The implementation of the law governing commercial anvertisement, reality an recommendations

About definition of advertisement, in some countries, advertisement is not only a normal public activity, it is a commercial activity advertisement is invested by traders, it provides in

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HAP THI NHU NGUYET

THE IMPLEMENTATION OF THE LAW GOVERNING COMMERCIAL ADVERTISEMENT:

REALITY AND RECOMMENDATIONS

BACHELOR THESIS SPECIALTITY OF COMMERCIAL LAW

HCMC – 2011

HO CHI MINH CITY UNIVERSITY OF LAW FALCULTY OF COMMERCIAL LAW

-

BACHELOR THESIS

THE IMPLEMENTATION OF THE LAW GOVERNING COMMERCIAL ADVERTISEMENT:

REALITY AND RECOMMENDATIONS

STUDENT: HAP THI NHU NGUYET COUSE: 32 STUDENT CODES: 3220133 SUPERVISOR: DR HA THI THANH BINH

HCMC - 2011

COMMITMENT

During the time of studying at Ho Chi Minh city University of Law, the topics related to the field of Commercial law have always attracted the interest of the

author Therefore, the author has chosen the topic: “The implementation of current law

governing commercial advertisement: Reality and recommendations” to study and

present in bachelor thesis Despite of the limited time and reference material, the thesis was done with the high concentration of the author on both its form and content The author protests that this thesis is the research results of the author, with the guidance of supervisor The information other than my idea presented in this thesis is also fully cited I would bear full responsibility for my protest

Ho Chi Minh City, 07/2011

Hap Thi Nhu Nguyet

This thesis is dedicated to my parents, my elder brother and all of family members for always supporting and encouraging me in the time of studying at Ho Chi Minh city University of Law A very special thank to my mother who always believes

in me and makes me believing in myself It is her desire making me decide to study at

Ho Chi Minh city University of Law and it is her love giving me the strength to face all the difficulties of my student life

Finally, an honorable mention goes to my special friends for their lovely support and understandings Thanks to my dear best friend, Nguyen Thi Ha for always being by my side every time I need Thanks to my dear brothers and sisters in Ho Chi Minh City University of Law, especially Tran Quang Huy, Nguyen Thi Duyen, who helped me improve my English writing skill Without their helping, perhaps I would not have completed this thesis as well as it is now

Thank you all for all the help you have given me This thesis would have not been possible without you

TABLE OF CONTENTS

CHAPTER 1 CURRENT LAW GOVERNING COMMERCIAL ADVERTISEMENT:

SOME SIGNIFICANT REMARKS

1.1 Overviews of commercial advertisement Error! Bookmark not defined.

1.1.1 Definitions and main characteristics of commercial advertisement Error! Bookmark not defined

1.1.2 Parties to advertising business Error! Bookmark not defined

1.1.3 Advertising products and advertising media Error! Bookmark not defined

1.1.4 Natures of commercial advertisement Error! Bookmark not defined

1.1.5 Roles of commercial advertisement Error! Bookmark not defined.

1.2Overviews of the law governing commercial advertisement in Vietnam Error! Bookmark not defined.

1.2.1 Development of advertising activities in Vietnam Error! Bookmark not defined

1.2.2 Development of the law governing commercial advertisement Error! Bookmark not defined

1.2.3 Relationships between the law governing commercial advertisement and some related legislations Error! Bookmark not defined.

1.3 Analyses of some important provisions of current law governing commercial advertisement Error! Bookmark not defined.

1.3.1 State management on advertising activities Error! Bookmark not defined

1.3.2 Provisions governing prohibited advertising activities Error! Bookmark not defined

1.3.3 Provisions governing advertising licenses Error! Bookmark not defined

1.3.4 Restrictions on advertising activities Error! Bookmark not defined

1.3.5 Provisions governing sanctions for violations on advertising activities

Error! Bookmark not defined.

CHAPTER 2 SOME SHORTCOMINGS IN THE IMPLEMENTATION OF THE LAW

GOVENING COMMERCIAL ADVERTISEMENT AND

RECOMMENDATIONS FOR IMPROVEMENT

2.1 Shortcomings in implementation of current law governing commercial advertisement Error! Bookmark not defined.

2.1.1 Implementation of current law governing commercial advertisement at local level Error! Bookmark not defined

2.1.2 Shortcomings in implementation of State management on advertising

Error! Bookmark not defined

2.1.3 Shortcomings in implementation of provisions on advertising licenses

Error! Bookmark not defined

2.1.4 Implementation of provisions governing restrictions on advertising activities Error! Bookmark not defined

2.1.5 Handling of violations on advertising activities Error! Bookmark not defined.

2.2 Recommendations for improvement of commercial advertising law Error! Bookmark not defined

2.2.1 Recommendations for improvement of some specific provisions Error! Bookmark not defined

2.2.2 Recommendations for improvement of State management on advertising

activities Error! Bookmark not defined

I INTRODUCTION

1 Reasons why the topic is worth consideration

The market mechanism has opened a new development trend for our economy Businesses in Vietnam have confirmed their position in the world marketplace through their strong brands Contributing partially to this success is the role of advertising activities It is considered that advertising activity is one of indispensable activities on business promotion of companies In addition, consumers also consider it as a channel providing information about the price and quality of

