Compliance issues for gifts that advertise

Advertising gifts mean items printed with brand name, logo or slogan that operators give to counterparties or the public in business dealings with the view to increasing awareness or market share. Legal matters involved in advertising gifts include, but are not limited to, anti-business bribery and other competition issues.

GIFTS OR BRIBERY

How do we distinguish legitimate advertising gifts from illegal business bribes? Article 8 of the Interim Provisions on Prohibiting Business Bribery, issued by the State Administration for Industry & Commerce (SAIC), states that, “Operators are not allowed to give cash or items to the counterparties or individuals of the counterparties, except for small-ticket advertising gifts given as a customary practice. Any violation of the foregoing is deemed business bribery.” The reality, however, is much more complicated than this simple rule. For example, the recipient of a business bribe may not be the counterparty itself but a third party that is sufficient to influence the transaction; the gift does not necessarily constitute a business bribe even if its value is significant.

Common distinguishing standards:

1. Recipient of gift. Advertising gifts for unspecific recipients does not usually constitute a business bribe since they mainly target consumers or the public. The provision of advertising gifts from suppliers may constitute a business bribe. And advertising gifts used for facilitation are bribes in disguise.
2. The gift. Low-value consumables, such as cups, will hardly be deemed bribes. However, according to the interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate, items of low value, but with considerable combined value, such as purchase cards and transportation cards, have the risk of accumulating as business bribes. Computers or mobile phones, with considerable value, obviously are out of reasonable scope, though they may be deemed as office supplies.
3. Purpose of gift. While the purpose of advertising gifts is to promote products, the purpose of a business bribe is to seek an inappropriate transaction opportunity or competitive advantage. In an administrative sanction case, a tyre company gave agents material incentives such as iMacs or iPhones of value proportional to sales. Such items had nothing to do with tyre equipment produced by the company, and therefore could not convince people that they were for promotion of products even if they bore the logo of the company.

Wu Jiang is a partner of AllBright Law Offices