Article 14 (1) of the Advertising Law stipulates that advertisements should possess identifiable characteristics, with the aim of ensuring that consumers have a clear understanding of the promotional intent behind the advertisement for goods or services. This enables consumers to approach such promotional activities in a rational and objective manner.
On 24 March 2023 the State Administration for Industry and Commerce (SAIC) issued the Measures for the Administration of Internet Advertisements, article 9(1), which now once again underscores the requirement for advertisements to be identifiable, in line with principles of the Advertising Law.
Identifiability of advertisements
The essence of the identifiability requirement lies in addressing the covert nature of contemporary commercial advertisements. Traditional offline advertisements are constrained by their display methods and content, and the mode of advertisement dissemination is unidirectional, making it effortless for consumers to recognise and perceive the distinctive features of commercial advertisements.
In contrast, commercial advertisements on internet platforms leverage both form and content in a covert manner, eliminating the jarring effect that traditional offline advertisements have on consumers.
The covert nature of commercial advertisements effectively transforms consumers into unwitting targets of marketing, forming a well-established industry chain within the realm of online e-commerce platforms.
Illegal cases
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Blossom & Credit Law Firm
In the case of the MCN organisation recruiting 400 influencers to assist other businesses in deceptive advertising, which occurred last year, Shanghai Qumo Culture Communication and Shanghai Zhengya Dental Technology signed a Service Order.
Under this agreement, Qumo Culture Communication was responsible for creating promotional content, and engaged an agency to recruit 400 influencers from the Xiaohongshu platform.
These influencers were instructed to write and post promotional articles and pictures based on the provided content, focusing on their positive experiences and endorsements of Zhengya’s invisible orthodontics product.
It is verified that these 400 influencers were not actual patients or users of Zhengya’s product, and their content was fabricated based on the promotional material provided by Qumo Culture Communication.
Once the graphics were reviewed and approved by Zhengya, Qumo Culture Communication informed the influencers to publish the articles on their personal accounts on the Xiaohongshu app. Qumo Culture Communication received a service fee of about RMB340,000 (USD47,400) for the promotional activities.
But these actions violated article 8(2) of the Anti-Unfair Competition Law, constituting assistance in the dissemination of false advertising by other operators. Considering the severity and consequences of the violation, the market regulation authority of Shanghai Pudong New Area imposed an administrative fine of RMB450,000.
Optimisation measures
The Advertising Law and Measures for the Administration of Internet Advertisements have established regulations regarding the identifiability of advertisements.
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Blossom & Credit Law Firm
However, these regulations are at a fundamental level and do not specify any measures beyond labelling them as advertisements. Comparing legislation, industry regulations and self-regulatory guidelines regarding commercial advertisements in various countries around the world, almost all include provisions emphasising the importance of advertisements being easily identifiable.
Governance practices worldwide demonstrate the significance of industry self-regulatory organisations. China’s advertising governance can benefit from learning and optimising practices in the following areas:
Regulatory oversight and guidance. In 2020, the China Advertising Association (CAA) released two group standards, namely the Technical Specification for Mobile Internet Advertising Identification and the China Internet Advertising Delivery Monitoring and Verification Requirements. These standards aimed to establish a new system of advertising identifiers to support the digital advertising industry. However, in practice, various advertising industry associations in different regions of China do not hold a significant position in governing and regulating advertising. The dominant role is still played by administrative departments.
Advertising industry associations have the potential to collaborate with administrative departments and leverage their own expertise in guiding the industry. To this end, it would be beneficial to draw on the experiences of Europe and the US, and develop and publish operational guidelines that regulate the behaviour of association members and enforce effective penalties for legal violations.
Self-management by advertisers. As the owner of the right to publish advertisements, advertisers should fulfil their obligation to effectively review the identifiability of their advertisements. The cost of reviewing and adjusting the content and presentation of advertisements by advertisers is minimal, yet yields significant results.
Sheng Ronghua, deputy director of the Office of the Central Cyberspace Affairs Commission and the Cyberspace Administration, emphasised the increasing significance of network integrity during the 2021 China Network Integrity Conference. In this era of rapid internet development, advertisers are not only accountable for the authenticity of their advertisement content, but are also obliged to provide necessary disclosures in accordance with laws and regulations.
Additionally, advertisers should rigorously scrutinise the distribution and presentation of their advertisements, paying particular attention to the deceptive practices of borderline advertisements that mislead and entice consumers.
Technological optimisation of platforms. As mentioned, the covert nature of commercial advertising is made possible through the internet, highlighting the significance of platforms. It is essential for platforms to fulfil their responsibilities and obligations, such as debunking false information, conducting content compliance reviews, and removing reports of false information.
Platforms can enhance their internal review capabilities through technological upgrades. By implementing identification tools that focus on publishing behaviour, language selection and visual presentation, platforms can facilitate consumers’ quick, convenient and efficient recognition of the commercial promotion attributes of advertisements.
For instance, labelling advertising content to differentiate it from other platform information allows consumers to flag and report it, while data classification can be employed for social media accounts that frequently publish advertising content.
Li Weiming is a partner and Zhang Yubo is an associate at Blossom & Credit Law Firm
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