China: Online Medical Advertising Using Paid Listings On Search Engines

In April 2016, the death of a terminally ill college student, Wei Zexi, outraged China's online community. Wei had been diagnosed with a rare form of cancer and when traditional treatments did not work, he had gone online to search for alternative options. Using China's largest and most popular search engine Baidu, Wei found a military hospital in Beijing claiming to have an experimental treatment for his illness. The treatment did not work. Prior to his death, Wei wrote a long and widely read post detailing his experience in finding a cure and blaming Baidu for displaying promoted search results that directed him to the hospital.

Thousands of China's netizens expressed sympathy for Wei and directed their anger at Baidu's role in the tragedy. Many centered their criticism on Baidu's paid listing feature, especially as it relates to medical services.

Similar to outside of China, paid listings are a major income source for most online search engines. However, in China paid listings have long fallen into a legal grey zone, and Wei's case helped highlight this lack of clarity. A critical distinction under Chinese law is whether a paid listing should be classified as an information search service or as an advertising service. The difference is important since it will determine which kind of regulation applies to paid listings, including those related to medical services and products.

1. Advertising Law

The key legislation involved is the Advertising Law of the People's Republic of China ("Advertising Law", amended on 24 April 2015, effective as of 1 September 2015). The current version is widely considered one of China's most stringent advertisement laws and many regular business activities fall under the regime of the law (e.g. a company's general introduction of itself on its own website). Companies (including internet operators) and individuals are required to strictly comply with the law in daily operation and routine business dealings.

All advertisers in China are subject to the specific provisions of the Advertising Law. For example, they must follow certain advertising registration, approval and filing requirements and are required to review their clients' certificates and advertising content before release. Based on the special features of the medical sector, Article 46 of the Advertising Law imposes additional, rigorous pre-approval requirements on advertising for medical services, medicine, medical equipment, pesticides, veterinary drugs and health care products. If an advertisement for a product or service concerning human life or health is found to be false and resulting in injury to consumers, the advertiser will bear joint and several liability with their client.

2. Paid Listings as Information Search Service or Advertising Service

Under the Advertising Law, paid listings could be considered as advertisement. The definition of advertising is broad and specifies that it includes "any activity of commercial advertising carried out by a product manufacturer or service provider to directly or indirectly promote its products or services through certain media in certain forms."

In terms of judicial practice, paid listings have traditionally been considered as information search services. For example, Article 39 of the Guidelines on Trial of Cases Involving Network Intellectual Property Rights issued by the Beijing Municipal Higher People's Court on 13 April 2016 ("Guidelines") expressly provides that "promotional search services provided by search engines are a type of information search service."

A new regulation following Wei's death does little to clarify the character of paid listings but does provide for specific requirement for search engines offering paid listings. Specifically, Article 11 of the Administrative Regulations on Online Information Search Service ("Regulation") (released by the Cyberspace Administration of China on 25 June 2016) requires that search engines who provide paid information search services shall (i) examine the required qualification of their clients, (ii) implement a specific cap on the number of the paid search results displayed, (iii) display the paid search result separately and (iv) clearly mark any paid search result.

As a result of the Regulation, it is clear that paid listings are subject to the administration of the cyberspace authorities; however, whether paid listings would also be subject to the stricter requirements of the Advertising Law remains unclear.

3. Looking Ahead

We find it questionable whether Baidu should be held liable for Wei's death. However, as key information sources for the public, Baidu and other large internet companies have a uniquely powerful position in terms of how information is presented. As such, it is prudent for search engines to both exercise due diligence in their daily business operations and keep a close eye on updates in laws and regulations governing online search services.

New legislations and regulations are likely forthcoming, and some search engines already seem to have seen the writing on the wall. For example, shortly after the death of Wei, 360 Search, another leading search engine in China, announced that it would stop offering advertising services related to medical services and products. Indeed, in case the strict requirements of the Advertising Law will eventually apply, search engines would likely be well served by beginning to take a cautious approach when offering paid promotional services, especially related to providing services for companies in the medical sector.

Ideally, the authorities will issue implementation rules for the Advertising Law as soon as possible. It would also be helpful if the government would introduce specific laws for online advertising into the current legal regime governing advertising. In this regard, we urge advertisers to raise awareness of the difficulties in legal compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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