The implementation of the law governing commercial anvertisement, reality an recommendations (luận văn thạc sĩ luật học)

In thischapter, the author presents following contents: The shortcomings in theimplementation of some significant provisions of current law governing commercialadvertisement; Recommendat

o0o 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

Ho Chi Minh City, 07/2011

Hap Thi Nhu Nguyet

This thesis is dedicated to my parents, my elder brother and all of familymembers for always supporting and encouraging me in the time of studying at Ho ChiMinh 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 allthe difficulties of my student life

Finally, an honorable mention goes to my special friends for their lovelysupport and understandings Thanks to my dear best friend, Nguyen Thi Ha for alwaysbeing by my side every time I need Thanks to my dear brothers and sisters in Ho ChiMinh City University of Law, especially Tran Quang Huy, Nguyen Thi Duyen, whohelped me improve my English writing skill Without their helping, perhaps I wouldnot 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 notbeen 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.

1.2 Overviews 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 commercialadvertisement 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

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.

Page 6

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.

1 Reasons why the topic is worth consideration

The market mechanism has opened a new development trend for oureconomy Businesses in Vietnam have confirmed their position in the worldmarketplace through their strong brands Contributing partially to this success is therole of advertising activities It is considered that advertising activity is one ofindispensable activities on business promotion of companies In addition, consumersalso consider it as a channel providing information about the price and quality ofproducts

In Vietnam, the importance of advertising activities was highly appreciatedrecent years Along the line, the law on advertising also has being improved gradually.However, because of the rapid change of advertising activities, current law governingcommercial advertisement has exposed some shortcomings and needs to be improved

The shortcomings of current law governing commercial advertisement arealso 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 televisionadvertising; 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 someother shortcomings must be improved This requirement becomes more necessarywhen 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 currentlaw governing commercial advertisement This thesis addresses the necessity of theimprovement of current law governing commercial advertisement Basing on analyses

of the effectiveness of current law governing commercial advertisement, the research’sresults of some authors, legislative experiences of some countries in the world, thisthesis also brings out some recommendations for the improvement of current lawgoverning 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 lawgoverning commercial advertisement in Vietnam Basing on these results, the thesis isintended to bring out recommendations for the improvement of current law governingcommercial advertisement.

The objects of this thesis are provisions of current law governing commercialadvertisement, 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: Somesignificant remarks” In this chapter, the author presents some following contents:Overview of commercial advertisement; Overview of the law governing commercialadvertisement; Analyses of some significant provisions of current law governingcommercial advertisement

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

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

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 provideinformation on goods and services for the purpose of facilitating of the sale of good orthe provision of services The word “Advertise” originated from a Latin word:

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

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

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

From different standpoints, the term “Advertisement” is defined differently.Literally, advertisement simply means an informative activity2 The strongdevelopment of science and technology is the basis of the rapid development ofadvertising activities which are more plentiful and dynamic now Advertisement is notonly 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

nganh-quang-cao-the-gioi.html

1http://marketing-branding.vn/vi/forum/quang-cao y-tuong-quang-cao/565-lich-su-phat-trien-cua-2Nguyen 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.

3Ha Thu Trang2004, The law governing advertising activities in Vietnam - Theoretical and practical issues– Master thesis of Law, Hanoi University of Law, p9.

4 http://en.wikipedia.org/wiki/Advertising

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

“non-According to The European Union Law, advertisement is any of activitiesgiving information of trading activities, profitable activities for the purpose ofpromoting the sale of products or the provision of services5 While according toAdvertising Law of China, the term "advertisement" refers to commercialadvertisements that publicize some kinds of the commodities or services, directly orindirectly through certain media at the expense of the suppliers of the commodities orservices.6

In Vietnam, definition of commercial advertisement was adjusted andchanged during the time According to the regulation of Decree No.194/ND- CP,31/12/1994 about advertising activities7 (which was expired) : "Advertising activitiesinclude 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 orservices, including advertisement for profit purposes and advertisement not for profitpurposes This definition was built to show that: although there are some advertisingactivities have no commercial/profit purposes, they must be adjusted by legalregulations for the purpose of ensuring their truthful and exact contents and protectingthe interests of society and consumers

5Truong Hong Quang(2009), cited book, p.3.

