Contributed By Haiwen & Partners
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, 2018 and 2021 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 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.
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:
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》)).
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. 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.
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 they 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 61, the Advertising Law). In addition, if the subject product or service of a false advertisement 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 56, the Advertising Law).
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 rules in the advertising and marketing sector. The main responsibility of 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.
Violations of these ethical 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 Civil Code, the Advertising Law, the Law on Protection of Rights and Interests of Consumers, 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). The remedies available for 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 their 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:
In addition to the Advertising Law, there are additional regulations governing the adverting of products and services in special sectors, including the following.
In the past 12 months, we have seen important regulatory updates regarding deceptive advertising, including in relation to:
On the law enforcement front, according to the 2021 Agenda of the Inter-Ministerial Joint Meeting on Rectifying False and Illegal Advertisements on 4 April 2021 (2021 Agenda), the areas of emphasis are actions to be taken against:
Ever since the beginning of the COVID-19 pandemic, regulatory attention has been focused on sanctioning false advertising by companies seeking to capitalise through mentions of the virus in their advertising and marketing efforts. In February 2020, the Supreme People’s Court, Supreme People's Procuratorate, the Ministry of Public Security, and the Ministry of Justice jointly clarified that false advertising related to the prevention or control of the COVID-19 emergency falls within the scope of the crime of false advertising (Article 2.5, Opinion on Cracking Down 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). Following this Opinion, court rulings and administrative penalty decisions have shown a tendency to impose penalties at the heavier end permitted by law on cases related to COVID-19. In December 2020, an individual who falsely claimed possession of a large amount of face masks on social media and accepted orders totalling CNY192,806 was found guilty of fraud and sentenced to six years and two months' imprisonment.
To date, we have seen continued efforts by competent authorities to crack down on fraudulent and deceptive advertising activities related to COVID-19, such as marketing and sales of purported “virus cures”. Measures carried out by local authorities include, without limitation:
As 2021 marks the 100th anniversary of the founding of the CPC, AMRs nationwide have issued reminders to marketers stressing the upholding of correct public opinion orientation in advertisements and carried out operations to enforce this requirement. Among other things, such reminders prohibit taking advantage of the anniversary celebrations, appropriating martyrs’ names or likenesses for private business interests, using incorrect maps or falsely claiming goods to be “specially supplied” to “state banquets”. Furthermore, consistent with the 2021 Agenda, local AMRs take action against advertisements “that involve politically sensitive issues, bring negative social impacts or challenge good social morals” or advertisements that incite irrational consumption, extravagance and waste.
Another notable trend is that to uproot the negative influence of celebrity culture upon the young generation, regulatory authorities, together with government-backed industry associations, have heightened regulation on celebrities to urge them to follow professional ethics and raise legal awareness. Since August 2021, the public has witnessed a series of abrupt denouncements of certain once highly influential celebrities due to their suspected criminal acts or unethical or controversial behaviour, and consequentially their endorsements have been terminated rapidly. As a result of the enhanced regulation and change of public atmosphere, a heavier burden is imposed on advertisers to conduct thorough background due diligence checks on potential endorsers and advertisers have been encouraged to enhance the moral clauses in their endorsement agreements to better cope with the potential moral risks of their endorsers.
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:
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. 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. To avoid being challenged, an advertising 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:
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 institutes owned, or sponsored, by the advertiser itself.
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.
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 an expected 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).
In addition, certain expressions are specifically prohibited in an advertisement relating to a regulated industry. 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.
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. 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 disadvantages 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.
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. Any advertisement appearing on digital platforms must comply with, in additional to the general rules of the Advertising Law, the special requirements for internet advertising. For instance, the SAIC issued the Notice on Launching Special Rectification on Internet Advertising in 2018 and the SAMR issued the Notice on Further Conducting Rectification on Internet Advertising in 2019 to call for severe crackdown on internet advertising violations and special campaigns to rectify internet advertising.
