To tap into China’s lucrative e-commerce market, luxury brands have adopted different marketing strategies over the years to boost sales. 

‘种草 Zhongcao’ (Planting Grass), ‘达人探店 Daren Tandian’ (Expert Shop Exploration) and livestream e-commerce are prominent advertising tactics which have been used extensively on leading social media platforms in China, and have proven to be successful monetisation tools.

‘Zhongcao’ means a person’s purchasing desire is stimulated by peer recommendation or by seeing someone close to you owning a product or experiencing a service. ‘Daren Tandian’ refers to an ‘expert’, usually a blogger or influencer, visiting relevant shops and creating promotional videos with shopping links for sharing on social media platforms. Livestreaming, often coupled with time-limited discounts, is commonly used by marketers to encourage impulse purchase. 

In an era where consumers are actively seeking to avoid marketing communications, it is not surprising that brands are reluctant to label promotional content embedded in these marketing tactics as ‘advertisements’, leading to escalated concerns over consumer confusion and misleading advertising.

Existing legal requirements 

The PRC Advertising Law already sets out requirements in relation to the identifiability and labelling of advertisements. Advertisements are required to be readily identifiable and should enable consumers to identify them as ‘广告’ (‘advertisement’ in Chinese). Any advertisement published via mass media should be clearly labelled as ‘广告’ to distinguish it from other non-advertising information. The Measures on the Administration of Online Advertising, which became effective on 1 May, also contains similar requirements for online advertisements. In particular, paid search advertisements for products and services, advertisements accompanied by a purchase method such as a shopping link embedded in knowledge or experience sharing posts, and consumer reviews must all be clearly labelled as ‘广告’.

That said, local authorities have recently taken a more robust approach to enforcement in this area and it is expected that enforcement cases will be on the rise. 

New draft enforcement guidelines on labelling requirements 

Further heightened scrutiny is on the horizon. To increase transparency and foster consumer protection, the State Administration for Market Regulation (SAMR) published on 28 August the Draft Enforcement Guidelines on the Identifiability Requirement of Advertisements for public consultation.  

The identifiability and labelling requirements of advertisements are not new to Chinese marketers. Rather, the draft enforcement guidelines seek to further substantiate the existing principles in the advertising law and the measures, and set out practical guidelines to facilitate enforcement actions by local authorities.

Key points in the draft enforcement guidelines include, amongst others, the following:

• Online advertisements for commercial promotion should be labelled as ‘广告’ in text or voice prompts (as applicable) and in a conspicuous manner.
• Vague terms such as ‘sponsored’, ‘promotion’, ‘recommendation’, or ‘AD’ are prohibited.
• In line with the advertising law and the measures, advertisements in a variety of disguised forms must be clearly labelled as ‘广告’. These include paid search advertisements and advertisements with shopping links embedded in knowledge or experience sharing posts and consumer reviews. The draft enforcement guidelines have also required that news feed advertisements published in online news feed or internet audio-visual content must be labelled as ‘广告’.

Here is the good news: while the draft enforcement guidelines set out strict advertising labelling requirements, a number of exemptions have also been introduced in certain scenarios. For example, if an ‘advertising zone’ is established by the online advertisement publisher or internet information service provider, advertisements within that zone will be exempt from individual labelling. 

Advertisements on a company’s own official website, official public account or online app will also be exempt from labelling requirements. These exemptions will helpfully provide a legal basis for businesses to proceed without labels for advertising content published on their official channels. 

The draft enforcement guidelines also set out specific rules for identifiability of advertisements in livestreams in recognition of its unique nature. For example, advertisements will be considered as identifiable if during the entire duration of the livestream, it is clearly indicated that the ‘live streamer’ is the seller of the goods and services.

What’s next?

The proposed draft enforcement guidelines represent a positive step towards bringing greater clarity on a state level to China’s advertising labelling requirements, in line with global market practices. For example, in the UK, the Advertising Standards Authority and the Competition and Markets Authority have jointly published guidance such as the ‘Influencers’ guide to making clear that ads are ads’, requiring influencers to make clear the commercial nature of advertisements by including prominent advertising labels, like ‘Ad’, ‘Advert’, ‘Advertising’ and ‘Advertisement’, but not ‘sp’, ‘spon’, ‘affiliate’, ‘collab’. Similarly, the US Federal Trade Commission issued guidance such as ‘Disclosure 101 for Social Media Influencers’ on labelling requirements. Vague terms like ‘sp’, ‘spon’, ‘collab’ or ‘thanks’ are not sufficient.

Although the draft enforcement guidelines have only been released for consultation, there is no doubt that the Chinese authorities are going to tighten enforcement actions in relation to clear labelling of advertisements, especially those on the internet. Luxury brands should gear their marketing teams up in anticipation of potentially more robust enforcement actions and undertake an audit of their compliance policies in relation to advertisements labelling.

Edward Chatterton is partner and co-head of intellectual property and technology practice (Asia) and Jane J. Li is a senior associate at DLA Piper Hong Kong. They advise on all aspects of intellectual property law including trademarks, copyright, patents, advertising, brand protection, trade secrets, database rights and designs. They can be reached at [email protected] and [email protected].