The operation, which started on Jan 8, focuses on stemming fake advertisements, the manufacturing and selling of counterfeits, and other illegal and deceiving actions that disrupt market order.
Spearheaded by the State Administration for Market Regulation (SAMR), the cross-department operation also involved 12 other government units, including the National Health Commission, the Ministry of Commerce, the Ministry of Culture and Tourism, and the Ministry of Public Security etc.
To understand the scope and extent of the operation, NutraIngredients-Asia recently interviewed industry players to find out more.
Some industry players, such as the US-China Health Products Association, have described the operation as a “very strict and serious” exercise, and that “almost all” health food companies were warned by the local government to conduct their businesses “in the right way”.
Diao said that logically speaking, foreign businesses which operate on the ground would have been warned. However, he has yet to receive any feedback from these foreign firms.
He pointed out that most of the warning went to the local firms.
The direct sales industry is also especially affected.
Diao said that the direct sales industry and companies would be restructured, and that the Chinese authorities have stopped issuing Direct Sale License temporarily.
He also pointed out how direct sales are circumventing loopholes in China.
“Direct sales has many issues in China for a long time…(For example), the direct sales practitioners have to stay in the approved provinces to start their businesses, but now, every company is doing the businesses all around China, regardless of whether they are approved to do so.
“Another point, every salesman has to get a certificate or authorisation before starting business by law, but actually few people did this and it was hard to supervise them one by one.”
In addition, he said that the authorities would enforce “tough control on sensitive areas, such as hotels, parks and parade squares in case of illegal conference sales.”
He added that the scope of the operation “is wider than just the health care industry”, as it also extends to “equipment, consumption goods and appliances which claim to produce some sort of health functions.”
Actions from different ministries
A regulatory intelligence platform, Chemlinked, also outlined some of the key measures that participating ministries will take.
For instance, the Ministry of Industry and Information Technology will set up a 24-hour surveillance system to catch illegal online activity and curb spam calls promoting health products, Ye Yilia from Chemlinked pointed out.
The Ministry of Culture and Tourism, on the other hand, will investigate the illegal health product promotion hooked by low-cost tour.
The National Health Commission will also crack down on illegal diagnoses and medical practice which are held under the guise of TCM healthcare.
The authorities will also regulate the elderly health food market.
For instance, the Ministry of Civil Affairs will conduct strict investigation on health product promotion in the areas where elderly services and facilities are provided.
Stick with the truth
The industry experts have advised manufacturers to “stick with the truth” when promoting their products.
For Diao, he advised manufacturers to refrain from exaggerating functional benefits of the products on the product packaging, promotional materials, and the online stores.
He also advised firms to regulate employees’ behaviours, in order to prevent them from marketing the products in unauthorised manners.
Another interviewee, Clarence Fong, the international marketing consultant at China Healthcare Association, also urged manufacturers to “stick with the truth and facts”.
“I think going forward, health supplements manufactures and marketers must be really careful with their marketing and product claims. I think aggressive marketing claims will no longer be tolerated and the authority is urging consumers to report cases to them.
“The best advice for any company is to stick with the truth and facts and do not for the sake of sales, make up claims or lie about the products’ benefits,” Fong said.
The “100-day operation” was launched in response to public outcry over unscrupulous practices of the industry.
Zhang Mao, the head of SAMR, said during the launch of the operation that the public had strongly reacted towards unethical behaviours witnessed in the country’s health food market, and that the public had expressed pressing concerns.
He described the “100-day operation” as an “important political task” for the central committee of CPC and the state council.
In December last year, Chinese website “Clove Doctor” claimed that a four year old Chinese girl had passed away from cancer after her father solely relied on products marketed as “anti-cancer” drugs by health supplement firm Quanjian to treat his daughter.
Earlier this month, 18 employees, including the founder Shu Yu Hui were placed under criminal detention for suspected involvement in putting up fake advertisements for its MLM activities.
Stricter licensing boosts legitimacy
The “100-day operation” would make it harder for direct sales companies to obtain their license, but this would also boost the legitimacy of companies which managed to obtain the license, Diao said.
“After this operation, we believe that the industry will get closer to what is defined in laws and regulations, and more importantly, this event and operation will tell the public what is a legal health product in China and how to distinguish between legal and illegal health food.”
Fong, on the other hand, said that while such operations might restore consumer trust, it might not exert a lasting effect in the long run.
“The strength of these operations is to give consumers some assurances that the authorities are enforcing regulations hopefully the consumers will still have confidence in the industry.
“The limitations is that eventually things will quiet down and that some unscrupulous people or company will once again try to adopt the same malpractices.”
Ye also concurred with Fong, pointing out that it is “hard to guarantee that the false promotion will be totally eliminated.”
She explained that it was more important to optimise the entire health product supervision system and eliminate ambiguous standards.
Industry players are concerned that the term “health food products”, used by the Chinese government to refer to dietary supplements, may be problematic.
“In the past, HPA-China and other groups have encouraged China to adopt the term ‘dietary supplement’ instead as it is more universally accepted,” Jeff Crowther, the executive director of US-China Health Products Association said.
“Also the term ‘Health Food Product’ has somewhat of a bad reputation stretching back to the beginnings of the industry’s development in China some 30 years ago.
“Like any market, there are always those players that will cut corners, misrepresent or outright deceive consumers. Unfortunately the compounding of illegal acts, counterfeiting and especially those that take advantage of the senior population have made the term ‘Health Food Product’ synonymous with the word ‘cheats’ for some Chinese consumers.
“HPA-China supports efforts by the industry, associations and the government to review and rectify where necessary. This industry is in place to benefit the health and wellbeing of consumers…Hopefully this 100-day operation will not impede or disrupt the business of those top companies that place quality and safety first,” he said.