Advertising & Marketing 2020

Last Updated October 09, 2020

China

Law and Practice

Authors



Haiwen & Partners was founded in May 1992 and is one of the leading general practice law firms in the People's Republic of China, with around 200 lawyers in total working in its Beijing, Chengdu, Hong Kong, Shanghai and Shenzhen offices. The firm started its pioneering entertainment and media law practice more than a decade ago, involving a wide variety of practice areas in the entertainment industries, including the development, production, and distribution of film and television projects; large theme park projects; recording and music publishing; live concerts; literary publishing; advertising; and new media matters. The firm’s clients include major film studios, leading investment companies, as well as top talent, producers and directors, both in and outside China. Combined with its strong practice in the capital markets and M&A areas, Haiwen also provides extensive legal services to clients conducting IPOs, M&A, and other general corporate finance transactions in the entertainment industries.

The Advertising Law of the PRC (the Advertising Law – 《广告法》) sets forth the legal framework in connection with advertising and marketing practices in the PRC. The law was initially adopted in 1994, and was amended, in 2015 and 2018 respectively, in response to the rapid development of the advertising industry. In addition, provisions regulating advertising and marketing activities are found in various national laws and administrative regulations including the Anti-Unfair Competition Law (《反不正当竞争法》), the Food Safety Law (《食品安全法》), the Drug Administration Law (《药品管理法》), the Law on Protection of Rights and Interests of Consumers (《消费者权益保护法》), and the Provisional Measures for Administration of Internet Advertising (《互联网广告管理暂行办法》). 

The State Administration for Market Regulation (SAMR), and a local counterpart to the SAMR, an AMR, is the primary regulatory authority that enforces both the Advertising Law and the Anti-Unfair Competition Law. Formerly, the Chinese State Administration of Industry and Commerce (SAIC), and a local counterpart of the SAIC, an AIC, undertook such responsibilities. During a general restructuring of the Chinese regulatory bodies in 2018, the SAIC’s responsibilities for regulating market activities were moved to its successor, the SAMR.

While the SAMR is the key government authority responsible for overall market regulation, the Advertising Law also empowers certain regulatory bodies to work with the SAMR to supervise advertising activities in specific industries. For instance:

  • advertisements for medical treatment will be examined by the competent health administrative authority;
  • advertisements for medicine, medical devices and dietary supplements by the food and drug supervision and administration department; and
  • advertisements for pesticides, veterinary drugs and genetically modified agricultural products by the agriculture administrative department.

Under PRC laws and regulations, the persons or entities that can be held liable for false advertising include advertisers, advertising agencies, the publishers of adverts, and also, in certain circumstances, those who endorse products. Administrative penalties resulting from violation of the Advertising Law and Anti-Unfair Competition Law range from fines, forced cessation of illegal acts, confiscation of illegal proceeds and revocation of business licences. Criminal liability for false advertising, when the violation amounts to a crime, may apply to advertisers, advertising agencies and the publishers of adverts (Article 222, the Criminal Law, (《刑法》)).

Advertisers

The advertiser, as the provider of the product/service, is in principle liable for false advertising with limited exceptions. The advertiser may be subject to fines or confiscations in an administrative ruling and compensations in a civil proceeding, while the shareholders or employees of the advertiser are generally not subject to such civil or administrative liabilities. However, if the false advertising constitutes a criminal offence and the advertiser (being a legal person) is found guilty of false advertising under the Criminal Law, the directly responsible individual or the individual taking primary responsibility for that false advertising may be held chargeable (Article 231, the Criminal Law).

Agencies and Publishers

Both the advertising agent and the publisher of an advert must take responsibility for verification in connection with an advertisement. They shall verify, among other things, the certificates and other types of files provided by the advertiser and also the content of the advertisement, in order to make sure the advertisement is consistent with the qualification of the product. For instance, the advertising agent and advert publisher shall verify if a certificate of grant of patent is in place if the advert contains a claim that the product is under patent protection.

Endorsers

A person who endorses a product may be held liable for promoting falsely advertised products, if the endorser is, or should have been, aware of the fact of false advertising but he or she still recommended or otherwise endorsed the product or service. In such cases, the AMR may confiscate the illegal income and impose a fine on the endorser (Article 62, the Advertising Law). In addition, if the subject product or service concerns the life or health of consumers and causes injury or damage to the consumer, the endorser shall take joint liability with the advertiser, advertising agent, and advert publisher (Article 62, the Advertising Law).

Third Parties

Other participants involved in a false or misleading advertisement may also be held liable. For example, the law requires that an administrator of a public place, an operator of a telecommunications business, or an internet information service provider shall stop the sending or publishing of illegal advertisements through the release platform if the administrator, telecommunications operator or internet information service provider knows or should have known about the illegality relating to the advertisements in question (Article 45, the Advertising Law). Through the operation of this provision, the law essentially imposes liability for verification on these third parties.

The Advertising Law outlines self-regulation in the advertising and marketing sector. The main responsibility of such self-regulatory bodies is to assist the government authority to regulate the industry, set up industry standards and develop an industry self-regulation system. As the key self-regulatory bodies, the China Advertising Association (CAA) and the China Association of National Advertisers (CANA) have adopted certain ethical codes to help maintain order in the advertising market and strengthen self-regulation in the industry. For example, one of their ethical codes provides that advertisers of milk powder shall also protect consumers’ right to information and right to choose, and shall promote breast feeding. Such self-regulatory bodies do not have judicial or administrative authority or special arbitration procedures to resolve disputes. Violations of the ethic codes may result in admonishment or a circulated notice of criticism within the organisation.

A private right of action is available for consumers and private citizens to challenge advertising practices. When the content of an advertisement infringes the legitimate interest of a consumer or private citizen, the latter may have a cause of action and claim for remedies based on various laws, depending on the actual circumstances in question. These possible laws include the Advertising Law, the Law on Protection of Rights and Interests of Consumers, the Contract Law (《合同法》), the Copyright Law (《著作权法》), and the Law of Tort (《侵权责任法》). Among others, the Advertising Law specifically provides for a cause of action for consumers against the advertiser if the advertisement is fraudulent, deceptive or misleading and the consumer’s interest is harmed after the purchase of products or receipt of services (Article 56, the Advertising Law). That said, in practice, if the subject product or service is of relatively little value, the consumer may choose to bring the case on the basis of the Law on Protection of Rights and Interests of Consumers to claim for punitive damage; and, for a product or service of high value, the consumer may rely not only on the Advertising Law, but also other laws, such as the Contract Law, to resolve a dispute with the advertiser. The remedies available for such private actions include, in general, fines, rescission and apologies.

Private citizens may challenge advertising practices in capacities other than that of consumers. For example, an individual, such as a celebrity, may challenge an advertiser if the advertisement uses his or her likeness or other personal features without an appropriate release. A copyright owner may also dispute with the advertiser if the advertisement incorporates copyrighted work without a proper licence in place.

The Advertising Law stipulates stringent rules in connection with certain regulated industries, including for example:

  • Certain prescribed drugs are prohibited from being advertised, including narcotics, psychotropics, and toxic drugs for medical use.
  • Prescription drugs other than those set out as being prohibited for advertising may only be advertised in specialised pharmaceutical or medical journals jointly designated by the health and the drug administrative departments of the State Council.
  • Any advertisement for medicine, medical equipment, and medical services may not include content such as a statement on the recovery or response rate.
  • Advertisements for tobacco may not be published in mass media, in public places or outdoors; no tobacco advertisement shall be sent to minors.
  • Advertisements for wine shall not contain any inducement or instigation to drink or immoderate drinking.
  • Advertisements for investment products and services shall contain a reasonable reminder or warning of the possible risks.

