The Chinese government published two new regulations aimed at further tightening the administration and supervision of advertising over the Internet, partially to address the recent public outcries in relation to the Baidu scandal1. The two new regulations are The Administrative Provisions for Internet Information Search Services, published by the State Internet Information Office of China on June 25, 2016, and The Interim Measures for Administration of Internet Advertisements, published by the State Administration for Industry and Commerce on July 4, 2016. Both of these mandates came into effect on August 1, 2016.

The Administrative Provisions for Internet Information Search Services (Internet Search Services Rules)

Under the Internet Search Services Rules, all Internet search services providers (Service Providers) must comply with certain requirements and restrictions if they are to provide Internet search services within China. Although the Internet Search Services Rules do not make it clear, our discussions with the local authorities in Shanghai and Beijing indicate that a Service Provider is considered to provide services within China if the search service can be accessed by Chinese users, regardless of whether the server is actually located in China. Internet search services are defined as services that enable Internet users to search for information by employing computer technologies to collect and process information.

The major requirements for Service Providers include:

(a) Service Providers must satisfy the qualification requirements under relevant PRC laws and regulations, including the requirement to obtain a business license and a Value-added Telecommunication Business License (commonly known as the "ICP License").

(b) Service Providers must establish a sound system for information inspection and evaluation, public information real-time monitoring and personal information protection, and they must provide necessary technical assistance to government authorities for the latter to enforce laws and regulations.

(c) Service Providers must not provide any prohibited content via links, abstracts, webpage snapshots, suggested search keywords and recommendations.

(d) Upon discovering that any search results might contain prohibited information, blocked websites or applications, Service Providers must not display such search results, must archive relevant records and must report to the national or local administrations.

(e) Service Providers must not provide search results that contain false information or dead links for the purpose of making profits therefrom; and Service Providers must provide objective, just and authoritative search results and not damage the interest of the state, public and individuals.

(f) Service Providers must use distinctive marks to identify paid search results, and must limit the proportion of paid contents displayed on each search results page. Service Providers must also verify qualifications of their customers for paid search services and advertisements.

(g) Service Providers must comply with other relevant laws and regulations when providing commercial advertisement services, including without limitation, the Advertisement Law, the AntiUnfair Competition Law and the Internet Advertisements Rules, which will be discussed in the below section.

The Interim Measures for Administration of Internet Advertisements (Internet Advertisements Rules)

The Internet Advertisements Rules regulate all advertisement activities over the Internet. Internet Advertisements are defined as commercial advertisements in the form of words, pictures, audio, video or others that directly or indirectly promote products or services through webpages or applications, including without limitation, email advertisements, paid search results and commercial displays.

The Internet Advertisement Rules provide the following major prohibitions and restrictions over the publication of Internet Advertisements:

(a) Advertisements for prescription drugs and tobacco are strictly prohibited; and advertisements for medical treatment, medicine, formula food for special medical purposes, medical devices, agricultural chemicals, veterinary medicine and health food are subject to prior inspection by competent authorities before publishing.

(b) Advertisements and paid search results must be distinctively marked so that they can be easily identified by consumers.

(c) Pop-up advertisements must be able to be closed with one click; and advertisements or links to the same shall not be included in a user's email without such user's consent.

(d) Any individuals and entities that will provide or display Internet Advertisements, have the chance to verify the content of such advertisements and can decide whether to publish such Internet Advertisements, will be considered to be Internet Advertisements Publishers. Internet Advertisements Publishers have the responsibility to establish an administrative system regarding registration, inspection and archiving its advertisement business, inspect and verify the name, address and contact information of advertisement owners, and employ advertisement inspection staff that is familiar with advertising laws and regulations.

(e) Demand-Side Platform operators may push advertisements to specific users or users group via information integration and data analyses through a DSP (Demand-Side Platform), Media Platform or Advertisement Information Exchange Platform; provided, however, that DSP operators must explicitly identify the sources of the advertisements. "Media Platform" refers to a media service platform that provides programmed advertisement categorization and filter services; and "Advertisement Information Exchange Platform" refers to a data processing platform that provides data exchange, analyses and matching, and transaction settlement services.

(f) Internet Advertisement operators shall not use software or hardware techniques to intercept, filter, cover, fast-forward or encumber in other forms the advertisements legally published by others; use network channels, utilities or software applications to impair the normal transmission of advertisements legally published by others; and use fake statistical data or misleading promotional effects to induce mistaken quotations, seek illegitimate interests or harm the interests of others.

Our Observations

The statutory language in both the Internet Search Services Rules and the Internet Advertisement Rules is very extensive, and there is no reason to think that these regulations are aimed only at Chinese enterprises. On the contrary, foreign-invested enterprises and even foreign companies that have no operations in China or do not have servers located in China should be alert to the requirements of these rules.

Although many of our clients have already followed the rules, standards and model contracts published by various government authorities or industry associations such as the Interactive Advertising Bureau and the American Association of Advertising Agencies, it is still a prudent practice to reexamine those rules, policies and standard contracts to make sure that they are in compliance with these newly published regulations in China, especially companies in the search, e-commerce and social-networking industries that have not considered themselves to be subject to the PRC Advertising Law in the past. These rules also will apply to individuals on social media sites (e.g., Sina Weibo or WeChat) who have significant numbers of followers.

With the publication of these two new rules, together with the Online Publishing Service Management Rules that went into effect on March 10, 20162, we are seeing a tightening grip on the part of the Chinese government over online activities, from online publishing to Internet advertising, from Chinese companies to foreign enterprises, and from emails to video. We will continue to closely monitor future developments.