Image: Dior

Live streaming has been at the center of China’s booming entertainment industry for years, but only recently has it become so commercialized, with the most popular online influencers attracting millions of viewers eager to buy products touted by their idols. As businesses in China try to boost sales during the coronavirus slump, live streaming promotion has grown phenomenally. Besides professional live streamers, influencers and KOLs, more and more celebrities and entrepreneurs also livestream to promote products and services.

Given its growing prevalence, it is no surprise that regulatory supervision and legal enforcement in this area is also becoming more vigilant. This article addresses certain legal issues that marketers need to know for marketing and promoting goods/services by live streaming in China.

Advertising Law Applies

The most infamous live streaming incident may have occurred during the 2019 Taobao Singles Day national shopping event. Li Jiaqi, one of the top live streamers in China with around 18 million followers on Alibaba’s Taobao Live, livestreamed a demonstration of a non-stick pan to 30 million viewers. Frying eggs, he raved about the pan. But to the 30 million viewers, it was obvious that the eggs were stuck firmly to the pan. Although Li quickly thereafter explained that this mishap was due to his improper use of the pan, the incident negatively impacted the brand’s reputation, and probably Li’s as well.

Compared with traditional advertising, live streaming promotion is fast-paced and unedited, perhaps leading many live streamers and merchants to assume that a sprinkling of false and misleading words would not catch the authority’s attention. And to date, this has been the case. This incident may have been considered a false advertisement were it part of a traditional advertisement, but to date the world of live streaming has had something of a free pass. In fact, Li was not punished by the authorities.

However, that may be changing. After this incident, the National Radio and Television Administration issued a notice urging live streaming campaigns to avoid false advertising, and noting that promotional language used in live streaming and advertising programs should be civilized, compliant with laws and regulations, and should not contain exaggerations, misleading information or fraudulent content.

According to the Advertising Law, advertisements shall not use terms such as “national level”, “highest level” or “best”, when characterizing the underlying product or service. However, these rules are often flaunted by live streamers and merchants. For example, the famous live streaming hostess, Li Xiang, used the words “best for people’s health” to promote a cultivar of mushroom in her live streaming promotion. To date, she, too, has gone unpunished by the authorities.

Another controversial case involved the first live streaming promotion of Luo Yonghao, the founder of Chinese mobile phone brand Smartisan. In April 2020, Luo promoted 23 kinds of products within three hours, amassing sales of over 100m RMB. During his live streaming event, one promotional billboard stated, “No. 1 sales”. Luo crossed out such words in red ink, and told the audience that such expression was illegal.

This type of incident represents a gray area under the law that will likely be addressed in the future: even though Luo crossed out the illegal language, he still deliberately let the public see that this product was a best seller, which could be deemed a violation of the Advertising Law. While this seems to have worked to his advantage, the most proper behavior is not to mention such prohibited words at all during the promotion.

More Enforcement is Expected

Live streaming promotions going forward will not be as much “anything goes”, since the live streaming free-for-all described above has prompted the involvement of governmental authorities. On March 18, 2020, the State Administration for Market Regulation and 11 other departments issued the Key Points of Jointly Meeting on Combating False and Illegal Advertising in 2020 (整治虚假法广告部际联席会2020年工作要点), which clarified the key tasks for cracking down on fake and illegal advertising in 2020, emphasizing strengthening supervision advertisement online and on live streaming platforms.

On May 6, 2020, the Guangzhou local government announced that the first live streaming festival will be held on June 6, 2020 and the Guangzhou Administration for Market Regulation also stated that during the festival, there would be strict legal supervision on illegal advertising through livestreaming platforms, especially advertisements hampering the social public order or demeaning social practice. Especially called out were false advertisements involving the prevention, treatment or cure of diseases caused by COVID-19.

Best Practices

Given the expected crackdown on live streaming, it is important for advertisers considering this promotional method to take certain precautions.

(i) Make sure the influencers know the product to be promoted. It is recommended that live streamers have professional knowledge of the different categories of products they promote. Unfortunately, this is often not the case, and their ignorance can affect the product’s reputation and potentially lead to lawsuits. This will become even more important going forward, as live streaming e-commerce is expanding from the promotion of daily-use items (such as food and cosmetics) to more expensive products, like real estate and automobiles.

(ii) Marketers and influencers need to know the laws and regulations. As there may not be scripts for live streaming, it is very important for both the marketers and the live streamers to understand in advance the legal requirements. Based the history of recent incidents as mentioned above, we note that the most common violations involve use of words such as “fastest”, “ultimate”, “supreme” etc. This is especially problematic when working with foreign brands, as often, the slogans themselves include this language. Therefore, not only should the livestreamer know the advertising rules well so as to avoid making illegal statements, but the merchants should also understand the advertising rules as well, or seek professional advertising counsel in advance to review the planned promotion.

With the foregoing in mind, live streaming promotions can lead to massive sales, and will likely continue to be an important means of promotion. However, as the regulation of this area develops, it will be increasingly important for both live streamers and merchants to pay attention to the advertising laws and enforcement trends, in order to avoid damage to market reputation as well as legal liability.

Justina Zhang is a Senior Partner at TransAsia Lawyers. She has extensive experience in the technology, media and telecom industry, as well as intellectual property protection and advertising.