CHINA: Stricter PRC online advertising regulation in response to search scandal

The China State Administration of Industry and Commerce recently issued the Online Advertising Regulation (Regulation) which will come into force on September 1, 2016. The Regulation has been widely regarded as the response to a recent scandal regarding paid search results.

Earlier this year, a promising college student in China, Wei Ze Xi sought cancer treatment at a hospital which was returned as a paid search result on an internet search engine. The hospital promised that the treatment would be effective and charged Wei US$30,000. The treatment was later found to be ineffective but Wei could not then afford further

The changes

The newly amended Advertising Law did not expressly address the regulation of “paid search results” but the new Regulation includes a specific definition of paid search results which sees them classified as an internet advertisement, and thus subject to the Advertising Law. As such, the Regulation means, inter alia, paid search results:

  • must not be misleading;
  • cannot be used in relation to the advertisement of prescription medication and tobacco products;
  • cannot be used in relation to the advertisement of medical services, medicine, medical formula food, medical devices, pesticides, veterinary medicines and health care products unless the relevant products and services have been previously approved by the relevant authorities; and
  • must be able to be closed with “one click” and must not interfere with a users’ internet experience.

The Regulation also requires online advertising service providers to establish internal systems for, inter alia, identifying clients who use paid search results and storing their details and advertisements.

Practical implications

The new Regulation affects not only search engine providers but all online advertising businesses and users of paid search results.

Businesses advertising in China using paid search results must check to ensure such paid search results are in compliance with the Advertising Law and those businesses operating in any of the restricted fields listed above must now ensure prior approval is sought before placing a paid search result advertisement.

Our team of lawyers in China is ready to advise you on the preparations you need to make ahead of the implementation of the Regulation.