the office.
The sanitiser products typically contain one of three types of alcohol: ethanol, isopropanol or n-propanol. These sanitisers are effective towards killing germs, with at least 60 percent alcohol concentration (normally 75 percent for products in mainland China).
Sanitisers reviewed by the US Center for Disease Control and Prevention state that their claims of killing “99.9% of germs” can be substantiated. However, these tests are conducted in laboratories when in real life the situations are significantly more complicate; the effectiveness of hand sanitisers varies on the oiliness or dirtiness of an individual’s hands and on the germs or viruses concerned.
So, how can a brand owner claim its sanitiser products “Kills 99.9% of germs” in mainland China and Hong Kong?
Classification of Hand Sanitisers and Entry of Market
In mainland China, hand sanitiser with a sterilisation function is classified as a sanitary disinfection product, the manufacture and sales of which are subject to special laws and regulations. Although it does not fall into the scope of medical products, the PRC governments closely supervise the manufacture and sale of disinfection products in the market. China categorises disinfection products depending on usage and the degree of risk. Hand sanitiser is categorised as second-class and should be strengthened to ensure high levels of effectiveness. Operators should not produce, sell or import hand sanitisers in mainland China until they have acquired a business and hygiene license and/or pass hygiene and evaluation tests required.
Regulations in Mainland China include:
1. Disinfection Management Measures (“DMM”) Articles 20, 22 and 26
Under the DMM, in order to lawfully manufacturing hand sanitisers, manufacturers should obtain the corresponding business license as well as a hygienic license issued by the local provincial authority. The number should be printed on the product packaging when launching to market.
2. Regulations on the Hygiene and Safety Evaluation for Disinfection Products (“Regulation”) Article 4
Under this Regulation, satisfaction in the Hygiene and Safety Evaluation is required before selling second-class disinfection products such as hand sanitiser in mainland China. The company can conduct the Evaluation either by itself or by entrusting a third party.
3. Notice of the General Office of the NHC on the Urgent Marketing of Some Disinfectants During the Prevention and Control of Pneumonia Outbreaks of New Coronavirus Infection (“Notice”) (issued on 3 February 2020)
According to the Notice, during the prevention and control of the pneumonia epidemic of COVID-19, inspections and filing procedures for launching alcohol, chlorine, chlorine dioxide and peracetic acid disinfectants are postponed. Products manufactured by companies with hygienic license, can be quickly launched to market. However, when this period ends, companies who continue to produce and sell those products will need to adhere to the relevant formalities in accordance with the original procedures.
The authority has the right to confiscate all the illegal income and fine approximately USD7,200 against offenders. Serious offences could incur criminal charges.
In Hong Kong, sanitisers are not classified as medical products, dangerous goods, strategic commodities or items of controlled and prohibited articles under the laws which govern on goods imported, exported, produced, traded or possessed. They are ordinary goods so their use, sale, distribution, marketing and advertising can be conducted freely, unless the activity violates general requirements for product safety or sale and marketing practices that are reasonably expected under common law and the legislations described below.
Regulations in Mainland China include:
1. Consumer Goods Safety Ordinance (“CGSO”) Cap 456
Under the CGSO, it is an offence to supply, manufacture or import into Hong Kong consumer goods unless the goods comply with general safety requirements for consumer goods.
The maximum penalty for the initial conviction is approximately USD1,300 and imprisonment for one year. The CGSO also requires that, if a standard exists, the goods are required to meet that standard if manufactured, supplied or imported into Hong Kong.
2. Claims/Descriptions of the Hand Sanitisers on the Labelling and Packaging
According to the US Center for Disease Control and Prevention, a sanitiser product claiming to “kill 99.9% of germs” must have an alcohol concentration of at least 60 percent. The CGSO has no special requirements on the labelling of personal care products in Hong Kong, however all information provided on the packaging of sanitiser must be true and not misleading. If a warning regarding the storage, use, consumption or disposal is placed on the sanitiser product or its package, the warning should be stated in both English and Chinese.
In mainland China, standards demand that the sterilisation rate is no less than 90%, nowhere in those standards stipulates that sanitisers should have a sterilisation rate of 99.9%. In any event, all descriptions or information on the product packaging must be true and not misleading and comply with other relevant advertising and standard regulations.
Regulations in Mainland China include:
1. Advertising Law of PRC Articles 3, 4, 8, 11, 28, 55
Under the PRC Advertising Law, an advertisement should be true to facts and lawful and should not contain any false or misleading information, nor shall it deceive or mislead consumers. Violators face losing their business license and penalties of up to five times the advertising fees or approximately USD145,000.
2. DMM Articles 31, 43
Under DMM, the label (including instructions) and promotional content on the disinfection product must be true and must not state of imply any healing effects. Offenders would be ordered to make a correction within a specific timeframe and may also suffer a penalty of approximately USD2,900.
3. Law of Protection of Rights and Interests of Consumers Articles 20, 45, 55, 56
Under this law, information pertaining to the quality, functions, use, etc. of the products should be true and complete, the company shall not make false or misleading advertising. Further, a consumer whose legitimate rights and interests are harmed as a result of false advertisements of the products has the right to seek compensation from the company. In case that the company commits fraud, compensation could total three times the amount of the price of the goods purchased by the consumer.