In addition to the Advertising Law, there are additional regulations governing the adverting of products and services in special sectors, including for example:

  • Internet advertising – The Provisional Measures for Administration of Internet Advertising, issued by the former SAIC, promulgate special rules over advertisements published on the internet.
  • Radio and TV advertising – The Administrative Measures for the Broadcasting of Radio and Television Advertisements (《广播电视广告播出管理办法》) and its Supplemental Provisions (《<广播电视广告播出管理办法>的补充规定》), issued by the former State Administration of Radio, Film and Television (SARFT), whose successor is the National Administration of Radio and Television (NATR), set forth rules on the possible broadcasting times and content of advertisements published through radio and TV channels.
  • Food – The Interim Measures for the Administration of Review of Advertisements on Drugs, Medical Devices, Dietary Supplements and Formula Foods for Special Medical Purposes (《药品、医疗器械、保健食品、特殊医学用途配方食品广告审查管理暂行办法》), issued by the SAMR, set forth the standards and procedures for review of adverts for drugs, medical devices, dietary supplements and formula foods for special medical purposes.
  • Tobacco – The Law on Tobacco Monopoly (《烟草专卖法》) and the Regulations for the Packaging & Labelling of Cigarettes (《中华人民共和国境内卷烟包装表示的规定》) set forth restrictions on the content and method of advertising on tobacco products.

The Healthcare Industry and Advertising in the Age of COVID-19

As illustrated above, the healthcare industry is heavily regulated from the perspective of advertising practice. In the past 12 months, since the COVID-19 outbreak, some advertisers have falsely claimed their products to be able to “prevent the virus” or “kill germs”. The legal and regulatory trends are to strengthen regulation over the healthcare sector, especially in relation to COVID-19.

Reported cases on the AMR’s enforcement against such false advertising activities include an administrative case in February 2020, where the Shanghai City AMR enforced against a cosmetics manufacturer who claimed its products to be anti-inflammatory and capable of preventing the virus from entering the respiratory system, and an administrative case in May 2020, where the Yuyao City AMR enforced against a masks retailer who falsely claimed its masks to be “N90”, “N95”, etc. In addition, it has been reaffirmed by the Supreme People’s Court, Supreme People's Procuratorate, the Ministry of Public Security, and the Ministry of Justice that false advertising related to the prevention or control of the epidemic emergency falls within the scope of the crime of false advertising crime (Article 2.5, “Opinion on cracking down on Illegality and crime that jeopardise the prevention and control of the coronavirus pneumonia epidemic” (《关于依法惩治妨害新型冠状病毒感染肺炎疫情防控违法犯罪的意见》, February 2020)

According to Article 28 of the Advertising Law, any advertisement that defrauds or misleads consumers with any false or misleading content will be a false advertisement. Furthermore, the law specifies a list of scenarios where a false advertisement will be deemed to exist, including where:

  • the advertised product or service does not exist;
  • in connection with the product's performance, functions, place of production, uses, quality, specification, ingredients, price, producer, term of validity, sales condition, and honours received, among others, or the service's contents, provider, form, quality, price, sales condition, and honours received, among others, or any commitments, among others, made regarding the product or service, there is any inconsistency with the actual circumstances that has a material impact on purchase decisions;
  • any scientific research result, statistical data, investigation result, excerpt, quotation, or other information, which is fabricated or forged or cannot be validated, has been used as certification material;
  • the results of using the product or receiving the service are fabricated; and
  • consumers are otherwise defrauded or misled with any false or misleading content.

In a judicial interpretation issued by the Supreme People’s Court, the court noted that “[i]n determining whether it is misleading and false publicity, the People's Court shall use as the basis such factors as daily life experiences, the general attention of the relevant public, the facts causing misunderstanding and the actual circumstances of the subject of the publicity, etc” (Item 3, Article 8, Supreme People's Court, Interpretation on Several Issues Concerning the Applicable Laws in the Trial of Unfair Competition Civil Cases, 《最高人民法院关于审理不正当竞争民事案件应用法律若干问题的解释》)

The scope of advertising claims subject to the regulation of the Advertising Law is broad, including both express claims and implied claims regarding products and services. In judicial practice, the scope of advertising includes general introductions made by the advertiser. Any product or service-related information that can have a material effect on a consumer’s decision-making is regulated by the Advertising Law, including introduction of the scale, location and environment of the advertiser, as well as claims having to do with business goodwill and the history of the advertiser.

The Advertising Law does not set forth how to distinguish express and implied claims; instead, the court and administrative regulator would have substantial discretion to determine whether there is an actionable implied claim. The key to determining whether there is an actionable advertising claim is whether the advertisement has any false or misleading content or defrauds or misleads consumers. The misrepresentation made by an advertisement may be any information relating to product quality, composition and ingredients, function and use, expiry date and place of origin. In many cases, misrepresentation may be the legal ground for not only an advertising claim, but also an unfair-competition claim. To avoid being challenged, an advertisement claim should be truthful and precise and an “implied claim” is not a safe harbour.

Advertising claim substantiation is largely achieved by verification of the certifications of the advertiser/advertised products. The Advertising Law requires the advertising agent and advertisement publisher to examine the relevant certification documents, and to verify the content of an advertisement under laws and administrative regulations. According to the Regulations for the Management of Advertising, the following certification documents need to be provided respectively in connection with the corresponding types of advertisements:

  • for a commodity advertised as meeting quality standards – the certificate of inspection issued by the competent standardisation administrative department or by a quality inspection body;
  • for a commodity advertised under the title of a high-quality product – the certificate of a high-quality product issued by the government;
  • for a commodity advertised as under patent protection – the certificate of grant of patent;
  • for a commodity advertised as bearing a registered trademark – the certificate of trademark registration;
  • for cultural, educational or public health advertisements – the certificate issued by the competent administrative department; and
  • the certificate issued by the competent authority, or its authorised institution, in the case of other types of advertisements for which certificates are required.

In addition, data, statistics, investigation results, excerpts, quotations, and other citations used in an advertisement must be true and accurate, with the sources indicated. As an example, in 2018, an internet car dealership was fined over CNY10 million by the Beijing Haidian AIC Bureau because the advertisement previously published on the company’s website was found to lack the necessary supporting statistics.

The Advertising Law does not specifically provide for standards generally applicable to testing that is conducted to support advertising claims. There have been some judicial findings indicating that an advertising claim is more vulnerable to being challenged if the statistics used in the claim are research results of the institutes owned, or sponsored, by the advertiser itself (see eg, Guangzhou Colgate-Palmolive Co., Ltd v P&G (China) Co., Ltd., Hu 2nd Intermediate Civil 5 (IP) Chu 40 (2004)).

According to the Drug Administration Law, prior to the launch of any new drug, three rounds of clinical trials are required to verify the safety and effectiveness of that drug. After the launch, the drug manufacturer shall collect information and look into safety incidents according to the clinical treatment of patients. Therefore, for advertisements of such pharmaceutical products, the requirement for clinical trials is in fact included in the supporting documents (such as relevant permits) required to be submitted. In addition, adverts for medical drugs are subject to content censorship review. Under the Provisions of Drug Advertisement Examination, an Application Form for Drug Advertisement shall be submitted for the application of a drug advertisement, and relevant supporting documents shall be submitted along with the form, including, without limitation, the business licence, the drug manufacturing certificate, the drug supply certificate, the drug approval document and the patent certificate.

