Luxury brands must prepare for a stricter advertising labeling regime in China, as outlined by DLA Piper attorneys Edward Chatterton and Jane J. Li.
In order to access China’s profitable e-commerce sector, luxury brands have implemented diverse marketing approaches over time to enhance their sales.
“Zhongcao” (Cultivating Interest), “Daren Tandian” (Expert Store Exploration), and live-streamed e-commerce are prominent advertising strategies widely employed on major social media platforms in China, proving to be successful tools for monetization.
‘Zhongcao’ signifies the stimulation of a person’s desire to purchase through peer recommendations or by witnessing someone they know owning a product or experiencing a service. ‘Daren Tandian’ pertains to an ‘expert’, typically a blogger or influencer, who visits pertinent shops and produces promotional videos featuring shopping links for dissemination on social media platforms. Livestreaming, often paired with limited-time discounts, is a prevalent tactic used by marketers to prompt impulse buying.
During a time when consumers actively try to steer clear of marketing messages, it’s unsurprising that brands hesitate to categorize promotional content within these marketing strategies as ‘advertisements’. This reluctance has sparked heightened worries about consumer confusion and misleading advertising.
Current legal obligations
The Advertising Law in the PRC already outlines regulations regarding the clear identification and labeling of advertisements. Advertisements must be easily recognizable, allowing consumers to identify them as ‘广告’ (Chinese for ‘advertisement’). Any advertisement distributed through mass media should distinctly feature the label ‘广告’ to differentiate it from other non-advertising content. The Measures on the Administration of Online Advertising, effective since May 1st, also impose similar requirements for online advertisements. Specifically, paid search ads for products and services, ads including a purchase link within knowledge-sharing or experiential posts, and consumer reviews must all be explicitly marked as ‘广告’.
However, there’s been a recent trend of local authorities taking a more rigorous stance on enforcement in this domain, with expectations of increased enforcement cases.
Fresh proposed guidelines for enforcing labeling specifications.
Increased scrutiny looms ahead. In a bid to enhance transparency and bolster consumer safeguarding, the State Administration for Market Regulation (SAMR) released the Draft Enforcement Guidelines on the Identifiability Requirement of Advertisements on August 28th for public review.
The identification and labeling criteria for advertisements aren’t novel to Chinese marketers. Instead, these draft enforcement guidelines aim to reinforce the current tenets within advertising laws and regulations. They establish practical directives to assist local authorities in carrying out enforcement actions.
Key aspects outlined in the draft enforcement guidelines encompass the following:
- Online commercial promotional content must conspicuously feature the label ‘广告’ either through text or voice prompts, as appropriate.
- Prohibition of ambiguous terms like ‘sponsored’, ‘promotion’, ‘recommendation’, or ‘AD’.
Adherence to advertising laws and regulations necessitates clear labeling for various forms of disguised advertisements. These encompass paid search ads, advertisements incorporating shopping links within knowledge or experience sharing posts, consumer reviews, and the stipulation that news feed ads within online news or internet audio-visual content must also bear the ‘广告’ label.
There’s a positive aspect to consider: although the draft enforcement guidelines establish stringent advertising labeling criteria, they’ve introduced exemptions in specific situations. For instance, if an online advertisement publisher or internet information service provider creates an ‘advertising zone,’ advertisements within that designated area will be exempted from individual labeling requirements.
Labeling won’t be necessary for advertisements on a company’s official website, official public account, or online app, offering businesses a legal basis to publish advertising content on their official channels without labels, thanks to these exemptions.
Moreover, the draft enforcement guidelines establish distinct regulations for identifying advertisements in livestreams, acknowledging its distinctive characteristics. For instance, an advertisement will be deemed identifiable in a livestream if it consistently indicates throughout the broadcast that the ‘live streamer’ is the vendor of the products and services.
The proposed draft enforcement guidelines mark a positive stride toward enhancing clarity at a national level concerning China’s advertising labeling standards, aligning with global market norms. For instance, in the UK, the Advertising Standards Authority and the Competition and Markets Authority collaborated to publish guidance, like the ‘Influencers’ guide to ensure the transparent disclosure of ads, necessitating influencers to prominently label commercial content as ‘Ad’, ‘Advert’, ‘Advertising’, or ‘Advertisement’—not ‘sp’, ‘spon’, ‘affiliate’, or ‘collab’. Similarly, the US Federal Trade Commission issued directives, such as ‘Disclosure 101 for Social Media Influencers’, outlining labeling prerequisites where terms like ‘sp’, ‘spon’, ‘collab’, or ‘thanks’ are considered insufficient.
While the draft enforcement guidelines are presently open for consultation, it’s evident that Chinese authorities are poised to heighten enforcement efforts regarding clear advertisement labeling, particularly online. Luxury brands should ready their marketing teams for potentially more rigorous enforcement measures and conduct an assessment of their compliance policies concerning advertisement labeling.
Edward Chatterton serves as a partner and co-leads the intellectual property and technology practice (Asia), while Jane J. Li is a senior associate at DLA Piper Hong Kong. They offer counsel on various aspects of intellectual property law, encompassing trademarks, copyright, patents, advertising, brand protection, trade secrets, database rights, and designs. They can be contacted at Edward.Chatterton@dlapiper.com and Jane.j.li@dlapiper.com.