In view of the above, the claim that a product “Kills 99.9% of germs” must be true and accurate. If challenged by consumers and the company fails to provide solid evidence, the supplier may suffer severe consequences and be subject to significant fines.
Regulations in Hong Kong include:
1. Trade Descriptions Ordinance, Cap. 362 (“TDO”)
The TDO is the prime legislation which regulates descriptions applied on goods and services in Hong Kong. Under Section 7, it is an offence for any person to apply a false trade description to goods or possess, supply or offer any goods to which a false trade description is applied. The maximum penalty upon conviction of an offence under Section 7 is a fine of USD64,000 and five years’ imprisonment.
Although there are no mandatory requirements under the TDO to list out product ingredients on labels, suppliers should be aware of the implications in violating the TDO. A “Kills 99.9% of germs” claim on the sanitiser product must be true and capable of substantiation if required by the Customs and Excise Department.
2. Undesirable Medical Advertisements Ordinance, Cap. 231 (“UMAO”)
According to the requirements of the UMAO, it is an offence to publish an advertisement which is likely to lead to the use of any medicine, surgical appliance or treatment which states it will prevent human beings from contracting certain specified diseases or conditions. Any company who contravenes these provisions is guilty of an offence and liable to a maximum fine of USD50,000 and six month's imprisonment.
Although advertisements of medical products for the purpose of relief of symptoms of common colds, coughs or conditions commonly referred to as influenza are permitted under the UMAO, suppliers of sanitiser products with a “Kills 99.9% of germs” claim should ensure that any advertisement of the product does not carry an indication or implication that the sanitiser can be used for treatment or prevention of any viral, bacterial, fungal or other infectious diseases such as COVID-19.
Enforcement cases in mainland China
Since the outbreak of COVID-19, procuratorates across the country have handled 1,086 economic crimes that interfere with the prevention and control of the epidemic; 427 cases are suspected of producing and selling counterfeit and inferior products (particularly medical masks and disinfectants), and 149 cases are suspected of selling counterfeit registered trademarks.
In one incident, it was identified that the chlorine content did not meet National Standards and therefore considered substandard products. The offenders were arrested for selling fake and inferior products.
Enforcement actions by Hong Kong Customs
On 27th January, Hong Kong Customs began inspecting retail locations selling sanitisers and other common protective items. Since then, several arrests and seizures have been made against pharmacies and retail outlets selling sanitiser products which violate the provisions of CGSO and TDO.
In one incident, Hong Kong Customs searched an office of a pharmacy group and its 20 branches in various districts across the territory as well as over 230 retail spots, seizing a total of 174 bottles of disinfectant alcohol with suspected false descriptions on composition. The disinfectant alcohol was put on sale in 1 litre bottles with claim of “75% ethanol” but was found to be of just 737 millilitres in volume and composed of 52% methanol and less than 0.1% of ethanol. A director and six salespersons were subsequently arrested.
3. What Can Brand Owners of Legitimate Sanitiser Products Do?
Sanitisers are hygienic products and are expected to provide users with enough protection against germs and infection. Counterfeit and substandard sanitisers may expose users to significant harm due to their inferior quality or as a result of them containing harmful substances. Often these products copy the designs, packaging, logos emblems and products descriptions of the real products.
A brand owner should protect their products by ensuring the registration and protection of their trademarks in mainland China and Hong Kong. The PRC Trademark Law (Chapter 7) and Trade Marks Ordinance (Cap 559) in Hong Kong provides remedies for the infringement of registered trademarks when a person who is not the registered owner or its licensee uses a trade mark identical or strikingly similar to a registered trade mark in relation to identical or similar goods or services.
In mainland China, in addition to the civil actions, the trademark owner may also file a complaint and request the Market Supervision Administration (“MSA”) handle the trademark infringement/ counterfeiting. If there is trademark infringement, the MSA has the power to order the infringer to stop the infringement, confiscate and destroy the infringing products, and impose monetary fines against. The brand owner may also file Customs Recordal of its trademarks with General Administration of Customs (“GAC”) in mainland China, meaning local customs can proactively protect the trademark rights through randomly inspecting and detaining the fake products.
In Hong Kong, the owner of a registered trademark can take civil actions against infringers for damages. The registered trademark owner may also record its trademarks with Hong Kong Customs in order to assist criminal enforcement actions against goods bearing forged trademarks under the provisions of the TDO.
Manufacturers must acquire a hygienic license before producing hand sanitisers in mainland China. Any products then sold in the market must bear this hygienic license number.
When making trade claims such as “kills 99.9% of germs”, sellers or distributors of personal care products should ensure that they have evidence to substantiate their claims. For any disinfection products sold in China or Hong Kong, any trade claims made on labels or advertisements must not be misleading.
Aside from trade claims, sellers or distributors of sanitary products should also note there are mechanisms for protecting their brands and get-up of their products sold in mainland China and Hong Kong against counterfeit or look-alikes.
 “Hong Kong Customs urges public to stop using one type of disinfectant alcohol with suspected false description on composition”, Hong Kong Customs Press Release, 21 February 2020, https://www.customs.gov.hk/en/publication_press/press/index_id_2856.html