Advertising claims in connection with all the following types of products and services are subject to special rules as stipulated in the law: education, real estate, dietary supplements, medical, drugs, medical devices, goods or services with expected an return on investment, crop seeds, tree seeds, grass seeds, breeding livestock and poultry, aquatic seedling and species breeding, etc. (Articles 24-27, the Advertising Law). For instance, advertisements for education or training shall not contain any explicit or implicit commitment or guarantee of future enrolment in a school, passing examinations, or obtaining an academic degree or a diploma or guarantee the results of education or training; advertisements for real estate shall not contain any commitment on appreciation or investment return.

In addition, some prohibited expressions are set forth in the existing rules and regulations issued by the former regulator (SAIC) and its successor (SAMR). For instance, according to the Criteria for the Examination and Publication of Medical Device Advertisements (《医疗器械广告审查发布标准》), advertisements on medical devices shall not contain any commitment-related language, such as “safe”, “no toxic side effect”, “refund if found ineffective”, or “non-addictive”.

Comparative advertising is, with certain exceptions and constraints, permitted by the Advertising Law, provided, however, that no advertisement shall disparage the goods or services of any other producer or trader, and the advertiser, advertising agent, and advertisement publisher shall not conduct any form of unfair competition in their advertising activities. Notwithstanding the foregoing, with respect to certain categories of products – such as medical drugs, medical devices and dietary supplements – comparative advertising is not allowed, as the effect of these products varies on different users, and a direct comparison between products may be unfair.

For products and services not prohibited by the law from conducting comparative advertising, on the basis that there is scientific evidence and/or proof that the products/services being compared are of the same categories and are comparable in nature, comparative advertising is allowed, and identifying a competitor by name is not prohibited by the law per se. Comparative advertising is allowed because, to a certain degree, truthful comparative advertising may help enhance the transparency of the market and protect consumers’ right to information, and consequently result in competition among the manufacturers in the relevant market, ultimately protecting the interests of consumers (see: Interpretation of Advertising Law of the PRC by the Advertising Supervision and Administration Department of the former SAIC, China Legal Publishing House, 2019).

In practice, it is not rare for an advertiser to make a one-sided comparison with competing products and emphasise the advantages of the advertiser’s own products and the disadvantages of the competition. However, the advertiser must avoid advertisement content that discredits or denigrates other traders or their products/services, as it may result in violation of both the Advertising Law and the Anti-Unfair Competition Law.

Generally speaking, all advertising claims must be truthful, objective and provable. The law does not stipulate a specific standard for comparative advertising claims. However, the non-disparaging requirement discussed in 3.1 General Requirements is closely related to comparative advertising.

There is a general understanding that has developed regarding comparative advertising claims. First, the products or services being compared must be comparable in nature. A comparison between products of a different nature to distinguish the advertiser’s own product/service may be misleading to consumers and disparaging to the product/service with which it is being compared. For instance, natural mineral water and deionised water were viewed as different types of product that lack comparability by the Guangzhou AIC, and an administrative fine was levied on the advertiser who compared the PH value of these two types of drinkable bottled water. Second, comparative advertising should be objective and fair. An advertisement is not required to disclose the disadvantages of the subject product or service. However, in the case of comparative advertising, if the advertiser excessively emphasises the disadvantages of the compared product, while remaining silent about the disadvantage of its own product, such claims may mislead the consumer to believe that the product being advertised has no disadvantages. In such case, a comparative advertisement lacking complete information may be viewed as a false advertisement.

There is no specifically delineated set of standards to determine whether comparative advertising claims are truthful and, therefore, the standard rules on truthful advertising apply. In practice, the advertiser should generally be prepared to prove the claims with evidence.

Obviously, the advertisement must support the fact it claims with credible sources. In an unfair competition case, the defendant (being the advertiser) claimed in its advertisement that its product received a high score of 95 in terms of “market growth potential”, while the product of its competitor (being the plaintiff) received a score of only 73. However, the defendant failed to support the truthfulness of this claim with proper source information and consequently the advertisement was deemed a false one, and the unfair competition claim was upheld by the court (Zongshen Group Co., Ltd. v Guangzhou Panyu South China Motorcycle Enterprise Group Co., Ltd., Yu High Court Final No. 43, 2009).

It is more difficult to challenge comparative advertising if the comparison is supported by research results, including data and statistics that come from an independent third party. On the contrary, if the statistics originate in institutes owned or sponsored by the advertiser, then the comparative advertisement is more vulnerable to a challenge (see, eg, Guangzhou Colgate-Palmolive Co., Ltd v P&G (China) Co., Ltd., Hu 2nd Intermediate Civil 5 (IP) Chu 40 (2004)).

An advertiser may challenge claims made by a competitor based on different causes of action, including false advertising. If the advertiser exaggerates its own products and disparages the competing products, or publishes false advertisements which contain non-truthful information, the advertiser may be found to have conducted false advertising and commercial disparagement, and consequently be subject to administrative sanction for violating the Advertising Law and/or the Unfair Competition law. The penalties range from fines, cessation of the illegal act, elimination of effects and revocation of the Business Licence (Article 55, the Advertising Law and Article 20, Anti-Unfair Competition Law).

There is no particular trend with respect to comparative advertising in the last 12 months. However, as influencer campaigns have become more popular in recent times, advertisers should pay close attention to the content published by the influencer to avoid false advertising or commercial disparagement if the influencer presents the advertiser’s product as superior to a competitor’s.

Digital Advertising has seen tremendous development in China over recent years. Forms of digital advertising range from advertising on social media to search engine advertising, e-commerce retail advertising, and in-feed advertising. All such advertising activities are primarily regulated by the Advertising Law and the Provisional Measures for Administration of Internet Advertising of 2016, issued by the SAIC. Any advertisement appearing on digital platforms must comply with not only the Advertising Law, including the specific heightened requirements applicable to particular industry sectors and products/services (see 1.6 Regulated Industries), but also the special requirements for internet advertising. For instance, Article 7 of the Provisional Measures for Administration of Internet Advertising provides that internet advertisements shall be identifiable and clearly marked with an “advertising” label, so as to be recognisable as such to the public.

Recently, the government has put more effort into regulating digital advertising. The SAIC issued Notice on Launching Special Rectification on Internet Advertising in 2018 and the SAMR issued Notice on Further Conducting Rectification on Internet Advertising in 2019 (collectively, the Notices). The Notices call for severe crackdown on internet advertising violations and special campaigns to rectify internet advertising. The Notices further provide that these campaigns shall:

  • focus primarily on portals, search engines and e-commerce platforms with substantial social impact and wide coverage, highlighting internet media such as mobile apps and new media accounts; and
  • enhance law enforcement efforts against false and illegal advertising in areas closely related to people’s health and property, such as medical care, medicine, dietary supplements, real estate, financial investment and wealth management. 

Digital marketing has become one of the key methods for business owners to expand their market and raise awareness of their brands. Some of the key challenges marketers often encounter in their practices are set out below.

