Recently, the State Administration for Market Regulation of China released the “Measures for the Administration of Internet Advertising” (the “Measures”), effective on May 1, 2023.
In our recent insight, Online Marketing Compliance, we outlined the Do’s and Don’ts for companies in preparation for the regulation changes.
With the Measures in effect, we take a deeper dive into managing online advertisements and working with third parties such as key opinion leaders (‘KOL’) and live streamers. Namely, the Measures directly impact companies in Fast Moving Consumer Goods (‘FMCG’), such as strengthening KOL and live streaming obligations. Therefore, certain online advertising practices shall be adjusted accordingly.
Legislative Background
Based on “Interim Measures for the Administration of Internet Advertising (2016)” (“Interim Measures”), the Measures is a comprehensive revision and aligns with the amended Advertising Law, E-commerce Law and other related legislation.
The Measures incorporate new provisions that adapt to internet advertising advances and trends. Furthermore, it provides a stronger legal framework by clarifying responsibilities, regulating internet advertising practices, and strengthening obligations.
Managing Online Advertisements
Legal Scope
Under the Measures, online advertising is defined as advertising activities within the territory of the People’s Republic of China, to directly or indirectly promote a product or service (‘purpose’) that uses either website, web page, web application, or other online media (‘media’) through the form:
- text;
- images;
- audio;
- video; or
- any other form.
Prohibited and Restricted Adverts
The Measures outline prohibited and restricted adverts similar to provisions stipulated in the Advertising Law. Forbidden adverts include:
- products that are prohibited from being produced or sold;
- services that are prohibited from being provided;
- products or services that are prohibited from being advertised;
- tobacco (including e-cigarettes) (through the Internet);
- prescription drugs (through the Internet).
Restricted adverts are subject to approval from the authority before adverts are published. Restricted adverts include:
- medical, pharmaceutical, medical equipment, pesticide, veterinary drug, health food, or food for special medical purposes (FSMP) product;
- other adverts subject to review according to laws or administrative regulations.
Prohibited Advertising Conduct
Companies are prohibited from forcefully spamming consumers with online adverts. The following advertisement activities are forbidden:
- deceiving or misleading users into an advertisement through any false system or software update, error or clean-up prompts or other notifications; or any false Play, Start, Pause, Stop, Return, or other buttons; or any false promises of a reward; or any other similar means.
- affecting users’ normal use of the network or inserting a paid search advert within the results of searches for a government service website, webpage, web app, official account, and so forth.
- delivering adverts without the user’s consent to any means of transport, navigation equipment, smart home appliance, and so forth.
- adding adverts or advert links to an email or online instant message sent by users.
Advertisement Principles
Under the Measures, online advertisements shall follow the below principles:
Authentic Content
Advertisements should be truthful and lawful. Contents should not contain false, exaggerated, misleading or other unauthentic information.
Lawful Information
Advertising practitioners should consciously abide by relevant laws and regulations and industry self-discipline norms. Namely, content shall be reviewed and controlled; advertisements in special industries and fields (such as healthcare, finance, real estate, etc.) should comply with corresponding industry management regulations.
Identifiable Adverts
Adverts should be identifiable. For example, adverts shall not appear as non-advertisements and mislead consumers. Advertising forms that are difficult to identify, such as search ads, recommendation ads, and social media ads, should be clearly labelled as advertisements.
No infringement
Adverts shall not infringe upon the legitimate rights and interests of others such as intellectual property rights and commercial reputation.
Minors
Advertisements for medical, pharmaceutical, health foods, foods for special medical purposes, medical devices, cosmetics, alcohol, beauty, and online games not conducive to the physical and mental health of minors shall not be published on websites, webpages, internet applications, official accounts and other Internet media targeting minors.
Managing Specific Online Advertising Practices
Pop-ups
Companies may utilise pop-ups to directly engage the user with an advertisement, notification or alert. Under the Measures, the ‘close’ symbol shall be prominently displayed in a pop-up. This ensures that the pop-up can be closed with one click. Prohibited pop-up practices include:
- no ‘close’ symbol or the advertisement can only be closed after a set time;
- the ‘close’ symbol is fake, cannot be identified, difficult to locate or the user is obstructed from closing the pop;
- two or more clicks are required to close the pop-up;
- pop-up continues to pop up after being closed when the user is browsing the same page or the same document, and affects the user’s normal use; and
- other practices that affect the one-click close.
Service or Product Recommendations
The KOL phenomenon has spurred many companies to indirectly advertise via an online persona recommendation. KOL is a popular soft advertising form utilised by companies as it directly reaches target consumers through a personal approach. Though the ambiguity of paid service and product recommendations can mislead consumers. Therefore, the Measures clarify that the promotion of products or services that meet relevant constitutive elements shall be constituted as an online advertisements.
Specifically, if products or services are promoted with purchase methods via the following forms shall be indicated as advertisements:
- knowledge introduction;
- experience sharing;
- consumption review; and
- other forms.
It is prohibited to publish an advert for medical, pharmaceutical, medical equipment, health food, or FSMP product as health or wellness knowledge.
Live-streaming
Similar to KOL, live-streaming is a popular online advertising practice. Often live-streams are utilised by e-commerce channels to directly increase product sales by employing a KOL to recommend products live on social media.
Under the Measures live-streaming including the form of video, audio, graphics & words or a combination of multiple ways is subject to the advertising supervision system. And obligations are defined according to the system.
- Where a product seller or service provider promotes a product or service through live streaming on the Internet, which constitutes a commercial advertisement, it shall bear the responsibilities and obligations of the advertiser according to the law.
- Livestream operators and marketers engaged to provide advertising design, production, agency and publishing services shall bear the responsibilities and obligations of the advertising agent and publisher according to law.
- Those who recommend or endorse goods and services in their names or images, which constitute advertising endorsements, shall bear the responsibilities and obligations of advertising spokespersons according to law.
Conclusion
Enforcement of the Measures falls to the Cyberspace Administration. And the Measures call for strengthened supervision of internet advertising, prompt investigation and punishment of illegal and irregular activities. Therefore, we foresee active regulators of the Measures and companies especially those in FMCG should be adapting and managing online advertisements to reduce legal risks.
Contact Us
If you have questions or concerns on managing online advertisements, please contact us at talktous@horizons-advisory.com to schedule a consultation session. Horizons can provide insight, expertise and the right solutions for you.
