Who: China’s State Administration for Industry and Commerce
When: 1 September 2016
Law stated as at: 11 August 2016
China’s State Administration for Industry and Commerce (“SAIC”) earlier this summer announced new regulations for online advertising, coming into force on 1 September 2016. These regulations follow on from the amended Advertising Law of the People’s Republic of China which was enacted in 2015, and demonstrate China’s determination to control the fast-moving world of online marketing. The regulations aim to protect the consumer by ensuring all forms of online advertising are clearly identified as such, while also ensuring that the Chinese government benefits by levying a tax on these advertising revenues.
Why this matters:
The regulations are far-reaching and include a complete ban on online adverts for prescription medicine and tobacco products. They require certain types of online ad to be government approved before publication (including those related to medical supplies and other health products).
The regulations also require all online adverts to be explicitly labelled, which means that any paid-for search results will now need to be flagged as such (previously, internet platforms have relied on lightly coloured text stating that certain links were promotions). The definition of online advertising is broad, and includes any content which promotes a product or service on any online platform (including search engines and ecommerce platforms). Promotional content includes any image or embedded link, as well as email or instant messaging adverts. It will also include any paid-for promotional lists (for example, recommended products or “hot right now” editorial pieces).
Widely thought to be in response to the death of a student earlier this year from experimental drugs bought from an online advert (without being aware that the link in question was paid for), the regulations also tax all revenue generated from online adverts at 3%. This will have a significant impact on established search engines such as Baidu, for whom a substantial part of revenue originates from internet advertising sales.
These new regulations will affect all online publishers with a presence in China. The wide scope of the regulations will require companies to scrutinise existing ads (including email ads) and ensure that these are clearly labelled, do not advertise banned substances, and have any necessary approvals from the Chinese government.
Getting it wrong could have significant consequences for businesses operating in China, with a range of administrative sanctions and penalties geared at enforcing compliance (including confiscation of illegal gains and / or hefty fines).