Defining “Advertising”

Determining what counts as an advert and the role of players in digital advertising can be difficult. The Provisional Measures for Administration of Internet Advertising require all online advertising to be marked with the word “advertising”, regardless of its form. In practice, however, a significant quantity of “soft advertising”, which does not appear as traditional advertising, exists and can be effective in driving consumer interest. Furthermore, in social media marketing, there is a great deal of role overlapping between advertisers, agents and publishers. As such, prior to placing promotional content online, marketers should assess whether their marketing activity will be subject to any advertising rules and their own role in that activity, as the Advertising Law imposes different liabilities on advertisers, advertising agents, advertisement publishers and product endorsers.

Ensuring Content Originality

Given the tremendous resources and information available online, marketers must ensure the originality and quality of their advertising content and prevent copying from other resources without proper licensing or permission, which may lead to severe copyright issues.

Local Regulation

Becoming aware of the various applicable regional rules is a key marketing challenge. Each of the AMRs, the primary government agencies regulating advertising actives, has its particular scope of authority, based on regional territories, yet social media advertising often transcends regional boundaries. The marketer active in digital advertising may find it challenging to figure out which regional entity, and therefore which regional rules issued by that entity, are applicable to it.

Platform Restrictions

Marketers face additional restrictions imposed by the platforms. Strong advertising platforms, such as Tencent’s advertising ecosystem, have their own rules about advertising. A business owner has to comply with the terms and conditions as required by such platforms, on top of the mandatory laws and regulations.

Data Protection

Marketers may have to play safe with regard to data utilisation. If the marketer chooses to advertise on a less sophisticated social media platform, as opposed to a strong and sophisticated network, the marketer needs to be more careful about the rules protecting user data before it uses the data provided by the platform.

As to the liability of the advertiser for content posted by others on the advertiser’s site or social media channels, as long as advertising is deemed to be in existence and the advertiser is deemed as an “advertiser” within the meaning of the Advertising Law, that advertiser is required to “be responsible for the truthfulness of the advertisement” (Article 4, the Advertising Law). Bona fide reliance by consumers may be found, which could render the host advertiser liable due to content posted by others on its website or social media. The law does not distinguish the identity of the publisher to determine the liability of the advertiser. To avoid being held liable, it is advisable that the advertiser timely review the content on its site or social medial channels, and remove any undesirable content.

In principle, the same disclosure requirements apply to social media advertising and traditional media advertising. Meanwhile, it is noteworthy that Article 7 of the Provisional Measures for Administration of Internet Advertising provides that internet advertising shall be identifiable and clearly marked with an “advertising” label to be recognisable as a kind of advertisement to the public. This provision sets forth a higher standard of identifiability for internet advertising over general advertising. According to Article 23 of the Provisional Measures for Administration of Internet Advertising, internet advertising that is not identifiable shall be punished in accordance with the provisions of the Advertising Law. The current law does not provide for any exceptions for social media ads that have space limitations or constraints. As discussed in 4.2 Key Legal Issues, however, there are grey areas of advertising on the internet that the current laws and rules do not seem to have fully caught up to yet. See also 4.6 Native Advertising.

At this time, we have found no unique laws or regulations that specifically apply to the use of any of the major social media platforms, such as WeChat or Weibo. Meanwhile, major social media platforms in the PRC, such as WeChat or Weibo, have developed their own editorial and content guidelines to which the advertisers must comply on top of the existing laws, and advertisers need to adhere to the different verification procedures as required by the respective platforms.

Native advertising is a type of advertising that matches the form and function of the platform upon which it appears. Native advertising can take the form of in-feed ads, search and promoted listing, content recommendation, Weibo posts, WeChat articles and so forth. The reason for it being called “native” is that such advertising integrates with the original content of a website or app and is designed with a focus on user experience. As such, native advertising does not look like other advertising, but more like part of the overall website or app content. Native advertising is appealing because, when the advertisement integrates well with the content of the website or the app, it reduces the reader’s advertisement recognition.

However, despite being called “native”, if it is a marketing activity to promote a product or service, it should, at least in the view of certain government agencies, still be subject to the disclosure requirements as provided for in 4.4 Disclosure. As said, the Advertising Law and the Provisional Measures for Administration of Internet Advertising both require that advertising be clearly identifiable. In practice, however, due to the blurred lines between editorial and sponsored claims, native advertising is usually not marked with an “advertising” label as required by law. As such, in the event that native advertising infringes on consumers’ rights and interests or “interrupts the order of the advertising market”, its well-hidden form could bring more uncertainties as to how it should be regulated.

Since the Chinese e-commerce giant Taobao launched its live streaming business in 2016, influencer campaigns have become an established form of online advertising in the Chinese market. An influencer is someone capable of exerting influence on the audience’s purchasing decisions due to his or her social status, fame, presentation skills, professional knowledge, etc. Popular types of influencers include celebrities, entrepreneurs or professional streaming hosts. In recent years, a growing number of brands have increased their influencer marketing budgets. Meanwhile, China’s unique social media landscape has led to a different ecosystem for influencer campaigns, resulting in two main business models: social media advertising, as well as e-commerce retail advertising.

Social Media Advertising

The first model involves numerous popular social media platforms in China (WeChat, Weibo, TikTok, Bilibili, Little Red Book, Zhi Hu, etc), whereby the influencer posts promotional content for soft-sell advertising. Successful influencers rarely adopt overwhelming product descriptions or direct brand endorsement. Rather, they take more creative approaches to persuading their audience, such as sharing personal experience or offering competitive discounts. Usually, social media sites are not qualified e-commerce platforms, and consequently, brand owners need to co-operate with e-commerce platforms for the stimulated consumer to complete the purchase. For example, there may be a link in the webpage redirecting the consumer to the online retail store where an order may be placed.

E-Commerce Advertising

In the second model, the platform (eg, Taobao Live Streaming) sets up a direct sales channel for various business owners to promote and sell their merchandise. In some circumstances, the influencer who promotes his or her own brand/products is the business owner him or herself, such as Zhang Dayi and Li Ziqi. In some other circumstances, a business owner would hire an influencer to create a post or/and conduct a live stream to promote products online. If interested, the audience can complete the purchase within seconds, through clicking the product link shown at the bottom of the webpage or app page.

Influencer campaigns have been continuing to grow fast against the backdrop of China’s booming digital ecosystem. On the one hand, the fast-paced change of the digital infrastructure in China is itself influencing influencer campaigns by way of offering more consolidated online ecosystems to marketers. An example would be the Tencent alliance ecosystem ( 腾讯优量汇 ). Based on its homepage introduction, this ecosystem brings together more than 50,000 apps and shows advertising campaigns to more than one billion users per month. On the other hand, influencer campaigns also help to reshape the digital infrastructure landscape, as advertising income remains a strong driving engine for internet companies.

An influencer campaign that promotes a brand or product and influences the purchasing decision of a consumer would be viewed as advertising and, as such, be regulated by the Advertising Law, the Provisional Measures for Administration of Internet Advertising and other regulations applicable to online activities in general. There are no special rules or regulations that apply to the use of influencer campaigns per se.

Very recently, the China Advertising Association released the Code of Conduct for Live Streaming Marketing (the Code, 《网络直播营销行为规范》), aiming to provide guidance for marketers, influencers, platforms, influencer marketing agencies and audiences that engage in live streaming marketing. For marketers, the Code provides that they shall have the qualifications and permits corresponding to the goods or services provided, and carry out business operation with certificates and licences displayed. For influencers, the Code provides that they shall ensure the information presented in live streaming to be truthful and legitimate, and shall not make false claims about goods and services or attempt to cheat or mislead consumers. As a self-disciplining document, the Code is mainly persuasive rather than mandatory. However, the Code also adopts certain measures to promote the effective implementation of such self-discipline. For instance, warnings, admonitions, supervision on rectification and public criticism may be conducted by the China Advertising Association as the case may be. Moreover, where a violation is suspected, the case may be referred to the competent authority for investigation and punishment in accordance with the law.