products

In Vietnam, the importance of advertising activities was highly appreciated recent years Along the line, the law on advertising also has being improved gradually However, because of the rapid change of advertising activities, current law governing

commercial advertisement has exposed some shortcomings and needs to be improved

The shortcomings of current law governing commercial advertisement are also the research contents of some authors such as Dao Huu Dung, Phan Huy Hong, Truong Hong Quang, Nguyen Ba Dien etc Most of them carried out their researches

on some aspects of advertising activities, for example Dao Huu Dung with television advertising; Phan Huy Hong, Truong Hong Quang with comparative advertising These authors have clarified many important issues of advertising activities However, beside these issues, in the law governing advertising activities, there are also some other shortcomings must be improved This requirement becomes more necessary

when Vietnam is about to build and issue Advertising law in the coming time

Because of this reality, the author has chosen the topic: “The implementation

of the law governing commercial advertisement: Reality and Recommendations” to

study and present on Bachelor thesis at Ho Chi Minh city University of Law

2 The purposes of the thesis

This thesis is conducted to serve the demand of the improvement of current law governing commercial advertisement This thesis addresses the necessity of the improvement of current law governing commercial advertisement Basing on analyses

of the effectiveness of current law governing commercial advertisement, the research’s results of some authors, legislative experiences of some countries in the world, this thesis also brings out some recommendations for the improvement of current law

governing commercial advertisement in future

3 Methodology

- Social methods (Analysis, Comparison, Demonstration);

- Legal methods (Analysis and Review of legislative activities)

4 Limitation on the research’s scope

This thesis points out the contents and implementation of current law governing commercial advertisement in Vietnam Basing on these results, the thesis is intended to bring out recommendations for the improvement of current law governing

commercial advertisement

The objects of this thesis are provisions of current law governing commercial advertisement, other related legislations of Vietnam and some countries in the world

(Germany, China )

5 The structure of the thesis

The content of the thesis includes 2 chapters

- Chapter 1: “The current law governing commercial advertisement: Some significant remarks” In this chapter, the author presents some following contents: Overview of commercial advertisement; Overview of the law governing commercial advertisement; Analyses of some significant provisions of current law governing commercial advertisement

- Chapter 2: “Some shortcomings in the implementation of the law governing commercial advertisement and recommendations for improvement” In this chapter, the author presents following contents: The shortcomings in the implementation of some significant provisions of current law governing commercial advertisement; Recommendations for the improvement of some regulations on the law governing commercial advertisement; Recommendations for the improvement of the State management on advertising

Due to the limit of time and documents resources, this thesis may have some mistakes The author wishes to receive the understanding and comments from teachers,

readers

II CONTENT

CHAPTER 1 CURRENT LAW GOVERNING COMMERCIAL ADVERTISEMENT:

SOME SIGNIFICANT REMARKS

1.1 Overviews of commercial advertisement

1.1.1 Definitions and main characteristics of commercial advertisement

Advertisement has a long history of development Thousand years ago, people already knew how to advertise The tasks of advertisement are to provide information on goods and services for the purpose of facilitating of the sale of good or the provision of services The word “Advertise” originated from a Latin word:

“adverture” This word means to attract the interest of people or create attentions and suggestions In the period from 1300 to 1475 this word was translated into English as

“Advertise” Accompany with the development of commerce, advertising activities developed rapidly and this word was used widely in the world From Seventeenth century to the end of eighteenth century when English became a popular language,

"Advertisement" was used officially At this time, advertising became a profession, a commercial sector1 These days, advertisement is an important activity in trading, it helps businesses promote their business in a larger area In addition, advertising increases businesses’ competition in the market and helps them achieve their business objectives With a long history of development, definition of advertisement is also

improved

From different standpoints, the term “Advertisement” is defined differently

Literally, advertisement simply means an informative activity2 The strong development of science and technology is the basis of the rapid development of advertising activities which are more plentiful and dynamic now Advertisement is not only an economic activity but also a cultural creation because it creates a special kind

of language An advertisement contains several concise sentences but can express a lot

of information3

Economically, “advertisement is a form of communications used to persuade

audiences (viewers, readers or listeners) to take some certain actions related to products

or services Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering”4

About definition of advertisement, in some countries, advertisement is not only a normal public activity, it is a commercial activity (advertisement is invested by traders, it provides information about goods, services and trading activities; it is governed by commercial law) In some countries, "Advertisement" is understood as

1

nganh-quang-cao-the-gioi.html

http://marketing-branding.vn/vi/forum/quang-cao y-tuong-quang-cao/565-lich-su-phat-trien-cua-2

Nguyen Thi Dung (2005), Definition of advertisement on Vietnam law and its impacts on improving

the law on advertising, State and Law Journal, (12/2005), p33

"commercial advertisement" But in Viet Nam, “Advertisement” is understood as

“non-commercial advertisement” and ““non-commercial advertisement”

