Just a year ago China introduced far-reaching amendments to its Advertising Law, updating the general legal framework and clarifying both advertiser obligations and non-compliance sanctions. The Law applied to online advertising, but only in general terms. Now, the State Administration for Industry and Commerce (SAIC) has introduced Interim Online Advertising Measures that provide specific guidance as to how the Advertising Law applies to all forms of online advertising. These Measures will come into effect on 1 September 2016.

The introduction of the Measures is both a response to the increasing volume of false and misleading internet advertising that has been taking place in China and a reflection of the country’s commitment to developing an appropriately regulated internet advertising environment.

The Measures are far-reaching, applying to all forms of direct or indirect commercial advertising through online media, including paid search results.  Concerns have, in fact, been expressed in some quarters that the scope may be too broad, but the certainty and clarity introduced by the Measures is likely to be of benefit to both consumers and businesses in the long run. Given the dynamic nature of the internet environment, however, and the fast-changing online advertising practices, there will, no doubt, be challenges and uncertainties involved in implementation. In this context, it is important to note that the Measures have been marked ‘Interim’, and that SAIC has indicated they are likely to be amended from time to time in the future.  

This note summarises some of the key provisions and comments on some of the uncertainties and challenges that are likely to be involved in their implementation.

Key provisions

• Online advertising has been very broadly defined to include all forms of commercial advertising that directly or indirectly promote goods or services through websites, web pages, internet applications and other internet media in the form of texts, pictures, audios, videos etc. It specifically includes advertisements that contain links of any sort; email advertisements; and paid search listings.  

• Internet advertising publishers and agencies are obliged to verify advertisers’ qualifications and to prevent the publication of material that does not comply with relevant advertisement laws. 

• ‘Pop-up’ advertisements must provide a prominently marked ‘Close’ button and be closable by one click.

• Deceptive means must not be used encourage consumers to click on advertisements.

• Online advertisements for prescription medicines and tobacco are prohibited and government approval is required for the advertisement of other pharmaceuticals, medical and veterinary supplies and health related products.

• All advertisements, both foreign and Chinese language, must be distinguishable and prominently marked with the word ‘advertisement’ in Chinese; and all ‘paid for’ search results must be ‘prominently distinguished from natural research results’.

• Certain forms of unfair competition are prohibited such as the provision or use of applications or hardware that block or tamper with the lawful advertising of third parties.

• The AIC’s have extensive investigative powers, including the power to conduct spot checks of venues suspected of engaging in illegal advertising activities; the power to question parties suspected of violating the law; and the power to inspect and copy all relevant material.

• Penalties for breach are provided by reference to the relevant provisions of the Advertising Law.

Comments

Since the introduction of the Advertising Law a year ago, there has been an increased focus on problems relating to online advertising. Now that specific Online Advertising Measures have been introduced, online advertisers should be prepared for their advertising practices to be subjected to greater scrutiny than ever before.  

While the Measures do clarify many issues and requirements, there are a number of areas that are likely to cause ongoing problems in practice. 

One of these is the obligation to label advertisements as ‘advertisements’ in Chinese.  It is not clear, for example, how this requirement will be satisfied in the context of celebrity endorsements on social media, or in the case of a company’s own website.  An entire website may, for example, be said to constitute ‘internet advertising’, but is it enough to mark the home page, or should every page be marked? It is not clear what would constitute compliance, standard practice, or best practice. Given the increasing number of professional buyers this is likely to be an important issue for website owners.

Another issue that is likely to cause problems in practice relates to the liability of online marketplace operators. Given that it is virtually impossible for them to check every link, even if they use technical means to do so, how far does, or indeed should, their responsibility extend? It will ultimately be necessary to strike a reasonable balance between the interests of service providers and consumers, but, again, this is something that remains to be clarified.

Because these and other issues are likely to be worked out in practice over the coming months, it will be important to keep a close watch on the cases. In the meantime, all those advertising on the internet in China should be carefully reviewing their advertising practices as a matter of priority.

For queries or request of further information, please contact Jin Ling, Executive & Head of Rouse China's Marketing, Advertising & Digital Law Practice based in Shanghai. 

TAGS

• China
• Online Advertising Measures
• Advertising Law