6Article 2 , Advertising law of China , 27/10/1994.

7 Article 1 Decree No.194/CP-31/12/1994 on advertising activities.

8 Item1, article 4 the Ordinance on Advertising.

According to Commercial Law 20059: “Commercial advertisement means thecommercial promotion activities of traders aimed at introducing to customers theirgoods 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, commercialadvertisement make consumers pay their attentions to products, services and promotethe purchasing of consumers Advertisements make consumers decide to buy theproducts which they believe as good products, it is the way manufacturers get moreprofit In advertising products, manufacturers usually offer the advantages and specialqualifications of products and services They usually use such words as “first”,

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

In this section, the author has presented some different definitions ofadvertisement 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

9Article 102, Commercial law of Vietnam (2005).

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 orindividuals who perform one process or all processes of advertising activities to getprofit10 Advertising services are commercial services that providers exploit to getprofit by carrying out commercial advertising activities for other traders11

 Owners of advertising media

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

Advertising activities is a complex sector The production of an advertisingproduct may include many processes therefore the numbers of related subjects is prettybig Current law governing commercial advertisement has defined only one entityrelated to advertising business: advertising service providers, other subjects have notbeen defined In the author’s opinion, the kind and legal responsibilities of relatedentities on advertising business must be defined clearly If the law ensures thisrequirement, the legal aware of these subjects will be improved

1.1.3 Advertising products and advertising media

a) Advertising products

10 Item 6, article 4, the Ordinance on Advertising.

Page 14

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 theinterests of other traders and consumers

b) Advertising media

Current law governing commercial advertisement has not defined thedefinition of advertising media Generally, the authors can make a definition as follow:Commercial advertisement media are instruments used for introducing advertisingproducts The selection of advertisers for the suitable advertising media is veryimportant because it affects to the success of advertising strategy Advertising mediainclude13:

- 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

12 Article 105, Commercial

Law 2005 13Article 106, Commercial

Law 2005.

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 promotingthe sale of goods and the provision of services Advertising expenditures are prettyhigh but businesses are willing to spend lots of money to invest in advertising activitiesbecause advertising activities not only brings immediate benefits but also brings longterm benefits for business Commercial advertisement has demonstrated the greatbenefits it brought to the economy, there are more and more strong brands areexpanded worldwide Nowadays, trading activities are carried out more effervescently

by far

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

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

b) Socio - cultural nature.

For commercial advertisements’ contents, consumers are not only interested

in economic information, they also never accept modern advertisements that go againsttraditional cultural values of the society In fact, advertisers always combine theelements of traditional culture and economic elements on advertisement’ contents forthe purpose of promoting the success of advertising activities

14 http://congthuong.com.vn/p0c0n8828/nganh-quang-cao-gianh-nhau-mieng-banh-nho.htm

Advertisement is an economic activity has many relevant factors of cultureand fine traditions, customs of each country The use of cultural factors onadvertisements’ content not only facilitates the success of advertising activities but alsoprotects the fine traditions, customs of the society Advertising is an indispensableactivity in the movement and development of the economy It also contains, reflectstraditional, cultural values, aesthetic tastes of a nation Because of traditional culturefactors, advertising products can strongly affect consumers’ behaviors on buying goodsand using services.

The combination of cultural elements and economic elements in advertisingproducts not only increases the effectiveness of advertisements but also creates thebasis for the assignment of jurisdictions of the State agencies on controlling advertisingproducts’ 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 toattract customer's attention to a business brand However, having good products is notenough for increasing customer’s attention on the brand, businesses also need to makeconsumers know more about the features, advantages and benefits of their products.This is a fairly difficult task because the relationship between a trade brand andconsumers is an invisible linkage It requires of businesses the big exertions on creatingand maintaining this linkage Because of these requirements, businesses need aneffective advertising strategy Recent years, advertising activities have contributedeffectively to such requirements of businesses

