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21 Jul 2016

Key Points of the Interim Measures for the Administration of Internet Advertising

The State Administration for Industry and Commerce (SAIC) recently released the Interim Measures for the Administration of Internet Advertising (New Measures), effective as of 1 September 2016.  As the first SAIC department rules to comprehensively regulate the Internet advertising business, the New Measureshave sparked widespread attention in the advertising and related industries. Below we set out some key aspects of the New Measures.

1. E-mail and Paid Search Advertisements are included as Internet Advertisements

In addition to traditional advertisements that promote commodities or services in the form of texts, pictures, audio, videos or other forms distributed via Internet media, the New Measuresfor the first time explicitly list e-mails and paid search advertisements that promote commodities or services as Internet advertisements. This is one important change in the New Measures, which also has echoed the provision that Internet search service providers must comply with applicable laws and regulations when providing advertisement information services as specified in the Administrative Provisions on Internet Information Search Services (issued by the State Internet Information Office on 25 June 2016).

2. Unfair Competition in the Internet Advertising Business is Prohibited

Article 16 of the New Measureslists prohibited activities of unfair competition in the Internet advertising industry. This basis of legislation is to forbid business activities that are carried out by technical means and impede the competitive market order, which has also been reflected in regulations issued by other regulatory authorities. For example, Article 5 of the Several Provisions on Regulation of the Order of the Internet Information Service Market (released by the Ministry of Industry and Information Technology on 29 December 2011 and implemented starting 15 March 2012) specifies by example activities that may not be carried out by Internet information service providers as they would violate the legitimate rights and interests of other providers.

The SAIC released the Interim Measures for the Supervision and Administration of Internet Advertisements (Draft for Public Comment) (Draft of Internet Advertisements) on 1 July 2015, compared with which, the New Measureshave deleted some unfair competition activities listed in Article 15 of the Draft of Internet Advertisements, including “restricting others to enter a market or business field by means of an alliance, union or other means” and “using other’s trademark or corporate name as the keywords of text link advertisements or paid search advertisements, or adding the same to web pages or source codes to boost search frequency and entice consumers to the wrong site”. We understand that as the Anti-Unfair Competition Law is currently undergoing revision (a draft for review was released in February 2016), although the above-mentioned activities are not specifically included in the New Measures, they may still be listed as prohibited activities of unfair competition in the official release of the Anti-Unfair Competition Law.

3. Protection of Internet Users has been Enhanced

According to Article 8 of the New Measures, Internet advertisements:

  • shall not affect the normal use of the network by users;
  • that are posted as pop-ups shall be clearly marked with a “Close” sign to ensure a “Click to Close”;
  • shall not induce users to click on the content of an advertisement through deception; and
  • or links thereof shall not be attached to e-mails sent by a user without its permission.

This provision has reaffirmed the requirements of Article 44 of the Advertising Law (amended in 2015), and emphasized the protection of Internet users.

Moreover, related provisions of the New Measuresalso provide that an Internet advertisement shall be identifiable and clearly marked as an “advertisement”, and that paid search advertisements shall be clearly distinguished from natural search results. All such provisions protect Internet users’ right to know and right of choice, inherently reflecting the idea of protecting the rights of consumers as set out under the Law on the Protection of Consumer Rights and Interests (amended in 2014).

4. Impact on Foreign Investment

Foreign investors should pay special attention to the following matters:

  • The New Measuresextend the provisions of the Advertising Law (amended in 2015), requiring that Internet advertisers be responsible for the authenticity of their advertisements and have administrative permits, citation details and other supporting documents. Therefore, if the products or services promoted through Internet advertisements that a foreign investor intends to publish do not have required licenses or qualifications, or the information contained in such advertisements is in violation of the law, the foreign investor may encounter legal risks when publishing such advertisements.
  • The New Measureshave expressly defined the Internet advertising business activities of advertisers and advertising operators, and corresponding punishments for violations thereof. Given the fact that the SAIC officially abolished the Administrative Provisions on Foreign-Invested Advertising Enterprises in 2015 (please refer to our newsletter for more details: New SAIC Rules Lift Controls on Foreign-Invested Advertising Enterprises), allowing foreign investors to conduct advertising design, preparation, publishing and agency services via foreign-invested enterprises in China, an increasing number of foreign investors have entered into China’s advertising market. Therefore, the Internet advertising business activities of foreign investors in China should be conducted in line with the New Measures. Additionally, such activities may require other operating qualifications (e.g., the Value-added Telecommunications Service Operating Permit), so foreign investors also need to meet such related requirements for legal compliance.

Based on the Advertising Law (amended in 2015), the New Measureshave systematically specified Internet advertising activities, which will inevitably exert significant influences on the Internet advertising industry. We recommend Internet advertisers, advertisement publishers and advertising operators update their operations as necessary to comply with the New Measures as soon as possibleand pay close attention to the subsequent law enforcement practice of the SAIC and its local arms to reduce legal risks. 

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