How to regulate search engines

Liu Bo / Opinion editor, FTChinese / 2016-05-23

The Age of Information implies that search engines are now the “infrastructure” of the Internet. It is no longer an individual product, but gradually becoming a public property. It is no longer sufficient to tame these giants with theories, reforms or rules. It is essential to initiate a shake-up of civil society, conglomerates and the government. People should be given stronger power and louder voices.

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The recent media coverage of Wei Zexi, a student who died after receiving illegitimate treatment from a hospital after finding its listing on the Chinese search engine Baidu,was reminiscent of a similar case in America five years ago. The U.S. Department of Justice (DOJ) issued a statement in August, 2011 that said Google agreed to pay a 500 million dollar fine to settle a case related to a fake drug listing online. The DOJ decided Google was responsible for inducing Americans to buy illegal prescription drugs, since the website posted listings for a Canadian online drug company that sold fake medicine. It is strictly prohibited to sell illegal drugs in the U.S.

This is a case with a strong American sense in its settlement result. The amount of 500 million dollars is equal to the earnings made by Google from posting the ad, plus the sales revenue of the disgraced Canadian drug company. Though Google saw its reputation harmed, a fine of 500 million dollars for the company is barely of any significance.

What is interesting about this case is that the DOJ gained evidence that proved Google knowingly posted illegal ads that had negative consequences. It was shown that Google tolerated the publication of such ads for profiteering, even though they were already aware of the sketchy quality of drugs sold by this Canadian company. “Google admitted illegitimate assistance to this Canadian online drug website,” said the DOJ statement. Aside from imposing a fine on Google, the DOJ also increased supervisory and regulatory measures. The DOJ requested stronger monitoring on the company’s marketing department, closer inspection of ad content for compliance and legality, and prompt reporting of suspicious items. Google beefed up its inspection efforts on advertising content to avoid future illegal conduct.

It goes without saying that many people in China nowadays fancy a solution like that of this 5-year-old U.S. legal case. It is easy to arrive at such a conclusion: If keyword bidding was defined as a marketing tool to be put under stern regulations, search engines that are too-big-to-be-regulated will be discreet with their business conduct by clearly distinguishing natural search results from paid search results. Better service is a part of the solution to prevent further similar incidents from happening.

However, this conclusion is derived from a vague perception and shortcut deduction. China and the U.S. have very different network servicing, market environments and legal systems. The death of Wei Zexi and sale of fake drugs are cases of a different nature and consequence. We tend to be allured by the similarities on the surface at the price of discrepancies in the details. It is better to go step-by-step to find the real solution: Should keyword bidding be deemed an advertising scheme? And if so, does it necessarily mean there will be no victims suffering from false postings?

Keyword bidding recognized as advertising

What is keyword bidding? While the legal system may not like the way it was designed, it has become a major revenue source for search engines such as Google, Yahoo and Baidu. Companies purchase slots for online promotional posts based on keywords people type in to search with. The more companies pay, the higher they will be displayed in the search results. Such a system has only recently developed and has brought up controversies about definitions and attributes, as it is not categorized as conventional advertising. At least in China, many legal cases have been handled under the presumption that keyword bidding is an information searching service, rather than an advertising activity.

Such a classification leads to different legal outcomes and accountabilities. Search engines will be treated as neutral information disseminators if keyword bidding is a form of information searching. The company is not required to conduct content checks and inspections, which makes the company immune from compensation to victims of bad search results. But when keyword bidding is defined as a marketing tool, ad carriers will have to ensure the authenticity of the posts and be held accountable when they are aware of false ads. The search service provider is also obliged to pay monetary compensation to victims. Under such circumstances, users can claim direct compensation from search engines as a result of joint liability, which strongly backs the lawful rights and interests of users.