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.
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. 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.
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.
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.
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. Article 23 of the same measures states that 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.
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 Disclosures. 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. 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 rather unique social media landscape has led to an 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.
In the second model, platforms (eg, Taobao Live Streaming, JD, Pinduoduo, etc) set up direct sales channels for various business owners to promote and sell their merchandise. In some circumstances, influencers who promote their own brand/products are the business owner themselves, 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.
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.
If an influencer campaign is carried in the form of live-streaming marketing, the relevant parties – including the platform, live-streaming operators, marketing personnel as well as the influencer – shall abide by recently promulgated rules including the Administrative Measures for Online Live-Streaming Marketing (for Trial Implementation) (May 2021), the Notice on Promulgation of the Guiding Opinions on Strengthening the Standardised Administration of Online Live-streaming (《关于加强网络直播规范管理工作的指导意见》, February 2021) and the Notice of National Radio and Television Administration on Strengthening the Administration of Live-Streaming Shows and E-commerce (《国家广播电视总局关于加强网络秀场直播和电商直播管理的通知》, November 2020).
Among the live-streaming marketing participants, live-streaming marketing platforms take primary responsibilities in connection with the marketing activities. Such responsibilities include going through filing formalities, obtaining necessary permits and approvals, and conducting security evaluation in accordance with applicable laws and regulations. In particular, platforms are required to:
For themed e-commerce activities such as e-commerce festivals and promotional days in the form of live programmes, the platform shall file in advance for record with the competent authority for radio and television administration. If a celebrity or a foreign individual intends to open a live-streaming room, the platform shall also make a filing with the competent radio and television administration.
For live-streaming studio operators and marketing personnel, qualification review and real-name authentication are required. They shall perform the duties and obligations of advertisement publishers, advertisement agents or advertisement endorsers, as applicable, if the live-streaming content constitutes a commercial advertisement.
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:
In addition, local authorities also regulate telemarketing in the form of local regulations or administrative rules. 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 and the Law on Protection of Rights and Interests of Consumers for infringement of consumers’ rights. 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 Advertising Law, 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.
In summary, the general requirements for SMS advertising are that:
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 and the Law on Protection of Rights and Interests of Consumers for infringement of consumer rights.
Relevant regulatory requirements regarding the use of consumer data for purposes of targeting or retargeting consumers with advertising are found in the newly promulgated Personal Information Protection Law (PIPL, 《个人信息保护法》) which will come into effect in November 2021. The new law provides that, in the case of a targeted push and commercial marketing to individuals by means of automatic decision-making, the option to not be targeted by their characteristics (eg, the option to refuse tailored recommendation) or convenient opt-out options shall be provided at the same time.
In addition, the Law on the Protection of Consumer Rights and Interests provides that, in collecting and using the personal information of consumers, business operators shall:
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 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.
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:
In connection with minors under the age of 14, the advertisement shall not contain:
If an advertiser violates the Advertising Law by sending 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 covered by the newly promulgated PIPL and is also 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 the handling of the personal information of minors (ie, those under the age of 14). Personal information of minors is categorised as, among other things, a kind of “sensitive personal information” under the PIPL. As such, in addition to heightened requirements regarding the collection and processing of sensitive personal information, consent from the minor's parents or other guardians shall also be needed and separate processing rules shall be made specifically for processing minors’ personal information.
Violation of the Cyberspace Protection of Children’s Personal Information may result in, among other things, confiscation of illegal turnover and relevant fines, a fine of up to CNY1 million if there is no illegal income, and shutdown of the website in question. In addition, if such action violates the PIPL, heavier penalties, such as a fine of no more than CNY50 million or 5% of the perpetrator’s business income from the previous year, may be triggered.
