Legal Update on The Specific Internet Advertisement Regulation in China ————Part 1: Overview and Summary

 

 

Following the new and most restrictive Chinese Advertisement Law taking effect on 1 September, 2015, which has reshaped the lives of so many brand legal lawyers, the State Administration for Industry and Commerce (“SAIC”) released the Interim Measures for Internet Advertising Supervision and Management (“IAD Measures ”) on July 8, 2016 with a view to regulating the specific area filled with countless issues: the internet advertisement. This time, after September 1, 2016 when the IAD Measures is taken effect, the lives of so many e-commerce industries which ultimately feed on advertisement will also be changed again

 

Regulatory scope & Definition

 

Under the IAD Measures, commercial advertising via the Internet including mobile Internet includes “links, emails, paid search results(付费搜索广告), commercial presentations and other forms with the purpose of selling products or services directly or indirectly, in the forms of text, picture, audio, video via various websites, emails, ‘we’ media(自媒体), forums, instant message tools, software and etc.”

 

We note that the IAD Measures specially include in their regulatory scope various new popular platforms, such as ‘we’ media (e.g. Sina Weibo, Wechat official accounts), instant message tools (e.g. Wechat), forums (e.g. Baidu Tieba), and software (e.g. Apps for mobile phones).

 

The implication of such clear regulatory scope is that various e-commerce leaders such as Baidu, Ali or any other internet platforms that has direct or indirect revenues arising from advertisement will have to worry about serious and discretional enforcement of PRC Advertisement Law by Chinese industry and commerce authorities.

 

Due to the constraint of length of article, we will herein focus on the facts: overview and summary of the IAD Measures and in the next article discuss the implication and mitigation in relation to this IDA Measures.

 

Summery & Highlights

 

  1. Distinguish advertisements from other information.

 

Mass media Advertisements, including business promotion, advertorials, and especially the paid search results, should be distinguished and significantly marked with “Advertisements”, “ad” or different fonts or colors etc, in the hope to enable consumers to identify it as advertisement.

 

Under the IAD Measures, paid search results would be a key regulatory target, and the searching service providers would have to clearly identity and distinguish any paid search results with natural search results (e.g. Baidu would have to modify the less conspicuous “promotion” mark to a clearer identifiable mark).

 

  1. The definition and obligation of internet advertising publishers

 

Under the IAD Measures, the internet advertising publisher is “natural person, legal person or other organizations who can push or display advertisement for advertiser or advertising agents, and entitled to determine the release and examination of the content”, including video platform, even the “big V” (大V)(VIP accounts) of social media.

 

The internet advertising publishers are subject to four kinds of duty for providing paid search results service:

 

  • verify the authenticity of the identify of all participants in the entire commercial chain as well as the content of the advertisement
  • clearly identity and distinguish any paid search results with natural search results.
  • Clearly set the maximum ratio of the paid search results in a single web page.
  • Identify and examine the certification of clients (e.g. advertisers or advertising agents)
  • Register with the administration for industry and commerce and post the registration information on a predominant place on their Internet media.

 

  1. The obligation of advertisers

 

The advertisers should be responsible for the authenticity of the content of their advertisement. And if the advertisers want to modify the content of advertisements, authorize or entrust the advertising agents or publishers to post the advertisements, should inform the relative advertising agents or publishers in a written form or other forms that can be legally identified.

 

  1. The obligation of internet information providers

 

The internet information provider is different from internet advertising publisher, advertiser or advertising agents. The internet information provider should bear a reasonable duty of care for the illegal advertising displayed on his platform. For example, if the internet information provider knows or should have known, or is informed by regulatory authorities, that others are using its platform to publish illegal advertisements, the provider should take measures to stop and ban the post activities by way of removing, put it off or disconnect the link etc.

 

  1. Consumers are entitled to refuse the post activity

 

Advertisement publishers should provide consumers with the choice to consent to, refuse or cancel subscription when posting advertisements via online private space, such as emails, instant messages etc. Such election should be offered predominantly as a component on the advertisement webpage or the advertising platform. Publishers should provide consumers with “one-click to close” setting, which means that Pop-up advertisements and etc can be closed with one click.

 

Publishers are not allowed to send advertisement to users that have refused such posting or that have unsubscribed from the lists. Besides, the consumers should entitled to choose the time period for receiving the advertisement. Unless otherwise agreed by consumers, advertisement should not be sent to user outside of the designated time period.

 

  1. Legal subjects of Advertising alliance and their obligation

 

The so-called advertising alliance is a special business model connecting the demand side platform(DSP需求方平台) (e.g. small and medium-scaled advertisers) with the supply side platform(SSP媒介方平台)(e.g. websites and applications advertising spots providers), and the advertising automatic data exchange system(ADX广告信息交换平台)with an aim to provide the variety of advertising resources and the accurate advertising posting effects.

 

Under the relationship of advertising alliance, the advertising vendee should clearly label the origin of the advertising, while the media platform and information exchange platform should bear a reasonable duty of care to ban the illegal advertisements by disconnecting, removing or putting it off etc when the operators know or should have know the illegal advertisements.

 

  1. Restriction of the internet advertisement of prescription drug and tobacco.

 

It is international well established practice to ban advertisements via mass media and public place involving prescription drug and tobacco. Yet the regulatory scope left a blank in the internet before.

 

  1. Restriction of unfair competition of internet advertising

 

The IAD Measures specially listed conduct considered unfair competition: intercepting, filtering, covering, tampering with, and blocking others’ advertising by using application program, plug-in and hardware etc.

 

  1. detail the jurisdiction of illegal conducts of internet advertising

 

Generally, the administrative department of industry and commerce of the domicile or main business place of the advertising publishers has jurisdiction over the administrative penalty cases of illegal advertising conducts. However, the administrative department of industry and commerce of the forgoing place of the advertisers or advertising agents has the jurisdiction under the Forum Non Convenience Doctrine” or if firstly receives the complaints.

 

 

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Please note that this article is not contemplated to exhaustive or be relied upon as formal legal advice. Should you wish to know more about the details of this particular area of law, please send an email to j.cao@pricecao.comand we would be more than happy to hear from you.

 

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