According to The European Union Law, advertisement is any of activities giving information of trading activities, profitable activities for the purpose of promoting the sale of products or the provision of services5 While according to Advertising Law of China, the term "advertisement" refers to commercial advertisements that publicize some kinds of the commodities or services, directly or indirectly through certain media at the expense of the suppliers of the commodities or services.6

In Vietnam, definition of commercial advertisement was adjusted and changed during the time According to the regulation of Decree No.194/ND- CP, 31/12/1994 about advertising activities7 (which was expired) : "Advertising activities include the introduction or wide notice about business, goods, services, trademarks,

names, logos, other contents suitable to traders’ demands on advertisement"

Then, the Ordinance on Advertising provides following definition8: Advertisement is the introduction to consumers about business activities, goods or services, including advertisement for profit purposes and advertisement not for profit purposes This definition was built to show that: although there are some advertising activities have no commercial/profit purposes, they must be adjusted by legal regulations for the purpose of ensuring their truthful and exact contents and protecting

the interests of society and consumers

According to Commercial Law 20059: “Commercial advertisement means the commercial promotion activities of traders aimed at introducing to customers their

goods and services or trading”

From these above definitions, we can make a conclusion as follow: Commercial advertisement is a promotion activity which aims at profit purposes Through the introductions to consumer about goods, services, or trading, commercial advertisement make consumers pay their attentions to products, services and promote the purchasing of consumers Advertisements make consumers decide to buy the products which they believe as good products, it is the way manufacturers get more profit In advertising products, manufacturers usually offer the advantages and special qualifications of products and services They usually use such words as “first”,

“excellent”, “best” on their advertisements Commercial advertisement changes the demands and choices of consumer rapidly and leads to the formation of consumer’s

taste on goods

In this section, the author has presented some different definitions of advertisement and made the overview assessment about it In the scale of this thesis, the author will use the word: “advertising”, “advertisement” with the meaning as

“commercial advertisement”

1.1.2 Parties to advertising business

There are many subjects related to advertising business, such as advertisers,

advertising service providers, advertising publishers, owners of advertising media, etc

 Advertisers

Advertisers are organizations and individuals have the requirements to

advertise their trading activities, their goods and services

Advertising publishers are organizations and individuals publishing, broadcasting advertisements to the market (such as: press agencies, publishing houses,

computer networks organizations and other organizations and individuals)

 Advertising service providers

Providers of commercial advertising services are organizations or individuals who perform one process or all processes of advertising activities to get profit10 Advertising services are commercial services that providers exploit to get profit by carrying out commercial advertising activities for other traders11

 Owners of advertising media

Owners of advertising media are organizations or individuals who have advertising media (they can be traders or not) and have the right to choose their clients and collect fees from letting clients to rent advertising media through advertising contracts, for example: local committee where outdoor advertising plates placed,

billboards homeowners, transport firms

Advertising activities is a complex sector The production of an advertising product may include many processes therefore the numbers of related subjects is pretty big Current law governing commercial advertisement has defined only one entity related to advertising business: advertising service providers, other subjects have not been defined In the author’s opinion, the kind and legal responsibilities of related entities on advertising business must be defined clearly If the law ensures this

requirement, the legal aware of these subjects will be improved

1.1.3 Advertising products and advertising media

Commercial advertising products consist of images, actions, sounds, voices, scripts, symbols, colors and lights containing commercial advertising information12 Advertising products are advertisements with pictures, sounds, colors, etc introducing

to customers about goods, services, trading activities According the provisions of law, the contents of advertisements must be exact and truthful so as for it not to damage the interests of other traders and consumers

b) Advertising media

Current law governing commercial advertisement has not defined the definition of advertising media Generally, the authors can make a definition as follow: Commercial advertisement media are instruments used for introducing advertising products The selection of advertisers for the suitable advertising media is very important because it affects to the success of advertising strategy Advertising media include13:

- The mass media;

- Means of communication;

- Publications of all kinds;

- All kinds of boards, signs, banners, panels, posters, fixed objects or means of transportation and other movable objects;

- Other means of commercial advertisement

1.1.4 Natures of commercial advertisement

a) Economic nature

Commercial advertisement was born with its main task is to serve the demand

of exchanging goods in the market therefore it firstly has economic nature This nature

is shown at many aspects: advertising activities are commercial activities of traders,

advertising activities affects the development of the economy and society…

Nowadays, commercial advertisement is an indispensable tool on promoting the sale of goods and the provision of services Advertising expenditures are pretty high but businesses are willing to spend lots of money to invest in advertising activities because advertising activities not only brings immediate benefits but also brings long term benefits for business Commercial advertisement has demonstrated the great benefits it brought to the economy, there are more and more strong brands are expanded worldwide Nowadays, trading activities are carried out more effervescently

by far

In Vietnam, commercial advertisement is an industry which has the participation of numerous companies According to Vietnam Advertising Association’ report in 2010, Vietnam had about 5,000 advertising businesses14 Early years of its development, advertising revenue achieved fairly rapid growth from 300 billion VNDs

