Legal Update on The Specific Internet Advertisement Regulation in China. Part 2

 

Part 2: Risks and Mitigation

 

On September 1, 2016, the State Administration for Industry and Commerce (“SAIC”) released the Interim Measures for Internet Advertising Supervision and Management (“IAD Measures”) to, among other, eliminate the previously unclear grey issue about whether various internet services, such as bidding searching listing, can be considered advertisement and thus unfortunately subject to the robust and restrictive advertisement regulatory scheme of China.

 

Further to our overview and summary of the IAD Measures in our last article, we herein further discuss the risks for both of the advertisers and internet publishers, and more importantly, the possible mitigation measures.

 

Legal Risks for Advertisers

 

Under the Interim Measure and the PRC Advertising Law, an advertiser probably bears legal risks when:

 

  • Providing illegal or false advertising content as some, if not most, internet platform may not have the competence and experience as traditional media such as television or magazines in terms of the statutory obligation as an advertisement publisher;

 

  • Broadcasting advertisement on internet platforms (such as YouTude) that may use contents that infringe intellectual properties rights or other legal rights of a third party and thus invites third party IP claims;

 

  • Enter into a contract with advertising agents or publishers who with no legal certification or did not register with the administration for industry and commerce.

 

  • Fail to inform the advertising agents or advertising publishers by written documents or others legally identified forms if want to modify or post advertisements;

 

  • Fail to provide legally relevant certification and information to advertising agents or publishers;

 

Legal Risks for Internet Platforms

 

Although the IAD Measures has not imposed new obligations upon the internet platform but only clarify certain internet services shall be considered as advertisement, the major legal implication of the internet platform are that it will certainly be subject to the whole Chinese robust advertisement regulations.

 

Therefore, various internet service providers need to spend extra efforts to assure continuous compliance with statutory obligations for basically the full range of their internet services, including without limitation:

 

  • Mark conspicuous mark of “Advertisement” so that the consumers can identify that some internet services, such as searching engine results, are actually advertisement;

 

  • Assure that such advertisement can be closed by only one click;

 

  • Assure that no undue soliciting action is in place to seduce the users to click the advertisement contents;

 

  • Assure that no advertisement contents or link to such advertisement content is sent to unsolicited users by scam emails;

 

  • General censorship obligation of any illegal advertisement such as false or misleading advertisement.

 

Mitigate Measures

 

So far, it appears that most mitigation measures for both sides are contractual in nature, including without limitation:

 

  • clearly specify a release of liability in an endorsement agreement when advertising spokesperson in and of itself conduct misleading or false endorsement or illegal behavior.

 

  • Clearly specify in agreements with publishers or advertising agents own by whom a reasonable duty of notification in the hope that advertiser can completely disclose the business information and certification and clearly specify the methods and time limit of notification.

 

  • Clearly specify a release of liability in agreements with publishers or advertising agents if advertising agents or publishers fail to provide the administration for industry and commerce or other relevant department with legal certification or registration information.

 

  • Clearly specify a release of liability if completely and promptly inform the advertising agents or publishers with the modified or newly posted content of advertisements but fail to receive confirmation letter. And clearly specify the methods and time limit of notifications.

 

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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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