Relationship between live streaming sales and commercial advertising

By Wang Yaxi and Zhu Mengxuan, Yuanhe Partners
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Live streaming sales have become one of the main promotional and marketing tools for business – live streaming hosts present commodity information, personally try them out, verbally praise them, and offer special prices to viewers watching the live stream, prompting consumers to make purchase decisions and directly purchase commodities or services through the links presented in the live streaming campaigns.

Wang Yaxi Yuanhe Partners commercial advertising
Wang Yaxi
Yuanhe Partners
Partner

However, with the booming development of live streaming sales, there have been a number of “overturning events” harming the rights and interests of consumers due to inaccurate and untruthful content, sparking public controversy. Therefore, how to supervise live streaming sales, and whether such sales tools can be regarded as commercial advertisements, have become a hot issue.

On 24 June 2020, the China Advertising Association (CAA) issued the Code of Conduct for Live Streaming Marketing. Subsequently, on 29 July, the State Administration for Market Regulation issued the Guidance on Strengthening the Regulation of Live Streaming Marketing Activities (Draft). The above-mentioned code and guidance both give advice on whether the Advertisement Law is applicable to live streaming sales.

Zhu Mengxuan Yuanhe Partners commercial advertising
Zhu Mengxuan
Yuanhe Partners
Associate

First, the two new regulations do not take it for granted that live streaming sales are all commercial advertisements. Second, to a certain extent, both the regulatory authorities and advertising industry self-regulatory organizations have been trying to distinguish what live streaming sales behaviour can be included in the scope of commercial advertisements, and regulated by advertisement laws.

So, which behaviours in live streaming sales may be included in the scope of commercial advertisements? As the authors understand it, according to the code and guidance, behaviour by live streaming hosts to display, arrange and release the completed texts, images or videos of the recommended products during a live streaming, as well as behaviour by the platforms, accepting commissions of merchants to display the live streaming sales on the front page and publish watching invitation information on the social platform, etc., should be regarded as commercial advertisements.

In such cases, the platforms, merchants and live streaming hosts shall assume the relevant responsibilities of ad publishers, ad agents or ad endorsers under the Advertisement Law, in accordance with their roles.

In addition, according to the guidance, if a natural person, legal person or other organization is entrusted to recommend or prove commodities or services in their own name or image in a live streaming, and the live streaming content constitutes a commercial advertisement, the relevant provisions on advertising endorsement shall be observed.

In the authors’ opinion, top influencer hosts and celebrities tend to have the nature to endorse the quality of their products with their influence in their live-streaming sale behaviour, and are often supported by a well-established operation team so they have the ability to conduct necessary review on their live streaming products and product merchants.

Therefore, if an influencer host or celebrity recommends a product, or proves its quality by personally trying it out during the live streaming, the live streaming may constitute a commercial advertisement, and the influencer host or celebrity may constitute an advertising endorser.

It should be noted that if influencer hosts sell their own products during the live streaming, they do not meet the subject elements of an advertising endorser stipulated by the Advertisement Law, that is, only someone other than the advertiser can act as an advertising endorser for the product.

In such cases, in view of the strong commercial influence of influencer hosts, they should undertake more obligations to protect consumers, and may also be applicable to the relevant responsibilities of an “advertiser” as stipulated in the Advertisement Law.

Moreover, according to the provision of item 4 of paragraph 2 of article 3 of the Interim Measures for the Administration of Internet Advertisements, information that operators are required to provide to consumers according to the laws, regulations and rules shall not be regarded as advertisements.

According to the provision of article 8 of the Law on the Protection of Consumers’ Rights and Interests, consumers have the right to request the operators to provide information on price, origin, producers, use, performance, specifications, grades, main ingredients, dates of production, terms of validity, inspection certificates, instructions for use and after-sale service of commodities, or the content, specifications and expense of services, and other relevant information of services.

Therefore, in theory, if a live streaming host introduces only the price, origin, inspection certificate, use method and after-sales services of commodities in the live streaming campaign, it shall not be regarded as a commercial advertisement, but as sales behaviour of an operator.

If consumers’ rights and interests are damaged due to any false information contained in live streaming sales, the behaviour of the live streaming host shall be attributed to the merchant, according to the employment relationship between the host and merchant, while the live streaming platform and the merchant shall be liable according to the Electronic Commerce Law, the Tort Liability Law, the Internet Live Streaming Management Regulations, and other laws and regulations.

However, in practice, instead of just describing the products being sold during the live streaming sales, live streaming hosts often combine the description of the products with their personal trial experiences, and verbally praise them to promote and sell them.

In such cases, the boundary between “describing a product” and “recommending a product” has become quite vague. Especially in the current upsurge of nationwide live streaming sales, whether such live streaming sales should be identified as commercial advertisements remains subject to further maturation of laws and regulations, and further clarification in judicial practice.

Wang Yaxi is a partner and Zhu Mengxuan is an associate at Yuanhe Partners

Wang Yaxi Zhu Mengxuan Yuanhe Partners commercial advertisingYuanhe Partners
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