An advertiser’s liability under the Advertising Law for the content posted by its influencer is determined mainly by two factors: whether the influencer’s activity is advertising under the Advertising Law, and the relationship between the advertiser and the influencer. When advertising is deemed to have taken place, the influencer may be viewed as the advertising publisher where the influencer is presenting the advertising content, or as the endorser where the influencer personally certifies the product or service.

The Advertising Law imposes strict liability on the advertiser with respect to the truthfulness of the content of the advertisement. In a scenario where the influencer (being the advertising publisher or endorsement person) is conducting advertising activity, the advertiser would be held liable if the content posted by the influencer is deceptive or misleading.

Email marketing is regulated mainly under the Advertising Law, the Measures for the Administration of Internet Email Services (《互联网电子邮件服务管理办法》) and the Provisional Measures for Administration of Internet Advertising.

The Advertising Law provides that, electronic advertising shall clearly indicate the real identity and contact information of the sender, and provide to the recipient the means to unsubscribe. The Measures for the Administration of Internet Email Service provide that it is prohibited to send any email containing commercial advertising content without the recipient’s express consent, and that the word “advertisement” or “AD” shall be placed at the beginning of the subject line of emails containing commercial advertising contents. In addition, the Provisional Measures for Administration of Internet Advertising provide that, internet advertising shall be identifiable and clearly marked with the word “advertising” to be recognisable as a kind of advertisement to the public. 

Legal liabilities for violation of such rules include confiscation of illegal proceeds, rectification of wrongdoings, and a fine up to CNY100,000 as applicable.

Telemarketing is governed by the Advertising Law and certain other administrative rules. In 2018, the Ministry of Industry and Information Technology (MIIT) carried out a special action against unsolicited telemarketing calls. The Proposal for Special Action against Unsolicited Telemarketing Calls (《综合整治骚扰电话专项行动方案》) and the supporting Work Plan for Promoting the Special Action of the Comprehensive Rectification of Unsolicited Telemarketing Calls (《关于推进综合整治骚扰电话专项行动的工作方案》) provide that, so as not to interrupt the normal life of users, for commercial outbound telemarketing calls:

  • the consent of users shall be obtained;
  • a white list of users shall be established;
  • relevant materials shall be retained; and
  • the time and conduct of telemarketing calls shall be regulated.

In addition, local authorities also regulate telemarketing in the form of local regulations or administrative rules. For instance, the Regulations on Advertising of Jiangsu Province (《江苏省广告条例》) provide that, without the consent or request of the parties concerned, it is illegal to send advertisements to fixed telephones, mobile phones or personal email addresses via phone calls or electronic messages.

In summary, the user’s consent is essential for permitted telemarketing, alongside other factors, including that the content of telemarketing must be lawful (eg, solicitation of gambling is strictly prohibited in any event). There are no express legal liability provisions under the relevant rules governing telemarketing, but the authority may apply the Advertising Law for illegal advertising activities. In addition, in the event that telemarketing is associated with telephone scams, criminal liability may be imposed if that telemarketing serves as a means for fraudulent purposes.

Advertising by text messaging is mainly regulated by the Provisions on the Administration of Short Message Services Communications (《通信短信息服务管理规定》), issued by the MIIT, as well as the administrative regulations and rules promulgated by local governments. For instance, the Regulations on Advertising of Jiangsu Province provide that, without the consent or request of the parties concerned, it is illegal to send advertisements to mobile phones, which includes text messaging.

In summary, the general requirements for SMS advertising are that:

  • the recipient shall be informed and have given consent, as commercial short messages can only be sent after informing the user of the type, frequency and time limit of such messages and obtaining consent of users;
  • the name of the SMS content provider shall be included; and
  • a convenient and effective way to unsubscribe shall be provided along with the SMS.

Given that the Provisions on the Administration of Short Message Services Communications provide no specific liability provisions, the law enforcement body may rely on the Advertising Law to enforce the prohibition against illegal SMS advertising.

Relevant regulatory requirements regarding the use of consumer data for purposes of targeting or retargeting consumers with advertising are found in the Law on the Protection of Consumer Rights and Interests. It provides that, in collecting and using the personal information of consumers, business operators shall:

  • observe the principles of legality, rationality and necessity;
  • explicitly state the purposes, methods and scope of collection or use of information; and
  • obtain the consent of consumers.

Moreover, business operators shall not send commercial information to consumers without the consent or request of consumers or after receiving a clear refusal from consumers. Violation of the Law on the Protection of Consumer Rights and Interests may result in warnings, confiscation of illegal proceeds, fines of up to ten times the illegal gains, and revocation of business licences. Furthermore, the Provisions on Supervision of Internet Transactions of 2014 (《网络交易管理办法》) require internet business operators and services providers to keep consumers’ personal information and business operators’ business secrets strictly confidential. The Guiding Opinions on Regulating Data Interconnection and Sharing for Courier Services and of Electronic Business of 2019 (《关于规范快递与电子商务数据互联共享的指导意见》) also set forth requirements on legally collecting and storing shared users’ data.

Furthermore, the use of personal information by apps or software development kits (SDK) for targeted push has come to the attention of the authorities. On 22 July 2020, the MIIT issued the Circular concerning the Carrying-Forward of Special Tasks on the Remediation of APP Infringing User Rights (《工业和信息化部关于开展纵深推进APP侵害用户权益专项整治行动的通知》), emphasising that the providers of apps and SDKs must follow the regulations in the collection and use of personal information, as well as in sending targeted advertising.

As for self-regulation, a nationwide industry standard Personal Information Security Specification (《个人信息安全规范》) provides for restrictions on the use of personal information. It provides that, in using personal information, clear identity directionality shall be eliminated to avoid identifying any individuals directly, unless otherwise necessary for the realisation of the purpose of the use approved by the subject of personal information upon authorisation. For example, direct user portraits may be used to evaluate personal credit status, while indirect user portraits may be used for pushing commercial advertising. In addition, the Interactive Internet Advertising Committee of China released the Industry Standard Framework on Consumer Information Protection in Internet Targeted Advertising (《中国互联网定向广告用户信息保护行业框架标准》), which provides for industry self-regulation of targeted internet advertising.

The Advertising Law introduced a set of restrictions on advertising that targets minors under the age of 18, as well as certain additional restrictions on advertising targeting minors under the age of 14. In connection with minors under the age of 18, the following restrictions apply:

  • tobacco ads are prohibited;
  • no advertising activity shall be conducted in kindergarten, primary and middle schools, as well as on textbooks, school uniforms, stationery, etc; and
  • no adverts for medicine, drugs, cosmetics, etc targeting minors shall be published in mass media.

In connection with minors under the age of 14, the advertisement shall not contain:

  • any inducement for the minors to ask parents to purchase the advertised goods or services; or
  • any unsafe activity that may cause imitation by minors.

If an advertiser violates the Advertising Law to send advertisements to minors, the advertiser may be subject to sanctions including recall of illegal advertisements, fines, non-approval of future advertisements in a one-year term, confiscation, revocation of business licence, etc.