Businesses usually use a lot of methods on introducing their products toconsumer: advertising, public relations, promotion Among them, advertising isconsidered as a popular form now It's not only the fast way for traders to introduce andpromote 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 gointo consumer’s perceptions easily and specifically With this impact, advertisementshelp consumers to recognize easily familiar brands among many brands in the market

It is considered that advertisement is a “bridge” between producers andconsumers Many companies now are finding and taking the advantages of commercialadvertisement 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 developboth in depth and width Consumers not only need more goods but also have higherrequirements for the quality, color, shape of goods Because there are many kinds ofgoods in the market now, for consumers, choosing suitable products is not easy.Commercial advertisement was born to satisfy not only the needs of manufacturers forselling goods but also the needs of consumers for choosing the best goods This role isshown at some following aspects:

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

For the purpose of developing business operations, manufacturers have toinvest science and technology in their production With such investments, normally,new products have more advantages than before Through advertisements, the time fornew products meet the demands of consumers will be shortened Advertisement bringsconsumers the opportunity to use the advantages of new products quickly This makemodern 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 Itmakes the business of companies develop rapidly This is an important basis for thedevelopment of the economy

In the book “Television advertisement in the market economy: analyses andevaluation”, author Dao Huu Dung has affirmed that the development of advertisingactivities can strongly affect to the development of the economy He has also given anexample to demonstrate the close relationship between commercial advertisement andthe economy: In Japan, the growth indexes of the economy and commercialadvertisement 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 Japaneseeconomy had the “collapse of economic bubble”16 From this example we can assesspartially the importance of advertisement for the economy

Recently, the power of consumers is increasing quickly through the strongimpact of advertising activities Consumers have not been passive on accepting andpurchasing all kinds of goods manufacturers provided in the market as before This factrequires of businesses to improve both their products’ quality and their advertisingstrategy Therefore, some companies which produce low quality products may instantlylose its position in the market by the power of consumers along with the violentcompetition in the market This fact makes companies have to try their best to improvethe production of goods The high awareness of companies in improving theirproducts’ 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 amongeconomies in the world Advertising media such as television, internet, etc now havewidespread broadcasting Everyday there are millions of Vietnam products are soldabroad and millions of foreign products are sold in Vietnam market Throughadvertising activities, economies are connected and supported the others The generaltendency of countries now is to open their markets and develop their economy at theinternational 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 mainparticipations of the State – owned companies and co-operatives Both the productionand the consumption are pre-determined schedule, goods are not enough for thedemands of people and the distribution is controlled by the stamps Because of thisfact, advertising activities was not the necessary demand at this time

After the Sixth Party Congress (12/1986), new policies on changing thesubsidized economy to the market economy under socialist orientation was adopted.Since then, Vietnam's economy step into a new era - the era of industrialization andmodernization After a period of implementation new policies, Vietnam economy hashad some positive changes Based on the supporting of scientific techniques, theproduction of goods was carried out professionally In this condition, the competitionamong producers about selling their products was begun fiercely The important ofadvertisement was highly appreciated more than before

Nowadays, because of the wide expanding of the market, the exchange ofgoods among countries is carried out popularly Competition is becoming more andmore stressful Manufacturers have to find out an effectives way to popularize theirproducts and promote the consumption of products Therefore, the demand ofadvertising 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, thedevelopment of the law governing commercial advertisement is also improved Manylegal documents were issued to suit the demands of the economy on controllingadvertising activities

Before issuing Commercial Law 1997, the Government had issued some laws for the purpose of promptly dealing with problems arising in advertising activitiesand 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 someshortcomings Then on 01/05/1995 Vietnam applied for entering WTO, this fact putVietnam in an urgent condition of amending domestic laws Under thesecircumstances, on 23/05/1997 Vietnam issued Commercial Law (entered into force on01/08/1998) After that, several documents were issued to guide the implementation ofCommercial law18 In this period, Vietnam also issued the Ordinance on Advertising in2001

17 Such as: Decree 194/1994/ND-CP, 31-12-1994; Decree 87/2005/ND-CP, 12/12/1995…

18 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, Commerciallaw 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 legislationswere also issued19

