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SAIC Releases Interim Measures on Internet Advertising

China’s State Administration for Industry and Commerce (SAIC) has recently issued the Interim Measures on Administration of Internet Advertising, to be effective from 1 September 2016.

"Paid search advertising for goods or services" is defined as Internet advertising, and required to be clearly recognisable. The measures stipulate that "paid search advertising shall be clearly distinguished from organic search results" and Internet advertising shall be "explicitly marked as advertisement in accordance with the Advertising Law, allowing consumers to distinguish it as advertising."

The joint investigation team formed by the Cyberspace Administration of China (CAC) and SAIC after the "Wei Zexi incident" found that Baidu search results for associative words paid listings objectively affected the choice of Wei in seeking medical treatment, causing his ultimate death, and that Baidu’s search engine bid ranking mechanism failed to prominently label commercial promotion as such.

The legal nature of paid search was characterised as "commercial promotion services" by the investigation team in this action due to the absence of laws and regulations giving the definitions at that time. By itself, the Provisions on the Administration of Internet Information Search Service issued by CAC on 25 June 2016 do not expressly classify commercial search services as advertising.

The investigation team demanded Baidu to add eye-catching label on commercial promotion information, supplemented by risks reminder, and cap the proportion of commercial promotion information at 30% of each page.

The revised Advertising Law stipulates that "advertisements published through the mass media shall be prominently marked as advertisement." After the new law taking effect on 1 September, 2015, search engines including Baidu and 360 have changed the labelling of ​​paid search results from "promotion" to "commercial promotion."

In Chinese, "promotion" and "advertising" carry different meanings. Using the word "promotion" is suspected to deliberately sidestep the advertising nature, so search results of advertising nature should be clearly labelled "sponsored" or "advertising".

Should the measures be strictly complied with, all Internet advertisements are required to be clearly marked, including hypertext, images or videos, e-mail, as well as commercial display. But it is expected to be difficult to put into practice.  On the one hand, not only the cost for the merchants concerned is high but it also affects the user experience. On the other hand, law enforcement on such a large scale on this issue presents enormous difficulties.

For Interim Measures on Administration of Internet Advertising in Chinese, please see:

http://www.saic.gov.cn/zwgk/zyfb/zjl/xxzx/201607/t20160708_169638.html

For Provisions on the Administration of Internet Information Search Service in Chinese, please see:

http://media.people.com.cn/n1/2016/0626/c40606-28479163.html

Related article: China's Internet Regulator Issues New Online Search Rules

http://economists-pick-research.hktdc.com/business-news/article/Business-Alert-China/China-s-Internet-Regulator-Issues-New-Online-Search-Rules/bacn/en/1/1X000000/1X0A6KMQ.htm

Content provided by Picture: HKTDC Research
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