in 1994 to nearly 7000 billion VNDs in 200415 These figures have shown the rapid growth of commercial advertisement in Vietnam and the strong effects of it on the

economy

b) Socio - cultural nature

For commercial advertisements’ contents, consumers are not only interested

in economic information, they also never accept modern advertisements that go against traditional cultural values of the society In fact, advertisers always combine the elements of traditional culture and economic elements on advertisement’ contents for

the purpose of promoting the success of advertising activities

Advertisement is an economic activity has many relevant factors of culture and fine traditions, customs of each country The use of cultural factors on advertisements’ content not only facilitates the success of advertising activities but also protects the fine traditions, customs of the society Advertising is an indispensable activity in the movement and development of the economy It also contains, reflects traditional, cultural values, aesthetic tastes of a nation Because of traditional culture factors, advertising products can strongly affect consumers’ behaviors on buying goods

and using services

The combination of cultural elements and economic elements in advertising products not only increases the effectiveness of advertisements but also creates the basis for the assignment of jurisdictions of the State agencies on controlling advertising

products’ contents

1.1.5 Roles of commercial advertisement

a) Roles of commercial advertisement for manufactures

Producing high quality goods suitable to consumer demand is one way to attract customer's attention to a business brand However, having good products is not enough for increasing customer’s attention on the brand, businesses also need to make consumers know more about the features, advantages and benefits of their products This is a fairly difficult task because the relationship between a trade brand and consumers is an invisible linkage It requires of businesses the big exertions on creating and maintaining this linkage Because of these requirements, businesses need an effective advertising strategy Recent years, advertising activities have contributed effectively to such requirements of businesses

Businesses usually use a lot of methods on introducing their products to consumer: advertising, public relations, promotion Among them, advertising is considered as a popular form now It's not only the fast way for traders to introduce and promote their products but also helps consumers choose the best type of products by

themselves Many consumers have difficulties on distinguishing and choosing products

in the market When information of advertisements is broadcasted, it helps products go into consumer’s perceptions easily and specifically With this impact, advertisements help consumers to recognize easily familiar brands among many brands in the market

It is considered that advertisement is a “bridge” between producers and consumers.Many companies now are finding and taking the advantages of commercial advertisement and willing to spend more money for this industry

b) Roles of commercial advertisement for consumers

Along with the development of society, the demands on goods also develop both in depth and width Consumers not only need more goods but also have higher requirements for the quality, color, shape of goods Because there are many kinds of goods in the market now, for consumers, choosing suitable products is not easy Commercial advertisement was born to satisfy not only the needs of manufacturers for selling goods but also the needs of consumers for choosing the best goods This role is

shown at some following aspects:

Commercial advertisement is a useful mean to help consumers have more knowledge about products: Each product aims at different needs and goals of consumers Through advertising, consumers can know more about products (the material is used in products, the usage and benefits of product, etc) It helps consumers

save time and money

For the purpose of developing business operations, manufacturers have to invest science and technology in their production With such investments, normally, new products have more advantages than before Through advertisements, the time for new products meet the demands of consumers will be shortened Advertisement brings consumers the opportunity to use the advantages of new products quickly This make

modern life becomes more and more comfortable

c) Roles of commercial advertisement for the economy

Recently, advertisement has made the economy changed in many aspects Advertisement is an effective method to promote the sale of goods in the market It makes the business of companies develop rapidly This is an important basis for the

development of the economy

In the book “Television advertisement in the market economy: analyses and evaluation”, author Dao Huu Dung has affirmed that the development of advertising activities can strongly affect to the development of the economy He has also given an example to demonstrate the close relationship between commercial advertisement and the economy: In Japan, the growth indexes of the economy and commercial advertisement increased at the same rate in the early years of its development (1985-1986) and were backward at the same rate in the years of 1992 - 1993, when Japanese economy had the “collapse of economic bubble”16

From this example we can assess

partially the importance of advertisement for the economy

Recently, the power of consumers is increasing quickly through the strong impact of advertising activities Consumers have not been passive on accepting and purchasing all kinds of goods manufacturers provided in the market as before This fact requires of businesses to improve both their products’ quality and their advertising strategy Therefore, some companies which produce low quality products may instantly lose its position in the market by the power of consumers along with the violent competition in the market This fact makes companies have to try their best to improve the production of goods The high awareness of companies in improving their

products’ quality will make the economy have strong competitiveness

16

Dao Huu Dung(2004), Television advertisement in the market economy: analyses and evaluation,

National University Publishing House, p.6

In addition, advertisement is considered as a tool creates the linkage among economies in the world Advertising media such as television, internet, etc now have widespread broadcasting Everyday there are millions of Vietnam products are sold abroad and millions of foreign products are sold in Vietnam market Through advertising activities, economies are connected and supported the others The general tendency of countries now is to open their markets and develop their economy at the international level Advertising is a tool of countries for carrying out this tendency

