Is there any risks related to endorsing commodities via We-media?

Have you ever been attracted by a commodity’s using experience video on “Xiao Hong Shu” app? Maybe some of you have brought the endorsed commodity. Have you ever been touched by an article published via a WeChat official account? You found it had aroused your internal idea, the structure was so smooth, a commodity or service was just so matched, you would have the same using experience, you liked the brand, and finally you wanted to buy one.

The video and article mentioned above are the so-called “Advertorial”. An “Advertorial” is a concept compared to “Advertisement”. Normally, an “Advertorial” refers to an advertisement that is designed to look like an article in the newspaper or magazine in which it appears. For example, a using experience article, or the so called tips on many internet platform. The essence of an “Advertorial” is the “Implicit Marketing”.

The “Implicit Marketing” first appeared in major sports events. Some entities inserted commercial advertising content in the broadcasting of those events, which confused the public, and misled the public to misidentify them as the sponsors, so as to achieve the purpose of expanding their brands’ influence. Later, there are more and more methods of “Implicit Marketing”, such as the “Advertorial”, some videos on YOUKU, DOUYIN and etc., the false transactions on TAOBAO, the false or derogatory statements for the commodities, the using experience articles with the introduction of a commodity or the purchase link, and etc..

For consumers, “an ‘Advertorial’ would propose a topic and express emotions, which may confuse unspecified consumers. And some of those consumers, as the fans of the author, may buy the commodities endorsed in the ‘Advertorial’. ……” (Quoted from Xuzhou Intermediate People’s Court (2020) Su 03 Min Zhong No. 5502 Judgment) In other words, such business operators have gained a competitive advantage by misleading consumers. Therefore, in recent years, American, Japan and some other countries have paid more and more attention on regulating the “Implicit Marketing” behaviors.

In China, according to Article 2 of the “Advertising Law”, commercial advertising activities refer to business operators promote their goods or services directly or indirectly through a certain medium and form. Article 3 of the “Interim Measures for Administration of Internet Advertising” stipulates that the advertising channels include websites, web pages, Internet applications and other Internet media; and the forms include texts, pictures, audios, videos, etc. In addition, Article 17 of the “E-commerce Law” stipulates that E-commerce business operators shall not use false transactions, fabricated user review etc. to conduct false or misleading business promotion, so as to defraud or mislead consumers.

Therefore, regardless of the promotion channel or forms, a direct or an indirect promotion, as long as the purpose is to “promote their goods or services directly or indirectly”, the “Advertising Law” shall be applied to such behaviors. When identifying the purpose, whether such promotion is paid or with other benefits would be an important factor.

According to Article 14 of the “Advertising Law” and Article 7 of the “Interim Measures for Administration of Internet Advertising”, commercial advertisements shall be distinguishable and prominently marked with “advertisements”, in order to enable consumers to identify them as advertisements.

If any business operator fails to mark “advertisements” or mark in an inconspicuous manner, which misleads consumers to identify them as advertisements, such business operators would face the risk of administrative processing and may also face lawsuits brought by consumers.

Therefore, it is recommended that companies shall conduct compliance and risk control procedures when conducting marketing and promotion. Companies could pay attention to the following aspects:

(1) Regardless of the form of promotion (e.g. publishing “Advertorial” via new Medias, such as the company website, WeChat official account, etc.), directly or indirectly promoting the company itself or products/services should be clearly marked with “advertisement” or “Promotion”.

(2) Inviting bloggers or KOLs to give comments for free or with payment, companies shall suggest bloggers or KOLs to express their real using experience, give an objective and fair comments when comparing products with similar products of other brands, and refrain from making false or derogatory statements.