At present, because of the rapid growth of commercial advertising, theOrdinance 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 oncontrolling 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 CommercialLaw 2005, the Ordinance on Advertising 2001 and their guiding documents Besidethem which have a direct role on adjusting the field of commercial advertising, thereare 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, indetails:

- Competition Law 2004 was issued to aim at the targets that: assert andprotect the business right of businesses; maintain and stabilize the order oncompetition 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 activitiesthrough some regulations but when we combine it with advertising law, therelationship between these documents will achieve more efficient in protecting theinterest of consumers and society Consumers is a large numbers of people who aredirectly affected by advertising activities, therefore they should be protected againstillegal advertising activities, Consumer protection law prohibits some activities21

which have adverse effects on consumers

- Corporate Incomes Lax Law 2008: Corporate Incomes Tax law wasadopted 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 allocatingincomes in the society In Vietnam, this law also is an important legislation but touphold its role effectively, we need to consider it from many aspects and also learnfrom the experiences of foreign countries Corporate Incomes Tax Law is a legislationwhich has close relationship with advertising law because the nature of advertisingactivities is the commercial activities of companies which are controlled by CorporateIncomes Tax Law Corporate Incomes Tax Law 2008 limits the expenditure onadvertising is 10% of reasonable expenditures23 If companies use more than 10%reasonable expenditures, the expenditure exceeds this rate will not be considered asreasonable expenditure for determining enterprise’s taxable incomes In the marketeconomy, spending on advertising is an indispensable expenditure So we must becareful on using and controlling this expenditure at companies in particular and in taxpolicies in general

20 Such as: Article 45.

21 Such as: Article 10,13 Consumer Protection Law 2010.

22

http://www.tapchiketoan.com/tin-tuc/tin-tuc-ke-toan-kiem-toan/chi-phi-quang-cao-tiep-thi-khuyen-mai-khong-nen-khong-che-muc-2.html

23 Article 9, Item n, Corporate incomes tax law.

Regarding the relationship of these documents: In principle, if CompetitionLaw 2004 adjusts advertisements’ contents in order for them not to go against therequirements of fair competition among businesses, Commercial Law 2005, theOrdinance on Advertising 2001 must focus on adjusting the usage of advertisingmedia: their places, their forms, advertising license… in order to protect the generalinterests of consumers, society So, Commercial Law 2005, the Ordinance onAdvertising 2001 must be considered as the legal documents governing the Statemanagement 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 theOrdinance on Advertising 2001 are basically arisen between the State agencies andadvertisers in respect of controlling advertising activities Meanwhile, disputes on thecontents and impacts of commercial advertisement are arisen among advertisers andshould be controlled by Competition law In addition, when commercial advertisementhas bad impact to consumers, Consumer Protection Law will take place for settlement

1.3 Analyses of some important provisions of current law governing commercialadvertisement

In this section, the author will present a number of important regulations thataffect the effectiveness of advertising activities and State management in reality Theyare 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 advertisingactivities24: Ministry of Information – Communication, Ministry of Culture – Sports –Tourism, Ministries, Ministerial-level agencies, Government’s agencies, provinciallevel 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 Indetails: Ministry of Information – Communication controls advertising activities onnewspapers, computer information networks and publications; Ministry of Culture –Sports – Tourism controls advertising activities on other media Beside their individualjurisdictions, these Ministries also have the task to coordinate with the others onissuing Joint Circular on advertising licensing procedures, inspection, testing andhandling of law violations on newspapers, computer information networks advertisingand advertising on publication.

Before the existence of the current regulations, in the past the functions oncontrolling advertising belonged to Ministry of Culture – Information Such Ministryhad the function on controlling all types of advertisements However, when Ministry ofInformation - Communication was established, Press - Publish Bureau was moved toMinistry 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’sCommittees at local level while they are the closest agencies with public andconsumers who are directly affected by commercial advertisements In addition, thelaw also has not created conditions for the participation of social organizations such asAssociation of advertising or Association of public relation If the law on advertisingpromotes the power of these organizations and public power, the management onadvertising will gain more effectiveness

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

25 Article 2(7) Decree No.187/2007/ND-CP governing the functions, responsibilities,

authorities and structure of Ministry of Information – Communication.

