On July 4, 2016, China’s State Administration for Industry and Commerce (“SAIC”) issued the Interim Measures for the Administration of Internet Advertising (《互联网广告管理暂行办法》) (“the Interim Measures”), which will take effect on Sept. 1, 2016. Upon coming into force, the Interim Measures will govern all advertising activities conducted over the Internet, together with the Advertising Law of the People’s Republic of China (“the Advertising Law”), which was amended in 2015 to cover Internet advertising for the first time.

The final content of the Interim Measures has been a matter of great anticipation and concern for the industry. The draft Interim Measures issued for comment on July 1, 2015, caused a great deal of controversy and were not formally implemented on Sept.  1, 2015, as had been expected. After Baidu’s Wei Zexi scandal, the public raised questions about the apparent lack of regulation of Internet advertising. In response, the Cyberspace Administration of China (“CAC”) promulgated the Regulations of Administration of Internet Information Search Services (《互联网信息搜索服务管理规定》) (“Internet Search Regulations”) on June 25, 2016, which became effective on Aug.  1, 2016. In addition, by issuance of the Interim Measures, SAIC has shown its intent to regulate the Internet advertising industry.

We highlight below some key aspects of the Interim Measures.

Scope of “Internet Advertising”

According to the Interim Measures, Internet advertising refers to commercial advertising for direct or indirect marketing goods or services in the form of text, image, audio, video, or others means through websites, webpages, Internet applications, or other Internet media. Internet advertising includes advertisements in text, pictures, video, or other medium that contain links, email advertisements, sponsored-search advertisements, and advertisements in commercial displays.

For example, Internet advertising expressly includes those sponsored-search results produced by search engines and e-commerce platforms that intentionally change the organic search results. Such managed search results are thus governed by both the Interim Measures and the Advertising Law. Another form of Internet advertising is advertisements in commercial displays. That is a very broad category which may include substantially all commercial displays on e-commerce platforms and other websites.

In this way, the Interim Measures expand the scope of the definition of advertising used in the Advertising Law.

Definition of “Publishers” of Internet Advertising

Under the Advertising Law, an advertising publisher is an individual, business entity, or other organization that publishes advertising. By comparison, the publishers of Internet advertising under the Interim Measures are those that push or display Internet advertising and have the ability to verify the advertising content and decide whether to publish advertising.

Under the new definition, Internet advertising publishers include advertisers that publish advertisements through their own websites or Internet media (i.e., websites or media to which the advertising has a “lawful right of use”). Internet advertising publishers also includes Internet information service providers. For example, celebrities who have the ability to control the advertising they push on their own social media groups will bear a publisher’s obligation to verify the content. The same also applies to the Internet information service providers that participate in business activities of Internet advertising. For example, online video providers should bear a publisher’s obligation to verify the contents of Internet advertisements that are played before each video clip. Online video providers are considered publishers if they have the ability to verify the contents of and decide whether to publish Internet advertising.

Internet Advertising Must Be Identified as Advertising

Under CAC’s Internet Search Regulations, Internet information search service providers are required to explicitly distinguish the organic search results from the sponsored search results and to place prominent marks on each of the sponsored search results. The Internet Search Regulations subject Internet information search service providers that provide commercial advertising information services to the relevant advertising laws and regulations.

The Interim Measures, like the Advertising Law, require advertisements to be identifiable and marked with the word “advertisement” so that consumers can distinguish them from non-advertisement information. In addition, under the Interim Measures, sponsored search results must be clearly distinguished from organic search results. The Interim Measures do not specify the standard SAIC will use to enforce this “clearly distinguished” requirement. However, it would be safer if search engines not only mark sponsored search results with “advertisement” but also apply different front, color, layout, etc. to such results for distinction.

No Email Advertising Without Permission

The Interim Measures are more specific than the Advertising Law in regards to email and text message advertising. Under the 2015 amendments to the Advertising Law, no advertisement may be sent in the form of electronic information without the consent or request of the recipient. The Advertising Law also stipulates that where an advertisement is sent in electronic form, the sender's true identity and contact information must be explicitly indicated, and the sender must provide the recipient a method to discontinue receiving such advertisements. However, it is unclear which form(s) of electronic information are being referred to in the Advertising Law.

The Interim Measures expressly prohibit sending advertisements or advertisement links by email without the recipient’s permission. Thus, it is advisable to obtain that prior permission before any advertisement is sent via email. Otherwise, the senders could be fined RMB 10,000 to RMB 30,000.

Close Advertisement With One Click

The Interim Measures confirm the requirements in the Advertising Law that Internet advertising not affect the normal use of the Internet, and include a “close button” to ensure that any advertisement can be closed through one click. The Interim Measures further forbid inducing Internet users to click on an advertisement in a deceptive manner.

Obligations of Publishers and Operators of Internet Advertising

The Interim Measures impose stricter obligations on the publishers and operators of Internet advertising. The obligations of Internet Advertising publishers and operators under the Interim Measures include employing staff with expertise in advertising review, verifying the identity of advertisers, keeping relevant records, verifying the advertiser’s certifications, and reviewing the contents of the advertising.

Internet information service providers that provide the information services to Internet advertising but do not participate in the business activities of Internet advertising are required to stop the illegal advertising published though their information services only if they know or should have known the advertising is illegal.

Prohibition of Unfair Competition in Internet Advertising Activities

In doing Internet advertising business, the following activities are deemed to be unfair competition and are strictly prohibited:

1. Using applications or hardware to take restrictive measures, such as blocking, screening, covering, or fast-forwarding others’ advertisements;
2. Using network pathways, network equipment, or applications to destroy transmission of advertising data, to distort or hide others’ advertisements, or to load advertisements without permission;
3. Using false statistics, communication effects, or value of Internet media to induce inaccurate quotes, gain illegal earnings, or impair others’ rights and interests.

Conclusion

The Interim Measures, together with the amended Advertising Law, are the first step for Chinese authorities to regulate the Internet advertising industry after years of booming development without meaningful regulation. Some provisions and requirements remain unclear. It is worth keeping a close eye on the regulator’s interpretations, particularly those interpretations reflected in the regulator’s future enforcement of the amended Advertising Law and the Interim Measures.