1.2 Overviews of the law governing commercial advertisement in Vietnam

1.2.1 Development of advertising activities in Vietnam

Before 1986, Vietnam was an underdeveloped economy with the main participations of the State – owned companies and co-operatives Both the production and the consumption are pre-determined schedule, goods are not enough for the demands of people and the distribution is controlled by the stamps Because of this

fact, advertising activities was not the necessary demand at this time

After the Sixth Party Congress (12/1986), new policies on changing the subsidized economy to the market economy under socialist orientation was adopted Since then, Vietnam's economy step into a new era - the era of industrialization and modernization After a period of implementation new policies, Vietnam economy has had some positive changes Based on the supporting of scientific techniques, the production of goods was carried out professionally In this condition, the competition among producers about selling their products was begun fiercely The important of

advertisement was highly appreciated more than before

Nowadays, because of the wide expanding of the market, the exchange of goods among countries is carried out popularly Competition is becoming more and more stressful Manufacturers have to find out an effectives way to popularize their products and promote the consumption of products Therefore, the demand of advertising becomes more and more necessary Up to now, advertising activities are

becoming more professional, more creative with a lot of new forms: posters, flyers,

billboards, websites

1.2.2 Development of the law governing commercial advertisement

In Vietnam, along with the development of advertising activities, the development of the law governing commercial advertisement is also improved Many legal documents were issued to suit the demands of the economy on controlling

advertising activities

Before issuing Commercial Law 1997, the Government had issued some laws for the purpose of promptly dealing with problems arising in advertising activities and ensuring the State management on this field17

sub-Although many documents were issued to control advertising activities, commercial promotion activities, especially advertising activities still contain some shortcomings Then on 01/05/1995 Vietnam applied for entering WTO, this fact put Vietnam in an urgent condition of amending domestic laws Under these circumstances, on 23/05/1997 Vietnam issued Commercial Law (entered into force on 01/08/1998) After that, several documents were issued to guide the implementation of Commercial law18 In this period, Vietnam also issued the Ordinance on Advertising in

Such as: Decree No 32/1999/ND-CP, 05/05/1999; Decree No 31/2001/ND-CP 26/06/2001; Decree

No 39/2001/ND-CP, 13/07/2001; the Ordinance No 39/2001/PL-UBTVQH10, 16/11/2001 on Advertising; Decree No 24/2003/ND-CP, 13/03/2003; Circular No 43/2003/TT-BVHTT, 16/6/2003; Joint Circular No 01/2004/TTLT-BVHTT-BYT, 12/01/2004; Circular No.67/2004/TT-BTC,

07/06/2004 …

After 7 years being applied, Commercial law has made some positive impacts

to Vietnam economy However, because of the rapid growth of economy, Commercial law 2005 (entered into force on 01/05/2006) was issued to replace Commercial law

1997 in order to satisfy the need of the economy Then, some other related legislations were also issued19

At present, because of the rapid growth of commercial advertising, the Ordinance on Advertising 2001 is no longer satisfying with the actual needs of society There are many new problems rising on advertising activities Therefore, Vietnam need

to adopt Advertising Law in soonest to satisfy the demands of Vietnam market on

controlling advertising activities more effectively than before

1.2.3 Relationships between the law governing commercial advertisement and

some related legislations

The main documents regulating advertising activity now are Commercial Law 2005, the Ordinance on Advertising 2001 and their guiding documents Beside them which have a direct role on adjusting the field of commercial advertising, there are some other documents related to advertising field, such as: Competition Law 2004,

Consumer Protection law 2010, Corporate Incomes Tax Law 2008

Each document has its own function on controlling advertising activities, in

details:

- Competition Law 2004 was issued to aim at the targets that: assert and protect the business right of businesses; maintain and stabilize the order on competition Advertising activity is one of several objects governed by Commercial

19

Such as: Decree No 37/2006/ND-CP, 04/04/2006; Decree No 56/2006/ND-CP, 06/06/2006

law For advertising activity, Competition Law has the regulation about competitive activities, comparative advertising20

- Consumer Protection Law 2010 control indirectly advertising activities through some regulations but when we combine it with advertising law, the relationship between these documents will achieve more efficient in protecting the interest of consumers and society Consumers is a large numbers of people who are directly affected by advertising activities, therefore they should be protected against illegal advertising activities, Consumer protection law prohibits some activities21 which have adverse effects on consumers

- Corporate Incomes Lax Law 2008: Corporate Incomes Tax law was adopted at the early in the history of tax22 In almost countries in the world this law has

an important role on ensuring the source of revenue of national budget and allocating incomes in the society In Vietnam, this law also is an important legislation but to uphold its role effectively, we need to consider it from many aspects and also learn from the experiences of foreign countries Corporate Incomes Tax Law is a legislation which has close relationship with advertising law because the nature of advertising activities is the commercial activities of companies which are controlled by Corporate Incomes Tax Law Corporate Incomes Tax Law 2008 limits the expenditure on advertising is 10% of reasonable expenditures23 If companies use more than 10% reasonable expenditures, the expenditure exceeds this rate will not be considered as reasonable expenditure for determining enterprise’s taxable incomes In the market economy, spending on advertising is an indispensable expenditure So we must be careful on using and controlling this expenditure at companies in particular and in tax policies in general