26 Article 2(12) Decree No.185/2007/ND-CP governing the functions, responsibilities,

authorities and structure of Ministry of Culture – Sport- Tourism.

27 According to Article 6, Draft Advertising law 2010.

the efficiency of the State management; (ii) ensure the healthy development of thedomestic advertising industry.

1.3.2 Provisions governing prohibited advertising activities

Advertising is a business right of businesses Theoretically, businesses canuse all forms and methods to promote their products However, they must satisfy thecommercial orders and protect the interests of the State and society in general and theinterests of traders and consumers in particular Hence the law governing commercialadvertisement 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 businessentities, consumers and the State This is an important condition on ensuring theharmony among these entities and building a healthy investment environment inVietnam 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 theState29 But the Ordinance on Advertising prohibits advertisements for goods/serviceswhich are banned from trading or advertising by law30, so the goods restricted fromtrading 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 theboundary area of wine-producing companies, inside the area of stores etc Thisregulation is different than the regulation of Commercial Law 2005 (commercial law

28 Article 109 of Commercial Law 2005, Article 5 of the Ordinance on Advertising 2011, Article 3 of Decree 24/2003/ND-CP.

29 Item 3, Article 109, Commercial Law 2005.

30 Item 8, Article 5, the Ordinance on Advertising 2001.

31 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: advertisementsfor wines containing more than 15% alcohol volume will be imposed a fine from arange of 3 million VND to 5 million VND These are three different provisions withregard to an issue In principle, we must "apply the document which has highervalidity33”, thus, we can determine the applicable provisions However, this fact hasnot shown the unification of a progressive legal system Besides, it also makesdifficulties 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, immoralactivities are considered as illegal activities, it has been reflected in the law34.However, this regulation must have clear guidelines for application In fact, thedetermination on cultural and traditional contents of advertisements is vague andchangeable In Vietnam, most of authorities have based on their own views ondetermining the conformity and effect of advertisements Vietnam lawmakers shoulddetail these provisions by generalizing the society’s requirements on advertisement’scontents into some main standards if not these provisions will make relevant subjectsdifficult 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 ButCommercial law (1997, 2005), Competition Law (2004), the Ordinance on Advertising(2001) and their guiding Decrees did not define the definition of comparativeadvertising Countries in the world still have different views on comparativeadvertising activities Comparative advertising is considered as legal activities in somecountries as America, Britain but in Lucxemburg, Italian etc, it will be considered as

32 Item 4, Article 109, Commercial law 2005.

33 Item 2, Article 83, Promulgation of Legal Documents Law 03/06/2008.

34 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 comparativeadvertising, each nation will have its own views to allow or prohibit such activities.Vietnam has considered direct comparative advertising is an illegal activity Tohandling this violation we must define the definition and structure of it.

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

In addition, the provision on advertisement aiming at unfair competition ofCompetition law37 regulated only three types of advertising activities for the purpose ofunfair competition: direct comparison, copy of advertising ideas, provision of false,misleading information These provisions cannot be suitable for the knottiness andseriousness of these activities with many existing forms in reality

According to Paris Convention 1883, The law of Federal Republic ofGermany, beside defining comparative advertisements are illegal, some other activitiesalso are considered as illegal activities such as: Advertisements make consumers tounderstand that they have only one opportunity to buy goods; Advertisements aboutselling goods with limited numbers but in fact these goods are sold in a large scaleetc.38 Thus, in these documents not only comparative advertising but alsopressurization advertising are considered as advertising for the purpose of unfaircompetition

36 Truong Hong Quang(2009), cited book, p.17.

38 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 ofThegioididong.com, Cho Lon, Idea, Thien Hoa with the advertising message: "uniqueopportunity", "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 faircompetitive 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 onbroadcasts, channels, television programs specialized for advertising, supplementsspecialized for advertising must also be licensed39

