29 February, 2016
On 4 February 2016, the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) and the Ministry of Industry and Information Technology (MIIT) jointly issued the Administrative Regulations for Online Publishing Services (the “2016 Regulations”), which take effect on 10 March 2016.
Background
SAPPRFT is the result of a merger of State Administration of Radio, Film, and Television (SARFT) with the General Administration of Press and Publication (GAPP) in 2013 and takes over GAPP’s responsibility of regulating online publishing activities and granting license to online publishers. The former GAPP first issued the Interim Administrative Regulations on Internet Publishing in 2002 (the “2002 Regulations”), and it is the first time in fourteen years when the 2002 Regulations were amended. MIIT is in charge of regulating internet service providers, who are required to apply for license to or file its operation with MIIT.
Highlights of the 2016 Regulations
Expanded Scope of Online Publishing Service
Under the 2016 Regulations, “online publishing service” is defined as provision of online publications to the public on information network; whilst “online publication” is defined as digitalised works that are provided to the public on information network with features of a publication, such as editing and processing. Online publications mainly consist of (i) original digitalised works, e.g. text, graphics, maps, games, cartoons and comics, audio and video books, etc.; (ii) digitalised works, the content of which is identical with works already published; (iii) online database formed by selecting, arranging and compiling the foregoing works; and (iv) other types of digitalised works determined by SAPPRFT.
The definition of online publishing service appears unduly broad. Literally any act that makes available to the pubic any works, whether it is original or duplication, could be considered providing online publishing service. The catch-all provision which grants SAPPRFT the power to determine whether a particular work is an online publication will no doubt allow SAPPRFT to extend its power significantly over online content with a wider discretion. Notably, online database is now explicitly considered a type of online publication and providers of online databases could now be subject to a license for online publishing service issued by SAPPRT.
The 2016 Regulations further provide that SAPPRT will separately issue detailed categories of online publishing services and we hope that the scope would be further clarified.
More Stringent Requirements for Online Publishers
The 2016 Regulations have raised the hurdle for online publishers, who are now subject to requirements that are comparable with offline publishers; in particular, online publishers must employ a substantial number of qualified publishing personnel and must establish the reviewing, editing and proofreading mechanisms previously only applicable to traditional publishing services.
Two requirements imposed by the 2016 Regulations targeting online publishers are worth particular attention. First, online publishers must own their publishing platforms, whether it is a website domain name or an application on mobile devices.
Secondly, online publishers must own necessary technical equipment, and the services and their storage devices must be located within China. These seemingly technical requirements will not only increase the threshold for market entry but also make online publishers more susceptible to supervision and regulation by SAPPRFT.
Express Ban of Foreign Investment
The 2016 Regulations expressly prohibit any form of foreign investment in online publishing services, and any cooperation with entities with direct foreign ownership on publishing project is subject to prior approval by SAPPRT.
Although the 2012 Regulations are silent on foreign investment, in practice foreign investors have been kept out of online publishing industry from the beginning. In fact, it is not even the first time when foreign investment was expressly banned for online publishing services. In an official opinion jointly issued by five ministries (including the former GAPP) on foreign investment in culture sector in 2005, foreign investors are explicitly prohibited from investing in online publishing. The Catalogue for the Guidance of Foreign Investment Industries (2015 version) restates the position that online publishing is closed to foreign investment. Therefore, the express ban on foreign investment in the 2016 Regulations is a not change of government attitude but rather a continuity of its previous policy and practice.
Our Observations
Who will be affected
Currently licensed online publishers will be subject to more stringent requirements. As discussed above, the extensive scope of online publication and online publishing services may bring online operators, who are currently not regulated by SAPPRFT, under the licensing requirements and governance of SAPPRFT.
Foreign publishing companies will remain banned from investing in online publishing in China. However, foreign companies, whether they consider themselves engaged in publishing services, will still need to consider the following questions: (i) whether their operations currently conducted within China may now fall into online publishing services under the 2016 Regulations and may therefore require a license; and (ii) whether their cooperation with Chinese online publishers will require prior approval from SAPPRFT. For instance, foreign online database providers may be subject to online publishing service license granted by SAPPRFT.
We would expect to see a clearer guidance to be issued by SAPPRFT as to the scope of online publishing services.
A further step to tighten up grip on online publishing?
The 2016 Regulations extend SAPPRFT’s regulatory powers to a much wider range of online content providers and operators.
The more stringent requirement will grant SAPPRFT further control on whether an entity may enter the online publishing sector. Nonetheless, how effective these powers can be used by SAPPRFT would remain to be seen.
The 2016 Regulations are building up on the current practice and policy of the government and are not intended to bring a change to the status quo. In an age of self-media, enforcement of the 2016 Regulations to the fullest extent would be limited by resources and technical means available to SAPPRFT and depend on the collaboration and support of other ministries which may have competing interests.
In the near future, it would be sensible for SAPPRFT to focus its attention on a few categories of online publishing services that they expressly set out in the 2016 Regulations and possibly in the follow-up guidance on scope of online publishing services and on entities specialized in publishing works online on a large scale. A widespread crackdown on all online publishing activities that would technically fall under the 2016 Regulations is not likely to happen any time soon, but we note that SAPPRFT reserves the power to do so when the future situation precipitates a policy change of the government.
For further information, please contact:
Karen Ip, Partner, Herbert Smith Freehills
karen.ip@hsf.com