“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, sweepstakes can be loosely interpreted as prize-attached sales, which are subject to certain rules and may trigger different legal issues. According to the Interim Provisions for Regulating Promotional Activities (《规范促销行为暂行规定》), which came into effect in November 2020, prize-attached sales refer to the activities of business operators to provide consumers with prizes, articles or other benefits for the purpose of selling commodities or obtaining competitive advantages, including prize-attached sales in form of lucky draws, gift giving and the like.
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, they may be subject to criminal liability if a crime is constituted; where no crime is constituted, they may be subject to a public security penalty by the public security bureau; where there are illegal proceeds, such illegal proceeds shall be forfeited.
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, including the following.
Generally speaking, 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 and impose rectification proactively. The Interim Provisions for Regulating Promotional Activities require business operators, among other things, to clearly indicate the benchmark for discount or price reduction, the conditions attached to the discount, and the time period for the promotion.
According to the Measures for the Supervision and Administration of Online Transactions (《网络交易监督管理办法》, effective on 1 May 2021), online transaction operators shall notify the users in a prominent manner upon a user accepting relevant services as well as five days prior to the date of automatic renewal and allow users to make a choice. During the service period, operators shall also provide convenient and instant opt-out or change options without charging unreasonable fees. Furthermore, 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 an automatic renewal is triggered, it shall be brought to consumers’ attention in a conspicuous way.
Under the PRC regulatory framework, betting and gambling activities, including those related to sports, are generally prohibited. Where there is a violation, the threshold for administrative liability could be as low as, for organisers, accumulating a profit of CNY300 and, for participants, personal gambling of amounts of CNY200, under different enforcement rules promulgated by local provincial authorities. Criminal liabilities may be incurred if one engages in activities of gathering people to gamble for profit, engaging in gambling as one’s profession, operating casinos, or organising PRC citizens to participate in gambling outside China involving large amounts.
According to the Advertising Law, advertisement is prohibited from including gambling content. For the avoidance of doubt, the China Sports Lottery issued by the General Administration of Sports and the China Welfare Lottery issued by the Ministry of Civil Affairs, shall not constitute “gambling”. Advertisements for such lottery tickets are managed by their respective issuer authority and supervised by the PRC Ministry of Finance and the SAMR.
A cryptocurrency, often interchangeable with “virtual currency”, such as Bitcoin or Ethereum, is generally understood as a digital or virtual currency whose tokens or "coins" are mutually interchangeable with each other and secured by cryptography, making them nearly impossible to counterfeit and potentially functional as a universal equivalent for transactions.
NFTs (non-fungible tokens), though based on blockchain technology as well, are generally understood to be different from cryptocurrency, as each NFT is unique from and not interchangeable with other NFTs. Thus, NFTs cannot work as an intermediary in transactions as cryptocurrencies potentially do. By contrast, NFTs can be used to authenticate the ownership of digital assets.
To date, there has been no official definition of cryptocurrency or NFT at the legislative level in China, although regulatory notices and risk alerts issued by relevant authorities such as the People’s Bank of China, the SAMR, the China Banking and Insurance Regulatory Commission, etc, expressly provide that cryptocurrency is by nature a virtual commodity instead of a kind of currency in China. The regulation focuses on the issuance and trading of cryptocurrency which will be deemed an illegal financial activity under the current regulatory framework. Relevant regulations emphasise upholding the renminbi as the statutory currency, and cracking down on illegal financial activities of illegal fundraising (such as initial coin offerings), financial fraud, pyramid schemes and money laundering through cryptocurrency. Regarding the advertising of cryptocurrency, in July 2021, the Operation Management Department of the People’s Bank of China and Beijing Local Financial Supervision and Administration issued a risk reminder prohibiting entities from providing commercial display and marketing publicity for, among other things, virtual currency-related business activities. In September 2021, this prohibition was further stressed in a notice issued by high level authorities including, among others, the People’s Bank of China, the Office of the Central Cyberspace Affairs Commission and the Supreme People's Court. So far, there do not seem to be specific rules governing NFT activities or the advertising thereof.