Collection of personal information of minors is specifically regulated by the Provisions on the Cyberspace Protection of Children’s Personal Information (《儿童个人信息网络保护规定》). The Provisions provide detail regarding the network operator’s obligations in connection with handling of the personal information of minors (ie, those under the age of 14). The Cybersecurity Law sheds light on what constitutes “personal information”: personal information refers to all kinds of information recorded in electronic or other forms, which can be used, independently or in combination with other information, to identify a natural person’s identity.

Violation of the Provisions on the Cyberspace Protection of Children’s Personal Information may result in a fine up to CNY1 million, being ordered to shut down the website in question and the violation may even incur criminal liability for the violator.

“Sweepstakes” does not have a corresponding legal meaning under existing Chinese laws. As such, there are no specific rules governing sweepstakes as marketing activities, and there is no statutory guidance as to whether it is permitted to require consumers to make a purchase in order to participate. That said, this does not mean that sweepstakes are not regulated in China. On the contrary, as sweepstakes can be loosely interpreted as prize-attached sale, such types of marketing activity are subject to several rules and may trigger different legal issues.

Anti-Unfair Competition Law

Laws and regulations such as the Anti-Unfair Competition Law and the Certain Regulations on Prohibiting Unfair Competition in Prize-Attached Sales (《关于禁止有奖销售活动中不正当竞争行为的若干规定》) promulgated by the SAIC impose regulations on prize-attached sales. The regulatory focus includes unclear information on prize-attached sales, internally determined prizes, rigged winning results, inferior products with high prices, and the amount of the highest prize exceeding the statutory limit.

Lottery Management Regulations

If any person issues lottery tickets in the guise of prize-attached sales in order to seek profits, and to earn the price difference from the sale of commodities by setting prices much higher than the actual commodities under the lure of large prizes, this act shall be deemed illegal and may even constitute a crime. According to the Lottery Management Regulations (《彩票管理条例》), where anyone violates these regulations by illegally issuing or selling lottery tickets, or issuing or selling foreign lottery tickets within the territory of the PRC, he or she may be subject to criminal liability if a crime is constituted; where no crime is constituted, he or she may be subject to a public security penalty by the public security bureau; where there are illegal proceeds, such illegal proceeds shall be forfeited.

Advertising Rules

If sweepstakes are used as marketing promotions to reward consumers and to draw attention to products or services, then they shall be subject to all advertising law requirements as a form of advertising campaign.

The existing Chinese law has not defined what constitutes a “contest of skill” or a “game of chance”, nor does it provide for a distinction between them. Gambling disguised as a contest of skill or game of chance is strictly prohibited, yet the law has not provided the criteria to distinguish contests of skill and games of chance (as forms of marketing activity) from those regarded as prohibited gambling.

As “contests of skill” and “games of chance” are not defined legal terms, they are, in principle, subject to particular registration or approval requirements only if the concrete activity falls into the scope of defined activities for which such requirements exist. For example, if the contests or games constitute sports competitions, including e-sports and board and card games, they are regulated by the sports administrative department under the State Council, national associations and local people’s governments in accordance with the Sports Law (《体育法》). Under the sports rules, the filing of sport projects shall be submitted to the General Administration of Sports by the Sports Project Management Centre. The filing is either for approval or just for the record, based on the specific type of the project. For instance, Olympic sports and “an event” of non-Olympic sports are treated differently in terms of approval requirement. The General Administration of Sports reviews the application according to the Measures for the Administration of Sports Project Approval (《体育运动项目立项管理办法》) and makes public notice after approval.

There are no special laws or regulations for loyalty programmes. Similarly, the term “loyalty programme” does not have a corresponding legal definition under the existing Chinese law, despite the fact that such programmes are often seen in daily life. A typical “point-based” loyalty programme involves a business setting up an account for a customer and offering points for each purchase, the accumulated points may be redeemed for discounts or gifts from the business or connected stores. The lack of special laws or rules specifically for loyalty programmes does not mean that they are not regulated. There are rules to be borne in mind if a business owner intends to launch a loyalty programme, for example:

  • If the loyalty points are deemed as virtual currency for online games, specific rules would apply, including the Provisional Measures for the Administration of Online Games, Notice of the Ministry of Culture on Strengthening the In-process and Ex Post Regulation of the Operations of Online Games(《文化部关于规范网络游戏运营加强事中事后监管工作的通知》, Notice on Regulating the Operation Order of Online Games and Prohibiting the Use of Online Game Gambling (《关于规范网络游戏经营秩序查禁利用网络游戏赌博的通知》).
  • Loyalty programmes may not be used as a disguised commercial bribe; for instance, when a manufacturer gives away loyalty points with substantial redeemable value to retailers so as to induce the retailer into placing more orders, this kind of loyalty programme may trigger concerns for potential commercial bribery.
  • When a loyalty programme involves pre-paid membership, the business owner shall observe relevant rules such as the Administrative Measures for Single-Purpose Commercial Prepaid Cards (for Trial Implementation) (2016 Amendment) (《单用途商业预付卡管理办法(试行)》 2016).

The Chinese Anti-Monopoly Law prohibits operators in the market that have a dominant position from selling commodities at a price below cost. In addition, the Price Law forbids dumping sales for the purpose of crowing out competitors and dominating the market, or implementing hidden price decrease by way of increasing the grade of merchandises or services. A marketer’s offer of free or reduced-price products or services is not illegal per se but regulators may, in certain circumstances, deem such activities as unfair methods to gain advantages over competitors. For instance, on 21 March 2018, a Chinese ride-hailing company launched its business in Shanghai and offered substantial numbers of subsidies to its users. On the same day, the company was reported to have been called in for a face-to-face meeting with three local authorities: the Municipal Transportation Commission, Municipal Public Security Bureau, and Market Price Inspection Bureau of Shanghai. The authorities pointed out that the ride-hailing company was giving out a high subsidy to crowd out competitors and monopolise the market, and was operating at a price lower than the cost, which disrupted the normal market order. The company was required to immediately stop such unfair pricing strategies.

A number of recent commentaries have criticised businesses that use automatic renewal or continuous service offers, including articles published by the People’s Court Daily and People’s Daily Online. According to the E-Commerce Law (《电子商务法》), e-commerce platforms shall not turn on automatic subscription and renewal options for consumers by default. If there is tying behaviour, it shall be brought to consumers’ attention in a conspicuous way.

In implementing the above rule, local authorities sometimes take rather informal approaches, such as hosting face-to-face meetings, to urge the marketers to self-correct. For instance, it was reported that on 8 April 2020, the Consumer Rights Protection Committee of Zhejiang Province summoned nine major online platforms to attend a face-to-face meeting and warn against their illegal practices, including their automatic renewal settings. Subsequent reports indicate that some of these platforms quickly turned around and took measures such as sending internet messages or SMSes to users prior to deducting membership fees, reminding users of the upcoming fee deduction, and/or informing the users of the method to cancel the services.

Haiwen & Partners

20/F, Fortune Financial Center
5 Dong San Huan Central Road
Chaoyang District
Beijing 100020
P. R. China

+86 10 8560 6888

+86 10 8560 6999

caoyu@haiwen-law.com www.haiwen-law.com
Author Business Card

Trends and Developments


Authors



Haiwen & Partners was founded in May 1992 and is one of the leading general practice law firms in the People's Republic of China, with around 200 lawyers in total working in its Beijing, Chengdu, Hong Kong, Shanghai and Shenzhen offices. The firm started its pioneering entertainment and media law practice more than a decade ago, involving a wide variety of practice areas in the entertainment industries, including the development, production, and distribution of film and television projects; large theme park projects; recording and music publishing; live concerts; literary publishing; advertising; and new media matters. The firm’s clients include major film studios, leading investment companies, as well as top talent, producers and directors, both in and outside China. Combined with its strong practice in the capital markets and M&A areas, Haiwen also provides extensive legal services to clients conducting IPOs, M&A, and other general corporate finance transactions in the entertainment industries.

