China Media & Entertainment Law Report : China Media Lawyer & Attorney : Reed Smith Law Firm : Entertainment, Sports & Consumer Rights Law

On November 13, 2009, the Ministry of Culture ("MOC") issued a notice on online game content control issues.  The new rules require operators to: establish internal control systems; strengthen file management systems for imported and domestic online game content; supervise and prohibit games with illegal content; and improve social supervision and industry self-discipline.

The MOC also will be issuing a general outline for training and examining online game enterprises.  The notice also indicated that MOC will be promulgating amendments to rules governing the content investigation process and other regulatory matters in the online games sector.  Provincial level culture administrations are slated to be responsible for investigations of online gaming operations in their respective jurisdictions.
 

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On November 15, 2009, the Beijing Consumer Association issued an open letter to celebrities and movie stars as a follow-up to recent false-advertisement issues surrounding well-known Chinese media personalities Hou Yaohua, Zhao Zhongxiang and Tang Jiezhong. This is the fourth time that the Association has issued an open letter to celebrities and movie stars on controversial advertising practices. The letter points out four main issues associated with celebrity advertising: lack of knowledge of the products; exaggeration of the curative effects of medical services and/or drugs; illegal promotion of the efficacy of health-related products; and/or possessing the intent to 'trap' consumers through advertisements. This final category sounds a little broad. Please let us know if you know of any specific examples of ads that don't intend on "trapping" us. This may be a new innovation in the advertising marketplace of which we are not aware.

On November 11, the Professional Committee of Media Shopping, which is affiliated with the China General Chamber of Commerce, identified 20 commercials that it considers to be either in violation of applicable laws or an exaggeration of the relevant product's qualities. Zhao Zhongxiang, a 67-year-old veteran host for China's national TV station CCTV, starred in two of the identified advertisements, which promoted medicine curing coughs and heart diseases. On November 18, Zhao apologized for starring in these commercials.

Earlier in November, the China Advertisement Association identified 10 fake or unregistered medicine-related commercials in which famous cross-talk star Hou Yaohua starred. On November 6, Hou announced on his blog that he was sorry for his actions.

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The State Administration of Radio Film and Television recently issued The Measures on Radio and Television Advertisement Broadcasting ("Measures"), which are applicable to all television or radio broadcasting entities. The Measures, which become effective as of January 1, 2010, restrict the length of advertisements during radio and television programs to no more than 12 minutes per hour for every program. IN any episode of a TV show, there will only be two commercial advertisements allowed, neither of which shall exceed 90 seconds.  An exception allows shows aired between 7-9 pm to have up to 18 minutes of advertisements per hour.  

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The latest move in the continuing saga between the Ministry of Culture [MOC] and the General Administration of Press and Publication [GAPP] over popular online game World of Warcraft has led to MOC reiterating its sole responsibility for the administration of China’s online games market.

NetEase, operator of the game in China, recently made World of Warcraft available online again after a two-month hiatus imposed by government regulators which was originally attributed to the game’s controversial content. However, following resumption of the game on September 19, GAPP issued a notice ordering NetEase to cease operating World of Warcraft in China.

The battle has intensified this week, with the Ministry of Commerce on November 3 issuing an official statement that GAPP has no authority to administer the actions of World of Warcraft, and that its notice on terminating the examination and approval of World of Warcraft was invalid, given that MOC is responsible for the administration of online games.

To further emphasize its stance, MOC today released an official announcement of its intention to conduct investigations into illegal online gaming products and operations, asking local cultural departments to conduct investigations into online games within the month. The announcement noted that, as the administrator of the online games industry, MOC’s responsibilities include regulating online games and strictly punishing illegal online game products and operations.
 

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China has established an exchange devoted entirely to trading in companies that own or deal with culture. The Shanghai Cultural Equity Exchange (“SCEE”), whose investors include the Shanghai United Assets and Equity Exchange, Jiefang Daily Group and Shanghai Jingwen Investment Co., Ltd., was established with the approval of Shanghai Municipal Government in June.
SCEE is expected to be a platform for the trading of property rights, creditors’ rights, equities, and intellectual property associated with cultural assets. Trading will cover a wide range of cultural products, services, and companies operating in the press, publishing, film, television and Internet sectors, among others.