Regarding the relationship of these documents: In principle, if Competition Law 2004 adjusts advertisements’ contents in order for them not to go against the requirements of fair competition among businesses, Commercial Law 2005, the Ordinance on Advertising 2001 must focus on adjusting the usage of advertising media: their places, their forms, advertising license… in order to protect the general interests of consumers, society So, Commercial Law 2005, the Ordinance on Advertising 2001 must be considered as the legal documents governing the State

management on using the types of commercial advertisement

We must make a line between these documents to determine the jurisdictions

of the State agencies on advertising In fact, they can be distinguished in some respects, for example: disputes and complaints relating to Commercial law 2005 or the Ordinance on Advertising 2001 are basically arisen between the State agencies and advertisers in respect of controlling advertising activities Meanwhile, disputes on the contents and impacts of commercial advertisement are arisen among advertisers and should be controlled by Competition law In addition, when commercial advertisement

has bad impact to consumers, Consumer Protection Law will take place for settlement

1.3 Analyses of some important provisions of current law governing commercial advertisement

In this section, the author will present a number of important regulations that affect the effectiveness of advertising activities and State management in reality They are the bases for the assessment on the implementation and effects of these regulations

in chapter 2

1.3.1 State management on advertising activities

There are many State agencies has the jurisdictions on managing advertising activities24: Ministry of Information – Communication, Ministry of Culture – Sports – Tourism, Ministries, Ministerial-level agencies, Government’s agencies, provincial level People's Committees… But at present, the main jurisdictions belong to Ministry

24

Article 28, the Ordinance on Advertising

of Information – Communication25 and Ministry of Culture – Sports - Tourism26 In details: Ministry of Information – Communication controls advertising activities on newspapers, computer information networks and publications; Ministry of Culture – Sports – Tourism controls advertising activities on other media Beside their individual jurisdictions, these Ministries also have the task to coordinate with the others on issuing Joint Circular on advertising licensing procedures, inspection, testing and handling of law violations on newspapers, computer information networks advertising and advertising on publication

Before the existence of the current regulations, in the past the functions on controlling advertising belonged to Ministry of Culture – Information Such Ministry had the function on controlling all types of advertisements However, when Ministry of Information - Communication was established, Press - Publish Bureau was moved to Ministry of Information – Communication Then Ministry of Information – Communication has the function on controlling advertising activities in newspaper, internet and publication The rest jurisdictions are granted to Ministry of Culture –

Sports– Tourism

With these provisions, the law has not given enough power to People’s Committees at local level while they are the closest agencies with public and consumers who are directly affected by commercial advertisements In addition, the law also has not created conditions for the participation of social organizations such as Association of advertising or Association of public relation If the law on advertising promotes the power of these organizations and public power, the management on

advertising will gain more effectiveness

Some ideas have suggested that the State management on advertising should focus on and belong to only one ministry27 In the author’s opinion, whether the jurisdiction belongs to one or more ministries, the most important thing is that we should obtain the following purposes: (i) clarify the functions of the agency to improve

the efficiency of the State management; (ii) ensure the healthy development of the

domestic advertising industry

1.3.2 Provisions governing prohibited advertising activities

Advertising is a business right of businesses Theoretically, businesses can use all forms and methods to promote their products However, they must satisfy the commercial orders and protect the interests of the State and society in general and the interests of traders and consumers in particular Hence the law governing commercial advertisement has prohibited some advertising activities28

In this regard, the law has provided the sagacious directions on forecasting, capturing and performing prohibited activities which affect the interests of business entities, consumers and the State This is an important condition on ensuring the harmony among these entities and building a healthy investment environment in

Vietnam However, there are shortcomings arising from these provisions

Firstly, Commercial Law prohibits commercial advertisements for

goods/services which are banned or restricted from trading or advertising by the State29 But the Ordinance on Advertising prohibits advertisements for goods/services which are banned from trading or advertising by law30, so the goods restricted from trading are not prohibited by the Ordinance on Advertising Furthermore, the definition

of banned and restricted goods and services is still not specified clearly

Relating to this provision, according to Circular No 43/2003/TT-BVHTT31, wines containing more than 15% alcohol volume are only advertised within the boundary area of wine-producing companies, inside the area of stores etc This regulation is different than the regulation of Commercial Law 2005 (commercial law

Circular No 43/2003/TT-BVHTT, 16/06/2003 guiding the implementation of Decree No

24/2003/ND-CP, 13/03/2003 detailing the implementation of Ordinance on advertising

prohibits advertisement for wine containing more than 30% alcohol volume32) Furthermore, Decree No.56/2006/ND-CP, 06/06/2006 regulates that: advertisements for wines containing more than 15% alcohol volume will be imposed a fine from a range of 3 million VND to 5 million VND These are three different provisions with regard to an issue In principle, we must "apply the document which has higher validity33”, thus, we can determine the applicable provisions However, this fact has not shown the unification of a progressive legal system Besides, it also makes difficulties to authorities and advertisers on applying these provisions