Despite a number of complications and challenges in the past 12 months, including, the COVID-19 outbreak and the increased tension between the USA and China, the trend for the Chinese economy becoming more market-oriented at a certain level has not changed. The continued efforts toward this economic model have kept driving participants to expand the reach of their businesses where new growth is expected to occur, while the government is encouraged not to interfere with the market in general. The continued development of advertising and marketing over the internet presents novel legal and regulatory issues. Regulation of business has become increasingly targeted and precise, as we see the government strengthen and improve regulatory measures in certain areas. Needless to say, the COVID-19 outbreak has brought about special challenges for the government, and it is expected to maintain a strong enforcement stance on behaviour that interferes with COVID-19 prevention and control. This has already brought false advertising to the attention of the authorities.

Increases in Local Legislation with Expansion of Business into Third and Fourth Tier Cities, Smaller Cities and Townships

Information from the State Administration for Market Regulation (SAMR) appears to suggest that third and fourth tier cities are becoming the next “blue ocean” for the growth of the advertising industry. Advertisers and major internet platforms have been seeking opportunities by deepening penetration, and trickling further down, in this market. With the number of China’s mobile internet users passing 1.1 billion in 2019, it is not surprising to see advertisers shift their budgets substantially to online advertising. making advertising activities more dynamic and diversified in general.

There are no clear-cut definitions or official standards for the determination of third and fourth tier cities. The “tiers” are defined by a comprehensive consideration; weighing factors such as the economic development level, GDP, and the extent of urbanisation (including urban population and urban construction size). Some literature divides cities in China into as many as six tiers. For the purpose of illustration, suffice it to say that third and fourth tier cities are those that are less developed than the three or four dozen major metropolises in China.

In relation to this development, local “legislation” (used herein broadly interpreted to include the adoption/promulgation of administrative measures) regarding advertising activities in local jurisdictions have been rolled out on a substantial scale. According to a professional legal database, from 2019, there have been:

  • eight local regulations (promulgated by various local People’s Congresses) primarily dealing with outdoor advertising facilities and billboards;
  • 24 rules by the respective local administrations also regulating outdoor advertising; and
  • 37 local circular-style government documents focusing on outdoor advertising as well as on medicine and medical device advertising in light of the COVID-19 pandemic.

Moreover, the local legislative authorities have also been exploring ways to further deregulate so as to improve the business environment for participants in the advertising sector to do business at the less developed level.

Continued Exploration of Self-Regulation

At the macro level, alongside the reduction of its direct involvement in the daily regulation of business activities, the government has continued to encourage industries to implement forms of self-regulation. For example, the National Health Commission, together with seven other ministry-level agencies (including the SAMR, which is the principal regulatory agency for advertising), issued a Circular concerning Further Strengthening the Comprehensive Supervision and Enforcement of Work on Medical Cosmetology (《关于进一步加强医疗美容综合监管执法工作的通知》) in April 2020, specifically emphasising the cultivation and the role of self-regulatory industry organisations. The government believes that such industry organisations will be able to help their members comply with regulatory requirements, such as those concerning the publishing of medical advertisements.

There are several industry associations for the advertising business in China, including the China Advertising Association (China CAA). The China CAA has been helping with the promulgation of rules for self-regulation within the industry. For example, the China CAA promulgated the Self-Disciplinary Rules on Milk Power Advertisements (《乳粉广告自律规则》) in October 2019, in which a set of detailed requirements concerning milk power advertisements were put in place. Such requirements have included, for example, (i) that the expression in the advertisements regarding ingredients, energy, and nutritious components of the milk powder has to be accurate and, (ii) that claims regarding nutrients have to be based on scientific studies. While these self-disciplinary rules are not enforceable by the government, the China CAA may adopt supervisory measures including investigation, reprimanding, publicising to society at large and reporting to the governing agencies. Earlier in 2018, the China CAA published Industry Framework Standards on the Protection of User Information concerning Internet Targeted Serving Advertisement in China (《中国互联网定向广告用户信息保护行业框架标准》). These standards set forth self-disciplinary rules for the targeted serving of adverts over the internet.

At the micro level, the platforms have strengthened their monitoring of online advertising activities. Rooted in social media platforms, new forms of advertising have emerged, among which the live streaming by “internet stars” or influencers promoting products has been the most popular, some achieving sensational results. In December 2019, a major short video sharing website and app, Kuaishou, sanctioned 91 influencers on its platform for using false, misleading, or unproven information in express/implied representations when advertising products.

Continued Discussion about the Regulation of Online Marketing by Influencers

The development of new forms of online marketing continues to present challenges to regulators and IP marketers. A key unresolved issue is that under the Advertising Law (《广告法》), whether, or to what extent, certain forms of online marketing should be considered advertising, and consequently be subject to the compliance requirements. If the definition of “advertisement” is interpreted broadly, most, if not all, of the new forms of marketing would fall within the jurisdiction of the Advertising Law. However, it is sometimes difficult to extend the definition to include certain circumstances, in particular online marketing by influencers it would be difficult to apply the Advertising Law. For example, the Advertising Law provides that the operators and publishers of adverts have a duty to verify the content of the specific adverts. But in the context of live marketing by influencers online, it is not practically possible for the largely improvised content/language to be verified/reviewed beforehand.

The complexity partially comes from the fact that the Advertising Law was promulgated to accommodate traditional forms of advertising. The Advertising Law was last amended in 2018. But live streaming by influencers, which present new challenges, has become very popular only recently, and it seems to present new challenges. As such, consumers often find it more convenient and effective to resort to the Law on the Protection of the Rights and Interests of Consumers (《消费者权益保护法》) than to resort to the Advertising Law.

As a matter of policy, the central government has encouraged a “generous and cautious” regulatory approach with respect to the internet economy. It appears as though the applicability of the Advertising Law in certain forms of internet marketing will continue to be a topic for discussion.

Data Security and Protection of Privacy

As targeted advertising based on big data becomes a major trend in the advertising business, the protection of the privacy of consumers and data security has become important for regulators. In the past 12 months or so, substantial legislative efforts (including the promulgation of administrative rules) and government actions have taken place affecting or targeting the advertising industry.

On 22 July 2020, the Ministry of Industry and Information Technology (MIIT) issued the Circular concerning the Carrying Forward of the Special Task on the Remediation of Apps Infringing User Rights (《工业和信息化部关于开展纵深推进APP侵害用户权益专项整治行动的通知》). The Circular focuses on regulating the unauthorised collection of the personal information of users, including:

  • browsing and searching records, as well as personal habits;
  • the unauthorised use of such information in targeted "push" or "precision" marketing; and
  • the lack of opt-out options for users to stop receiving such targeted advertising.

On 28 May 2019, the Cyberspace Administration of China published draft Rules on the Regulation of Data Security for public comments. The Rules contain provisions specifically dealing with commercial advertisements. According to the Draft Rules, if an “internet operator” uses user data and algorithms for the targeted push of news and commercial advertisements:

  • the words “targeted push” (定推) must be displayed;
  • the internet operator must provide the user with the choice to opt out of targeted push notifications; and
  • if the user has opted out, the internet operator must delete the data and personal information of the user, including the ID of the user’s device receiving the targeted push.

