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New online ads regulations will impact social media and internet advertising

The Chinese government recently issued an updated set of measures that regulate online advertising in the country. The Measures for the Administration of Internet Advertising (New Measures), which took effect on May 1, 2023, will have important implications on the social media marketing and internet advertising activities for businesses across a wide range of industry sectors.


The New Measures improve regulatory oversight, explain the roles of important business parties involved, and further refine the do’s and don'ts for online advertising in China as an implementation regulation to the Advertising Law and Ecommerce Law.


Finance roles

The document intends to provide an updated regulatory framework, more in line with the current practices of Internet advertising, and envisage improved transparency, Internet user protection as well as amplified compliance obligations.


The content and forms of internet advertising are ever-evolving in the fast-changing but huge Chinese online market, and while the new Measures provide more clarifications on the dos and don’ts of Internet advertising in China, it remains challenging to ensure compliance.


Online advertising is commercial advertisements that directly or indirectly promote goods or services through websites, web pages, internet applications and other internet media in the forms of texts, pictures, audios, videos, among other.


Online editorial content can be regarded as online advertising if there is a paid promotion of goods or services, directly or indirectly, for profit.


According to the Advertising Law 2021, commercial advertising shall involve the activities carried out by sellers of goods or service providers to promote their goods or services, directly or indirectly, through a certain medium and form. Therefore, editorial content shall be caught by the rules governing advertising only if it can meet this condition.


The New Measures reiterate the censorship requirement under the Advertising Law upon online advertising for certain categories of products.


Specifically, the advertising for the following products shall be reviewed and approved by a competent advertising censorship authority before publication:

  1. Medical treatment

  2. Drugs

  3. Medical devices

  4. Pesticides

  5. Veterinary drugs

  6. Health food

  7. Formula food for special medical purposes

  8. Other advertisements that are subject to censorship as required by other laws and administrative regulations. Without being reviewed and approved, the advertising for such products shall not be published on the internet.

Furthermore, the New Measures expressly clarify and require that the online advertising subject to censorship be published strictly in accordance with the contents as approved by the censorship authority and not edited, spliced, or modified. If it is necessary to alter any content in the advertising that has been reviewed and approved, the advertiser shall resubmit the revised advertising to the authority for a new review and approval.



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Prescription drugs may only be advertised in medical or pharmaceutical professional journals that are jointly designated by the health department of the State Council and the drug regulatory department of the State Council.


False advertising

Under the Advertising Law 2021, a wider variety of advertisements are now vulnerable to scrutiny for false advertising. Advertisers are required to substantiate all claims and statements regarding their truthfulness to avoid non-compliance. The use of technical or digital methods to create or enhance the true effect of a product or service in advertisements is penalized as false advertising.

In accordance with article 13 of the New Measures, the advertiser shall be liable for the truthfulness of the contents of an internet advertisement.


According to the document, it is prohibited to design, produce, act as agents for or publish on the internet any advertisements for goods or services the production, sales, or provision of which are prohibited by laws and administrative regulations, or any advertisements for goods and services that are prohibited from being published. It is also prohibited to publish advertisements for prescription drugs and tobacco via the internet.


Livestreaming is considered Internet advertising


The Measures clarify that livestreaming promotion of products and services, which has become enormously popular in China, is considered Internet advertising. The livestreaming service provider, such as the operator of livestreaming website or the owner of the livestreaming account, may be considered as advertising agents depending on their specific involvement. In particular, the individual hosts who recommend products in their own name and based on their own experience may also be considered endorsers under the law.


Article 45 of the Advertising Law 2021 stipulates that internet information service providers shall curb the posting and publishing of illegal advertisements through their information transmission and distribution platform of which they are aware or should be aware.


For any violation of these provisions, the State Administration for Market Regulation (AMR) shall confiscate the illegal income. Where the amount is RMB 50,000 or above, a fine ranging from one to three times the amount of the illegal income shall be imposed simultaneously. Where the amount is less than RMB 50,000, a fine ranging from RMB 10,000 to 50,000 shall be imposed simultaneously. In serious cases, authorities could order the offender to stop the relevant businesses.


No advertising on smart devices without consent


The New Measures state that explicit consent is required for advertisers to be able to push Internet advertisements to smart devices such as vehicles, e-readers, navigation devices, smart home appliances, etc., and for attaching advertisements or advertising links to e-mails or Internet instant messaging messages. This is an expansion of the consent requirements compared to the Previous Interim Measures which only required consent for attaching advertisements or advertising links to e-mails.

Identifiability Requirement


The Advertising Law's identifiability requirement is highlighted by the new regulations. Online advertising needs to be recognizable for people to understand that it is in fact advertising. To ensure that customers can tell paid web rank advertising apart from organic search results, for instance, an indication like "advertisement" shall be put in a conspicuous area.


For products or services that are advertised via knowledge introduction, experience sharing, or consumption feedback and have a buy link or other method of payment attached, an indication must also be posted in a conspicuous location to ensure that customers can tell it is an advertisement.

Short articles

This suggests that for "soft sell" advertising, such as native advertising, where key opinion leaders (KOLs), or influencers, use experience or product endorsement posts on social media platforms that are compensated for promoting the advertisers' products and are attached with purchase links or other purchase methods, the content would be regarded as advertising and a declaration reflecting its advertising nature would need to be made.




Accountability and record keeping


The New Measures state that advertisers are accountable for the veracity of online advertising contents and must follow any legal requirements for qualification, approval, citation, or supporting documents, as applicable.


Significantly, the New Measures mandate that advertisers create and maintain advertising archives for their own internet-published commercials (e.g., those published on its own website, applications, official account, online store, etc.). The archival records must be updated on a regular basis and retained for at least three years after the advertisement has stopped being published.


The relevant terms of the algorithmic recommendation service and the advertising release records must be entered into the advertising archives whenever an internet advertisement is published. If the advertiser violates this, a non-compliance fine of up to RMB 50,000 could be imposed.


Any changes to the advertising contents for publication shall be communicated in writing or in another form that can be well confirmed by the vendors when the advertiser engages advertising vendors (such as an advertising operator or advertising publisher) to publish advertising online. The advertising vendors must also create and maintain their own archives and keep the records for at least three years after the advertising has ceased.


The advertiser, advertising operator, and advertising publisher must verify the contents of the next-level connections that are connected to the front-end advertisements before publishing an internet advertisement that contains a link. If it doesn't, the local government (AMR) has the right to demand that the advertiser make the necessary corrections and impose a fine of up to RMB 50,000.


In addition, the New Measures for pop-up advertising mandate that the advertiser and advertising publisher clearly identify a closure indicator to ensure that the pop-up advertisement can be closed with a single click.


Advertising targeting minors


The New Measures forbid the publication of advertising for nine categories of products on online media (websites, webpages, internet applications, and official accounts) aimed towards children. These products fall under the following nine categories:

  1. Medical treatment

  2. Drugs

  3. Medical devices

  4. Health food

  5. Formula food for special medical purposes

  6. Cosmetics

  7. Alcohol

  8. Cosmetology

  9. Advertisements for online games that negatively affect minors' physical or mental health.

A lot of digital innovation tends to come out of the Chinese internet so this new regulatory approach may be indicative of prevailing trends for the wider world. The change could lead to new technology, as there may be a need to build compliance checking features into ad serving platforms.


Foreign companies with operations in China should expect an increasingly strengthened advertising enforcement in the country. Advertisers should review and examine all existing online advertising in the China market to ensure compliance.




 

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