New Online Advertising Regulations Issued by Chinese Government

Over the past several years, the Chinese government has turned its attention toward the regulation of advertising, and recently more attention to online advertising. Following the amended Advertising Law implemented in 2015, the State Administration of Industry and Commerce’s (SAIC) Interim Measures for the Administration of Internet Advertising came into effect on September 1, 2016. The new regulation clarifies what content is considered “Internet advertising,” lays down rules for “publishers” of online advertisements, and outlines investigation measures and penalties for violators. Given the ubiquity of online advertising in China, the regulations will have a widespread impact on the actions of advertisers and platform operators.

The new regulation for online advertising in China clearly requires that internet advertising should be clearly distinguishable and be marked with the word “advertisement” in a prominent position.

It provides a definition for Internet advertising: Internet advertising is advertisements that directly or indirectly sell commercial goods or services through the websites, web pages, internet applications and other forms of Internet media including text, images, audio, video and etc.

The new regulation has an impact on social media, especially for the paid content on WeChat and Weibo. In addition to official advertising offerings from Weibo and WeChat, some marketers often pay individual users to publish carefully crafted messages on WeChat Moments or Weibo feed stream to indirectly promote advertisers’ products or services; these content are barely labeled or claimed as either “paid” or “ads”. Also, it disallows ads to entice users’ clicks on the ad content. No ads or ad links are allowed to be included in the emails to users without permission.

To avoid bothering internet users, a one-click close option is required on pop-up advertisements. Advertisers are not allowed to send advertisements via emails without permission from recipients, and email advertisements must include opt-out links. Besides, advertisers must not use spammy tactics to entice users to click on links inserted in emails or on web pages.

Under the regulation, advertisers are also banned from using unfair competition methods such as interfering with the display of competitors’ advertisements by some applications or network devices. Platform operators are forced to bear the responsibility to monitor third-party advertisements they post and would be subject to the same or more severe penalties that advertisers may face in cases of ad regulation violation. As per the regulation, advertisements must be clearly labeled so that users can differentiate advertising content from non-advertising content. Similarly, search engines are required to facilitate users to clearly differentiate between paid search results and organic ones.

If a third party wishes to advertise on an online platform, the platform operator is responsible for verifying the identity of the advertiser and removing illegal advertisements. This new regulation will cause considerable revenue loss for search engine providers like Baidu, which is being compelled to close illegal advertisement position selling as well as other relevant ad business. The regulation also requires that platform operators should employ a dedicated review team to examine both the ad content and the qualifications of the advertisers.