Keyword bidding in the U.S. was categorized as advertising shortly after its emergence and has since been under legal restrictions. However, it was the result of a civil society campaign, rather than government initiatives. In 2001, an American consumer group filed an appeal to the Federal Trade Commission (FTC) alleging that some search engines did not disclose that their search results contained paid marketing posts, which was against the laws backed by the FTC. In June the following year, the FTC ruled explicitly that any listings that come as a result of keyword bidding should be deemed advertising. Search engines should also separate results from natural searches from keyword bidding and attach clear standout labels to distinguish them.

It wasn’t until then that keyword bidding started to be recognized as an advertising vehicle. Google and Yahoo brand their keyword bidding services as an “advertising service ” or “advertising bidding.” On Google’s search result page, an “advertising” label tags each paid listing to distinguish it from natural search results. Also, Google notifies companies that all conduct should be carried out in compliance with relevant advertising rules and policies. In contrast, Baidu uses “promotion” to mark keyword bidding results, which fails to provide a clean distinction from other search results. Users may not be able to tell them apart as a result. Of course, netizens will be more cautious with search results in the wake of the Wei Zexi incident and become more aware of the risks correlated with online listings and content. Ultimately, it is only justifiable to treat keyword bidding as a way of advertising.

What’s on paper is far from enough

Now, it is almost the public will to regulate keyword bidding as online advertising. This could be achieved through legislation revision. Consequently, keyword bidding will have the same attributes in China as in the U.S. Regardless, a more profound question follows: With keyword bidding now being acknowledged as advertising, will it lead to a higher level of interest and rights protection for future victims and their families?

China’s Advertising Law regulates in Article 38 that advertising agents or publishers who design, produce and publish false advertisements with the knowledge, or should have the knowledge, of falsehood are subject to joint liability. What is worth mentioning is that the plaintiff bears the burden of proof. In other words, if a plaintiff fails to prove that the publisher “has the knowledge or should have the knowledge of” the advertisement being a fraud, the publisher will be waived from any joint liability. China and the U.S. do not differ much in terms of legal terms. An important reason Google accepted the fine was that the DOJ had gained proof that the Internet company was aware of the drug problems at this Canadian producer. But with Wei Zexi, how can we prove that Baidu “has the knowledge or should have the knowledge” of the fraudulent information published by the disgraced hospital? If this conundrum is left unsolved, whether keyword bidding will be taken as a form of advertisement does not necessarily mean a heavier
punishment against Baidu.

We have learned enough from past tragedies. Despite the joint liability clause in the Advertisement Law, rarely is a publisher held accountable for their misconduct, since it is difficult to find solid proof. Take the Sanlu contaminated milk powder as an example. Consumers had to bend over backwards to safeguard their lawful rights and seek compensation from the milk powder maker, let alone advertisers. Such a paradigm almost disabled any legislation framework that was designed to rein in the advertising industry. Will putting the burden of proof on the defendant sort out the dilemma? Not likely. Authorities have the most information and strongest power to exert influence on companies. A regulatory apparatus that comes under no public monitoring, with no responsibilities, will only result in an unfair distraction and a shift of accountability, which may consequently lead to a nosedive in Internet freedom and entrepreneurship.

What is a viable solution? The answer still lies in government regulation. Google has been put through anti-monopoly investigations in both the U.S. and EU. In April 2015, the EU accused Google of a monopoly as the company displayed its price comparison service on the top of the search page. The EU regulatory body believed that the company has been abusing its leading position in the search engine business and could potentially harm the rights and interests of consumers and competitors. In recent years, the EU anted up by asking Google to respect the “right to be forgotten” of its users. Strong government regulations paralleled with vibrant campaigns and voices from consumer groups and civil society guaranteed that search engines can only do good deeds.

The Age of Information implies that search engines are now the “infrastructure” of the Internet. It is no longer an individual product, but gradually becoming a public property. It is no longer sufficient to tame these giants with theories, reforms or rules. It is essential to initiate a shake-up of civil society, conglomerates and the government. People should be given stronger power and louder voices. Service-minded government should build fences around big companies and govern under the rule of law. Arbitrary rule-making and shaking off responsibilities are the last things we want to see from the authorities. Judging from the handling and development after the Wei Zexi incident, China still has a long way to go.