Background

The measures, which were first issued by the SAIC in July 2016, took effect on 1 September 2016, notably marking the anniversary of the revision to the PRC Advertising Law in September 2015. Whilst the amended Advertising Law already regulates advertising activities conducted over the internet, the measures further clarify the scope by setting out the statutory control on various forms of online advertising, and thus demonstrate an increasing regulatory focus on online advertisements in the expanding e-commerce market in China.

Key provisions

The following are a number of the measures’ key provisions:

  • “Internet advertisement” means any commercial advertisements directly or indirectly promoting the sales of goods or services, through websites, internet applications or other online media, in the form of text, image, audio, video or other format. The following categories of advertisements promoting the sales of goods and services are regarded as internet advertisements: (i) advertisements containing a link to a website in the format of text, image or video; (ii) email advertisements; (iii) paid-search advertisements; (iv) advertisements displaying commercial information (e.g. product information); and (v) any other commercial advertisements using the internet medium.
  • Internet advertisements must be clearly distinguished and must be marked with the words “advertisement”. Furthermore, paid-search advertisements must be clearly distinguished from other search results not related to advertisements.
  • The dissemination of internet advertisements must not affect the ordinary user-experience of internet users, and any pop-up advertisements must be capable of being closed by a single click. In addition, any email communications to internet users must not contain any advertisements without the consent of the users.
  • Whilst internet information service providers (e.g. e-commerce platform providers) are not regarded as publishers of internet advertisements or advertising agents under the measures, any information service provider must cease to provide its service if it is aware (or ought to have known) that illegal advertisements are being distributed through its service.

Comment

In light of the broad definition of “internet advertisement”, it is clear that the measures will regulate any advertisements disseminated through social media platforms including instant messaging applications and blogging sites. For instance, blog posts published by popular bloggers will be subject to the statutory control under the measures if such contents include advertisements.

Another key development under the measures is that its regulatory enforcement will be primarily undertaken by the local branch of SAIC in respect of the place of incorporation/business of the publisher of the internet advertisements. However, if there are difficulties for the local regulator to exercise its regulatory powers on an advertiser of a different place of incorporation, it may transfer its enforcement proceedings to the relevant SAIC local branch with appropriate jurisdiction over the advertiser. This is aimed at addressing the current industry trend under which advertisers often remotely engage publishers and agents of different geographical regions in order to increase the target audience of their advertisements.

In addition to internet-search service providers, it is expected that e-commerce platform providers in China will be reviewing their online advertisement activities in accordance with the requirements under the measures. In particular, the measures also regulate the conduct of “programmatic-advertisement purchase” (i.e. an automated form of purchasing ad space), and impose obligations on the service provider regarding the conduct of such activities (e.g. service providers are required to state the source of advertisements and cease to provide programmatic purchase services for the distribution of any illegal advertisements).

It is worth noting that the measures are preceded by the Advertising Law and the Provisions on the Administration of Internet Information Search Service issued by the Cyberspace Administration of China in June 2016 (which also requires that a paid internet search result must be clearly indicated). Whilst from a regulatory perspective, there are currently more “enforcement tools” against illegal online advertising activities, it remains to be seen whether the degree of regulatory scrutiny across the industry will encourage a strict compliance with the new advertisement-related statutory obligations. Understandably, stakeholders expect that the “interim” measures will be adapted gradually in line with the continuous expansion of the e-commerce market in China.

By Michelle Chan and Clarice Yue

 

 

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