Secondly, on Item 2, Article 109, Commercial law, the terms of “fine

customs” and “cultural traditions” have not been clarified In Vietnam, immoral activities are considered as illegal activities, it has been reflected in the law34 However, this regulation must have clear guidelines for application In fact, the determination on cultural and traditional contents of advertisements is vague and changeable In Vietnam, most of authorities have based on their own views on determining the conformity and effect of advertisements Vietnam lawmakers should detail these provisions by generalizing the society’s requirements on advertisement’s contents into some main standards if not these provisions will make relevant subjects difficult to apply

Thirdly, on the law governing commercial advertisement, the definition of

comparative advertisement is not defined In Vietnam, before Competition Law (2004), comparative advertising had been mentioned in Commercial Law (1997)35 But Commercial law (1997, 2005), Competition Law (2004), the Ordinance on Advertising (2001) and their guiding Decrees did not define the definition of comparative advertising Countries in the world still have different views on comparative advertising activities Comparative advertising is considered as legal activities in some countries as America, Britain but in Lucxemburg, Italian etc, it will be considered as

Nguyen Thi Tam(2010), The law governing commercial advertising activities on newspapers,

current application and directions for improvement, Master thesis of Law, HCM city university of law

, p39

35

Item 2, Article 192, Commercial law 1997

a breach36 In consideration of the advantages and disadvantages of comparative advertising, each nation will have its own views to allow or prohibit such activities Vietnam has considered direct comparative advertising is an illegal activity To handling this violation we must define the definition and structure of it

Fourthly, Item 6, Article 109, Commercial law prohibits direct comparison on advertisements’ content It is one of the forms of advertisements for creating of unfair competition which is regulated on item 9 so this regulation is not necessary, while advertising activities for creating of unfair competition in item 9 are not fully and

clearly regulated

In addition, the provision on advertisement aiming at unfair competition of Competition law37 regulated only three types of advertising activities for the purpose of unfair competition: direct comparison, copy of advertising ideas, provision of false, misleading information These provisions cannot be suitable for the knottiness and

seriousness of these activities with many existing forms in reality

According to Paris Convention 1883, The law of Federal Republic of Germany, beside defining comparative advertisements are illegal, some other activities also are considered as illegal activities such as: Advertisements make consumers to understand that they have only one opportunity to buy goods; Advertisements about selling goods with limited numbers but in fact these goods are sold in a large scale etc.38 Thus, in these documents not only comparative advertising but also pressurization advertising are considered as advertising for the purpose of unfair

Dao Thuy Vinh(2000), Competition on commercial activities under Vietnam Commercial law, HCM

City University of Law, Bachelor thesis of law, p45-46

In Vietnam, a long time ago, pressurization advertising has been carried out

in the market under many forms and caused damages to businesses and consumers but

we did not prohibit this advertising activity such as advertisements of Thegioididong.com, Cho Lon, Idea, Thien Hoa with the advertising message: "unique opportunity", "gold chance in year", "cannot be cheaper" In the author’s opinion, these acts should be handled first for the benefit of consumers, then for the fair competitive environment of Vietnam

1.3.3 Provisions governing advertising licenses

According to current law governing commercial advertisement, advertisements on computer information networks; billboards, panels, placards, screens

at public places, illuminating objects, objects on the air or underwater, transportation, other mobile objects must be licensed for advertising In addition, advertisements on broadcasts, channels, television programs specialized for advertising, supplements specialized for advertising must also be licensed39

For the licensing procedures, before 2007, licensing proceedings for advertising was regulated in Section III, Circular No 43/2003/TT-BVHTT of Ministry

of Culture - Information By 2007, the State management’s functions on advertising have been given primarily to the two Ministries: Ministry of Information - Communication and Ministry of Culture - Sports – Tourism Then, these Ministries have issued Joint Circular No 85/2008 / TTLT-BVHTTDL-BTTTT guiding the licensing, registration and implementation of advertisement on newspapers, computer information networks, publications and inspection, examination and handling

violations

Advertisements now appear in public popularly especially outdoor advertisements so these provisions will ensure the beauty of urban areas, residential areas and prevent advertisers from doing other illegal activities Through the

39

Article 15, 16 the Ordinance on Advertising 2001

examination of the State agencies, advertisements violate the law or contain false,

misleading information…may be not permitted for advertising

For advertisements on other media which is not required to have licensed, the law control mainly by inspection, examination, handling violations In addition, the law also regulates the responsibilities of relevant subjects for the contents of advertisement