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

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

Advertisements now appear in public popularly especially outdooradvertisements so these provisions will ensure the beauty of urban areas, residentialareas 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, thelaw control mainly by inspection, examination, handling violations In addition, the lawalso regulates the responsibilities of relevant subjects for the contents of advertisement

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

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

1.3.4 Restrictions on advertising activities

In this section, the author will present two types of restrictions on advertisingactivities: Firstly, restrictions on advertising expenditures according to CorporateIncome 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% ofreasonable expenditures (which is 15% for new business in the first three years afterestablished)41 This provision belongs to Corporate Incomes Tax Law but also have adirect impact to advertising activities The rate of 10% reasonable expenditures onadvertising purports to protect the development of domestic advertising companies.Vietnam advertising companies now still lack of competitiveness and their advertising

40 Article 27, Decree No 37/2006/ND-CP, 04/04/2006 detailing regulations of Commercial Law on commercial promotion activities.

41 Item n, Article 9, Corporate income tax law.

activities are still unprofessional Because of this fact, we need to regulate a reasonablerate on advertising spending to limit some large foreign companies on using too muchadvertising expenditures for competing with Vietnam companies With this restriction,the advertising strategy of big foreign companies may not affect the development ofcompanies in Vietnam seriously In addition, this restriction will also help Vietnam todeal 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 advertisingalso control the length and area of advertisements in almost advertising media, such as:

 For printing newspaper advertising, advertisements must not be shownmore than 10% of the area, except specialized newspapers on advertising; eachadvertising campaign for an advertising product does not exceed over 5 days for thedaily newspaper or over 5 consecutive reports in periodical newspaper; eachadvertising 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 broadcastingseries for an advertising product does not exceed over 8 days, except for special casesstipulated 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.

43 Item 1, Article 10 the Ordinance on Advertising.

 Pictorial newspaper is a kind of newspaper in which information istransmitted by images through audio stations, televisions… Advertisements onpictorial newspaper must not be extended over 5% of time in each program, exceptspecialized channels on advertising, each broadcasting for an advertising product mustnot extended over 8 days, except for special cases stipulated by Government, and notmore 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 totransmit information with images, sounds, articles, videos Regulations of Law aboutelectronic newspaper are the same as printing newspapers

 Each round of broadcast for an advertising product on radio or televisiongenerally cannot last over eight days Advertisements constantly last more than tenminutes on radio or television program is considered as a specialized advertisingprogram and must be allowed by the State agencies Each film program on televisioncannot be interrupted to advertise more than two times, each time cannot be lastedmore 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 ingeneral This has demonstrated the State’s sagacious direction on building andprotecting a healthy competitive environment However, these tools have not reflectedtheir role and effectiveness The cause of this problem is that we have not promoted theprimary functions of each tool In the author’s opinion, we should not use these toolsfor all advertising forms but should use them for certain advertising forms We foundthat for many companies, especially for small companies, the limit on advertisingexpenditures also limit their duration, area of advertisements Therefore, advertising ontelevision, newspapers can be managed by one tool among the others for each While,for other forms such as sponsorship, PR, marketing…the limit on advertisingexpenditures is very appropriate

44 Item 3, Article 10, the Ordinance on Advertising.

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1.3.5 Provisions governing sanctions for violations on advertising activities

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

a) Criminal sanctions

Criminal Law has only one provision46 about criminal sanctions inadvertising: False advertisements This provision is quite similar to China's CriminalLaw47 when requiring two parts of illegal behaviors: (i) there are illegal behaviors and(ii) there are aggravating circumstances: repeat offences, serious consequences… Infact, these regulations are too low for comparing with the serious consequences ofthese violations while the other economic violations have very heavy penalties

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

46 Article 168, Criminal Law 2005 amended in 2009 of Vietnam.

47 Article 222, China’s Criminal Law 1997: “Advertisers, advertising providers, advertising makers

violate State’s regulations, exploit advertisement to propagandize untrue information about a type of goods or services with serious circumstances, shall be fined to 2 years or be applied the sanctions of laboring regeneration and be fined or be fined only.”

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