These draft Rules, however, at time of writing (October 2020), have not been officially adopted yet.

The draft Data Security Law (《数据安全法》) was published in July 2020 for public comments. The draft law provides that, among other things, where the laws and administrative regulations have prescribed the purpose and scope of the use of data, then that purpose and scope must be observed. Once the Data Security Law is passed, the State Council will likely issue implementation rules for the Law. The regulatory agencies may be authorised to issue departmental rules as well. Such new legislation will likely provide more details on the constraints regarding how data and personal information may be collected and used. It would not be surprising if the Cyberspace Administration, as the regulator of all online activities, officially rolls out the Rules on the Regulation of Data Security (as may be revised) or other rules concerning online data security and personal information activities. Such future legislation will likely influence online advertising activities.

Increased Precision in the Regulation of Advertising

Over the past 12 months or so, the regulation of the advertising market has become increasingly detailed and more precisely targeted. The move may be perceived as part of the government’s overall efforts to raise governance quality. The regulators have focused on advertising in the following industries: medical cosmetology, food, dietary supplements, education, and training.

Medical cosmetology

As mentioned above, eight ministry-level agencies jointly issued the Circular concerning Further Strengthening the Comprehensive Supervision and Enforcement of Work on Medical Cosmetology (《关于进一步加强医疗美容综合监管执法工作的通知》) in April 2020, in an effort to implement the State Council’s policy. This Circular, among other things, makes it clear that medical cosmetology advertisements shall be treated as medical advertisements and, therefore, may not be issued by non-medical institutions. Medical cosmetology advertisements are now subject to the review of the health regulatory agency as medical advertisements before publishing.

Dietary supplements

Remediation and sanctions for the advertising of dietary supplements adopted by the government has increased. Several provinces have issued guidance to implement stricter regulation of dietary supplement advertising. The emphasis has included sanctions for:

  • advertising that alters the content of approval documents for such supplements;
  • advertising that is issued in the guise of healthcare programmes or non-advertising articles in the media; and
  • advertising that involves prevention and treatment of diseases.

The parties publishing food advertisements are required to strengthen their review of such advertisements.

Education and training

In September 2019, the Ministry of Education, with seven other agencies including the Cyberspace Administration, jointly issued an Opinion concerning the Guidance and Normalisation of the Orderly Development of Mobile Internet Applications for Education (《教育部等八部门关于引导规范教育移动互联网应用有序健康发展的意见》). The Opinion requires, among other things, that educational apps may not impose any charges on students or parents, or have commercial advertisements or games embedded within them. In addition, some local governments launched taskforces targeting educational and training advertisements, focusing on content concerning entry into high school, passing exams, acquiring diplomas or certificates of competency, or express or implied commitments concerning the effect of the education or training provided.

Measures Relating to COVID-19

In the wake of the COVID-19 pandemic, a number of measures and rules have been promulgated by governments at all levels. Given the prevailing view that it will be years before human beings “defeat” the virus, and the consequent vigilance required on a continued basis, such measures and rules will likely continue to be effective and well-enforced, at least for the foreseeable future, with new measures and rules to be adopted as the situation evolves.

On 6 February 2020, the SAMR issued an opinion calling for severe and speedy sanction of unlawful activities during the period of COVID-19 prevention and control. While this Opinion does not identify specific advertising-related punishable activities, given that the SAMR is the general regulatory agency for the advertising market, the effect of the Opinion would also cover activities in the advertising market.

On 10 February 2020, the Supreme People’s Court, Supreme People’s Prosecutor, Ministry of Public Security, and Ministry of Justice jointly issued the Opinion on Cracking Down on Illegality and Crimes Jeopardising the Prevention and Control of the Coronavirus Pneumonia Epidemic (《关于依法惩治妨害新型冠状病毒感染肺炎疫情防控违法犯罪的意见》). This Opinion specifically identifies the activity of using adverts to make misrepresentations about the product or service being marketed. If meeting certain conditions, such activity will be sanctioned as criminal false advertising under the Criminal Law (《刑法).

In addition to efforts at the central government level, local governments have also promulgated rules in the wake of the COVID-19 situation, including those specifically dealing with advertising activities. For example, the Shanghai Municipal Administration of Market Regulation issued a circular specifically calling for the strengthening of regulation of advertisements during the period of COVID-19 prevention and control. Among other things, the circular detailed the kind of advertisements that are prohibited or discouraged. For example, it is prohibited to issue advertisements for the sale and purchase of wild animal products, or advertisements for products purporting to “prevent, treat, or cure” COVID-19. Advertisements that may lead to the congregation of people, such as those for commercial promotions, exhibitions, and live performances are expressly discouraged. Local jurisdictions have, in general, strengthened their enforcement and sanctions concerning behaviours that interfere with the central government’s efforts to deal with COVID-19. False advertising has been put under the “spotlight”. Multiple cases were reported where the sellers of face masks made statements misrepresenting and exaggerating the functions of their products, typically purporting to be “medical”, “virus-preventing”, “N95”, etc. Other false advertising activities include defrauding potential buyers to pay while the purported seller did not have face masks to sell, misappropriating a hospital’s name to endorse the face masks to be sold, etc. Some local governments provided examples of “typical cases” of violation during the pandemic prevention and control period, which identified false advertising cases. Such false advertising was dealt with and punished on a “severe and speedy” basis. It can be expected that this high level of enforcement and sanctions relating to COVID-19 will be maintained in the near future.

Haiwen & Partners

20/F, Fortune Financial Center
5 Dong San Huan Central Road
Chaoyang District
Beijing 100020
P. R. China

+86 10 8560 6888

+86 10 8560 6999

caoyu@haiwen-law.com www.haiwen-law.com
Author Business Card

Law and Practice

Authors



Haiwen & Partners was founded in May 1992 and is one of the leading general practice law firms in the People's Republic of China, with around 200 lawyers in total working in its Beijing, Chengdu, Hong Kong, Shanghai and Shenzhen offices. The firm started its pioneering entertainment and media law practice more than a decade ago, involving a wide variety of practice areas in the entertainment industries, including the development, production, and distribution of film and television projects; large theme park projects; recording and music publishing; live concerts; literary publishing; advertising; and new media matters. The firm’s clients include major film studios, leading investment companies, as well as top talent, producers and directors, both in and outside China. Combined with its strong practice in the capital markets and M&A areas, Haiwen also provides extensive legal services to clients conducting IPOs, M&A, and other general corporate finance transactions in the entertainment industries.

Trends and Development

Authors



Haiwen & Partners was founded in May 1992 and is one of the leading general practice law firms in the People's Republic of China, with around 200 lawyers in total working in its Beijing, Chengdu, Hong Kong, Shanghai and Shenzhen offices. The firm started its pioneering entertainment and media law practice more than a decade ago, involving a wide variety of practice areas in the entertainment industries, including the development, production, and distribution of film and television projects; large theme park projects; recording and music publishing; live concerts; literary publishing; advertising; and new media matters. The firm’s clients include major film studios, leading investment companies, as well as top talent, producers and directors, both in and outside China. Combined with its strong practice in the capital markets and M&A areas, Haiwen also provides extensive legal services to clients conducting IPOs, M&A, and other general corporate finance transactions in the entertainment industries.

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