In details40: Advertising services providers must be responsible before the law if the content of their advertising products violate the forbidden advertising contents regulated by the law on advertising In additions, headers of agencies have the jurisdiction on controlling mass media, news media, newspapers and other publications etc are responsible for advertising products’ content, which are advertised on their media In fact, there are many entities relating to advertising activities, however, to reduce violations on advertising, the law on advertising has regulated above entities to

be responsible for their advertising contents They are considered as the entities have the main jurisdiction on examining the contents of advertisement before they are

circulated in the market

1.3.4 Restrictions on advertising activities

In this section, the author will present two types of restrictions on advertising activities: Firstly, restrictions on advertising expenditures according to Corporate Income Tax Law; secondly, restrictions on the time and area for advertising

a) Restrictions on advertising expenditures

As mentioned above, the expense on advertising is limited at 10% of reasonable expenditures (which is 15% for new business in the first three years after established)41 This provision belongs to Corporate Incomes Tax Law but also have a direct impact to advertising activities The rate of 10% reasonable expenditures on advertising purports to protect the development of domestic advertising companies Vietnam advertising companies now still lack of competitiveness and their advertising

activities are still unprofessional Because of this fact, we need to regulate a reasonable rate on advertising spending to limit some large foreign companies on using too much advertising expenditures for competing with Vietnam companies With this restriction, the advertising strategy of big foreign companies may not affect the development of companies in Vietnam seriously In addition, this restriction will also help Vietnam to deal with corruption, control the costs for meetings, receptions and to reduce the losses

of national budget However, to balance the interest between the State and companies,

this rate must be regulated appropriately

b) Restrictions on the length and area of advertisements

Beside the restriction on advertising expenditures, the law on advertising

also control the length and area of advertisements in almost advertising media, such as:

 For printing newspaper advertising, advertisements must not be shown more than 10% of the area, except specialized newspapers on advertising; each advertising campaign for an advertising product does not exceed over 5 days for the daily newspaper or over 5 consecutive reports in periodical newspaper; each advertising series must be interrupted at least 5 days for the daily newspaper or at least

4 consecutive reports for periodical newspaper; do not advertise on first page or front page42

 Spoken newspaper advertisements must not be taken place more than 5%

of time in the program, except specialized channels on advertising, each broadcasting series for an advertising product does not exceed over 8 days, except for special cases stipulated by the Government, does not exceed more than 10 times a day; each advertising series must be interrupted at least 5 days, do not advertise immediately right after the theme song of News program43

42

Item 1, Article 10, the Ordinance on Advertising

43Item 1, Article 10 the Ordinance on Advertising

 Pictorial newspaper is a kind of newspaper in which information is transmitted by images through audio stations, televisions… Advertisements on pictorial newspaper must not be extended over 5% of time in each program, except specialized channels on advertising, each broadcasting for an advertising product must not extended over 8 days, except for special cases stipulated by Government, and not more than 10 times per day; each advertising round must be interrupted at least 5 days; advertisers is forbidden to advertise right after the picture symbol of News program44

 Electronic newspaper is a type of newspaper using electronic webs to transmit information with images, sounds, articles, videos Regulations of Law about electronic newspaper are the same as printing newspapers

 Each round of broadcast for an advertising product on radio or television generally cannot last over eight days Advertisements constantly last more than ten minutes on radio or television program is considered as a specialized advertising program and must be allowed by the State agencies Each film program on television cannot be interrupted to advertise more than two times, each time cannot be lasted more than five minutes, for entertainment program on radio or television is four times, each time cannot be lasted more than five minutes45

The provisions of law on the amount of advertising time now are very tight in general This has demonstrated the State’s sagacious direction on building and protecting a healthy competitive environment However, these tools have not reflected their role and effectiveness The cause of this problem is that we have not promoted the primary functions of each tool In the author’s opinion, we should not use these tools for all advertising forms but should use them for certain advertising forms We found that for many companies, especially for small companies, the limit on advertising expenditures also limit their duration, area of advertisements Therefore, advertising on television, newspapers can be managed by one tool among the others for each While, for other forms such as sponsorship, PR, marketing…the limit on advertising

expenditures is very appropriate

1.3.5 Provisions governing sanctions for violations on advertising activities

The handling of violations in the commercial advertisement now consists of two forms: administrative and criminal sanctions

a) Criminal sanctions

Criminal Law has only one provision46 about criminal sanctions in advertising: False advertisements This provision is quite similar to China's Criminal Law47 when requiring two parts of illegal behaviors: (i) there are illegal behaviors and (ii) there are aggravating circumstances: repeat offences, serious consequences… In fact, these regulations are too low for comparing with the serious consequences of these violations while the other economic violations have very heavy penalties

serious damages to the health and life of consumers

Violation on false advertising, providing false information on the quality of goods which were recorded in the advertising license49; violation on advertisements

48

Item 5, article 48, Decree 56/2006/ND-CP on handling administrative violations in the field of

culture and information

detract from the prestige of other traders, comparative advertisements will just be fined from 3,000,000 VND to 5,000,000 VND50 These fines are too small for the dangers of these violations especially the violations on advertisements detract from the prestige of other traders, comparative advertisements because when a brand reputation was badly impacted, it is difficult to be overcome as soonest.

These provisions in fact are not strict enough on preventing businesses from violating This is one of the reasons of which many violations to be happened at

present

The summary of chapter 1

In this chapter, through the provisions of Vietnam law, foreign law, the

research results some researchers, the author has presented some main contents below:

- The definition of commercial advertisement;

- The natures and role of commercial advertisement;

- The development of the law governing commercial advertisement in Vietnam;

- Analysis of some basic provisions of current law governing commercial