By China Briefing

The Chinese government is increasing the levels of regulation for advertising, and lately its attention has turned to online advertising.  Following in the footsteps of the amended 2015 Advertising Law, the State Administration of Industry and Commerce’s (SAIC) Interim Measures for the Administration of Internet Advertising came into effect September 1. The new regulation clarifies what content is considered internet advertising, lays down rules for publishers of online advertisements, and outlines investigation measures and penalties for violators. Given the ubiquity of online advertising in China, the regulations will have a widespread impact on the actions of advertisers and platform operators.

What Qualifies as Internet Advertising?

According to the regulation, internet advertising encompasses the following activities:

  • Product promotion via text, pictures, videos, links
  • Email advertisements
  • Paid search advertisements
  • Advertisements within commercial presentations

In practice, any digital content placed on any online platform with the intent of promoting a product or service could be subject to the regulation.

Who is an Internet Advertising Publisher?

The regulation identifies individuals or groups called publishers, who have the responsibility to comply with the online advertising rules and are subject to penalties when in violation. Any entity conducting the following activities is considered an internet advertising publisher:

  • Displaying or submitting internet ads
  • Verifying or moderating submitted ads for publishing

Notably, this group includes content creators and platform operators, such as search engines or content sharing platforms that host third-party advertisements.

Products and Services Requiring Approval

The Interim Measures for the Administration of Internet Advertising applies to products and services under the same scope as the pre-existing Advertising Law. The new regulation prohibits online advertisements for prescription drugs and tobacco products. The regulation also states that the following products require review before being published online:

  • Medical treatments
  • Pharmaceuticals
  • Foods for special medical purposes (FSMP)
  • Medical devices
  • Pesticides
  • Veterinary drugs
  • Dietary supplements

Effects of the Regulation

Implications for Advertisers

The regulation holds advertisers responsible for the veracity of their content. In addition, advertisers are prohibited from engaging in deceptive or disruptive online advertising tactics.

To avoid disrupting internet users, a one-click close option is required on pop-up advertisements. Advertisers are not allowed to send advertisements in emails without permission from recipients, and email advertisements must include opt-out links. Additionally, advertisers may not use disruptive tactics to entice users to click on links, either in emails or on web pages.

Under the regulation, advertisers are also barred from using unfair competition methods such as interfering with the display of competitors’ advertisements using applications or network devices.

Implications for Platform Operators

Platform operators are responsible for monitoring the third party advertisements they post, and can be subject to the same or steeper penalties that advertisers face in cases of violation. Under the regulation, advertisements must be clearly labeled so users can differentiate between advertising and regular content. Similarly, search engines are required to differentiate between paid and organic search results.

If a third party wants to advertise on an online platform, the platform operator must verify the advertiser’s identity and remove illegal advertisements. This will result in revenue loss for search engine providers like Baidu, which are legally required to reject illegal advertisements. The regulation also requires platform operators employ an advertisement review team to examine both the contents of the advertisement and the qualifications of the advertiser.

 

About the Author

This article was first published on China Briefing, a subsidiary of Dezan Shira & Associates. Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at [email protected] Further information about our firm can be found at: www.dezshira.com

Posted by China Briefing