In accordance with the “Measures of Shanghai Municipality for the Management of Property Rights Exchange”, SCEE will provide services such as consulting, public announcements, transaction structuring, and project financing related to the cultural assets exchange. SCEE will administer transactions in a manner similar to other assets and equity exchanges in China, which typically involve a public bidding process and negotiated transfer facilitated by exchange rules and procedures.  

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Reports indicate that China’s fifteen-year-old Consumer Rights Protection Law will undergo serious revisions this year. Liu Junhai, Vice Director of the China Consumers’ Association, noted in a June 15 interview with China’s Xinhua News Agency that changes are necessary to address new issues facing consumers in China.

The current Consumer Protection Law does not recognize an independent right to privacy. Mr. Liu noted that changes in contemporary society necessitated providing protections for individual privacy, and suggested that amendments would likely include provisions on a product recall system and the establishment of a cool-down period after major purchases, such as cars and houses. 

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On July 27, 2009, the Ministry of Culture Issued the “Circular on Investigation into ‘Gangs’ and Other Illegal Online Games”. The Circular notes that some popular online games based on the themes of gangs, the mafia, or “godfather” concepts advocate obscenity, gambling, or violence and undermine morality and traditional Chinese culture. It goes on to note that these games encourage people to deceive, loot, kill, and glorify the lives of gangsters, providing a negative influence on youngsters. The Ministry of Culture has prohibited websites from running, publicizing, or offering such online games, and has also ordered its law enforcement bodies to step up oversight and harshly punish any sites that continue to offer such games.

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Foreign companies and their Chinese partners have always been major players in the Chinese online gaming market. The partnership normally is has the foreign company licensing rights to a Chinese partner. The Chinese partner is then responsible for developing the local market. The Chinese partner is required to apply to the Ministry of Culture’s Content Censorship Commission (“CCC”) and the China’s General Administration of Press and Publication (“GAPP”) for pre-approvals to distribute the game. CCC censors game content and reviews the license agreement, which becomes effective upon CCC approval. GAPP examines the qualification of the Chinese partner to provide foreign online game services and decides whether to issue a License for Internet Publishing Service to the Chinese partner.

Chinese companies have accused foreign gaming companies of abusing their copyrights via unfair and arbitrary contractual terms. The Ministry of Culture and GAPP seem to be responding to these accusations by cracking down on foreign online gaming companies. On April 24, 2009, the Ministry of Culture issued the “Notice of Regulating the Censorship and Reporting Mechanism on the Content of Imported Online Games” (“MOC Notice”), and on July 20, 2009, GAPP issued the “Notification on Strengthening the Administration of Approval of Imported Internet Games” (“GAPP Notification”).

These two sets of regulations seek to tighten the control over the activities of foreign online gaming companies in China:

1. Each foreign online game must be distributed in China by a single Chinese partner with exclusive rights.
2. In the event that the Chinese partner is changed, the game is renamed or new game versions are released, the Chinese partner must re-apply with CCC and GAPP for approvals.
3. Foreign operators who are deemed to have included arbitrary contractual terms in their distribution agreements will be sanctioned and CCC may suspend its approval of the relevant foreign online game.
4. GAPP has expanded its authority to review the import of foreign online games for exhibition, demonstration, trade or promotional activities, all of which are now prohibited without GAPP pre-approval.

Kou Xiaowei, Deputy Chief of the Sci-tech and Digital Publishing Department at GAPP, stressed that GAPP would not discriminate between Chinese and foreign game service providers during the approval process. Still, Chinese produced online games only require filing with the GAPP before distribution, approval with GAPP or CCC is not a requirement.

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Reports indicate that the State Administration of Radio, Film and Television (“SARFT”) will issue new rules to limit the growing number of TV dramas. Wang Weiping, the Deputy Director-General of the Department of Teleplay Administration of SARFT confirmed that the agency has drafted a new set of rules stipulating that only two episodes of a given television drama can be broadcast consecutively during prime time (7 pm to 9:30 pm), and no more than three episodes will be allowed in the time period from 6 pm to 1 am the next day. No more than six episodes of one TV drama can be broadcast during daytime hours, while TV series will be restricted to 45 percent of the total programming schedule, limiting episodes to 46 minutes of air time. The new rules are expected to take effect in January 2010.

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