Mobile Apps Face New Controls in China

By Peter Corne and Robin Weir

The circumstances surrounding the replacement of Lu Wei as head of the Cyberspace Administration of China in June remain difficult to discern, but the politics surrounding its leadership seem not to have deflected the CAC from its mission to assert more control over cyberspace.

The CAC – also known as the Office of the Central Leading Group for Cyberspace Affairs – has issued new regulations which took effect on 1 August 2016 and place obligations on providers of mobile internet applications, or “apps”, that seem to mirror those placed on website and social media operators.

Under the Mobile Internet Applications Information Services Administrative Regulations, providers of mobile apps in mainland China must, among other duties:

• Report to the CAC within 30 days of their services going live online;

• Operate a system of real-name registration, and verify the identity of registered users;

• Protect the security of users’ information, including being open about the collection and use of such information;

• Monitor and manage the content of information, including shutting down the accounts of users who publish content which breaches laws or regulations, retaining their records and reporting breaches to the authorities in charge; and

• Keep a log of user information and maintain it for 60 days.

There are a number of prohibitions, including on the publication and use of apps which infringe other parties’ intellectual property; tracking users’ geographical positions; and photographing and recording without users’ permission.

For Chinese and foreign businesses alike, the new regulations underline the fact that internet-related business in China is not getting any easier. For example:

• Mobile apps fall into the category of “value-added telecommunications services”. To offer these services requires a licence issued by the Ministry of Industry & Information Technology. The only foreign-invested companies which may apply for this type of licence are joint ventures with a maximum foreign share of 50%.

• The Online Publishing Service Administrative Rules, issued jointly by the State Administration of Press, Publication, Radio, Film and Television and the Ministry of Industry and Information Technology and effective from March this year, reinforced an existing prohibition on foreign direct investment in the online publishing sector.

• The provision of video on line is regulated even more strictly. Only state-owned enterprises which meet strict criteria are permitted to offer such services.

Some foreign companies have attempted to get around the restrictions by adopting a structure known as the “variable interest entity” or VIE, in which they contract with Chinese companies to offer services on their behalf. VIE structures, however, are precarious and subject to official crackdowns from time to time. One aim of the Online Publishing Service Administrative Rules, mentioned above, was to get tough on VIE structures in the online publishing business.

Dorsey & Whitney’s Beijing and Shanghai offices have a track record of advising internet-related businesses in China and are ready to advise any client whose business may be affected by the continuing tightening of the net over the Net.