The Cybersecurity Administration of China has begun soliciting industry feedback on a new set of recommendation algorithm regulations that would take significant steps in regulating how the technology can be used. If passed and enforced as intended, the regulations will have a major impact on companies that rely heavily on the technology, such as social media applications, e-commerce platforms, and news sites, requiring them to increase oversight and make significant technical adjustments.
On August 27, 2021, the Cybersecurity Administration of China (CAC), China’s internet watchdog, began soliciting feedback from the public on Internet Information Service Algorithm Recommendation Management Regulations (Draft for Solicitation of Comments), a new set of draft regulations for reining in the use – and misuse – of recommendation algorithms.
The regulations, if they pass in their current form, will be the most extensive set of rules ever to be created for the implementation of recommendation algorithms in the world, demanding more transparency over how the algorithms function and affording users more control over which data companies can use to feed the algorithm. But the regulations also go beyond addressing user rights, mandating that algorithm operators follow an ethical code for cultivating ‘positive energy’ online and preventing the spread of undesirable or illegal information.
Many of the issues tackled in these new regulations – discriminatory data practices, opaque recommendation models, labor violations, and more – have already been addressed in other legislation, such as the Personal Information Protection Law (PIPL) and the Data Security Law, as well as in local rules, such as Shenzhen’s data protection regulations.
The CAC is soliciting feedback from the industry until September 26, 2021, after which the regulations may undergo another round of edits before being deliberated.
The proposed regulations define ‘application algorithm recommendation technology’ as the application of algorithm technology, such as content generation and synthesis, personalized recommendation, sorting and selection, content retrieval and filtering, or scheduling and decision-making in order to provide users with content and information.
The regulations would have far-reaching consequences for the tech industry if they are implemented as intended. Personalized recommendation algorithms are used extensively by social media apps for content recommendation and targeted advertising, so companies such as Douyin (the Chinese version of TikTok) operator ByteDance and WeChat operator Tencent are would-be targets of the new regulations. These two companies also own news aggregator apps, namely Jinri Toutiao and Tencent News, which would also have to fall in line.
E-commerce companies and service platforms, such as food delivery apps that recommend products and services to users based on their past activity and preferences, will also be affected. Meanwhile, food delivery and logistics apps will have to adjust how they implement algorithms to allocate orders and schedule working hours of their employees.
Any foreign company that operates an app or online service that uses algorithms for any of the above-mentioned purposes would also have to adhere to the regulations.
Under the proposed regulations, algorithm operators would have to update their technology to comply with new technical requirements, from auditing keywords to enabling users access to and control over their personal data profiles. In addition, operators will have to adjust the direction of their recommendation algorithms in order to adhere to ‘mainstream values’ and are prohibited from using algorithms for a range of illicit behavior, such as implementing anti-competitive practices and price discrimination.
Below are the technical and policy requirements proposed in the new regulations.Of the above requirements, perhaps the most significant are those outlined in Article 15, which grant users the power to control their profile. This will require developers to create an interface where users can view their profiles and actively edit and remove keywords used for the recommendation algorithm – a first for any algorithm regulation anywhere in the world.
In addition, the regulations stipulate that the algorithm operators must also clearly inform users of the circumstances in which they are using the recommendation algorithm and make public the basic principles, intentions, and operating mechanisms of the algorithm recommendation service.
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The content moderation requirements stipulated in Article 9 also make platforms liable for any illegal or undesirable content that is recommended to users through algorithms. This is an extension of similar stipulations in China’s Cybersecurity Law that hold platforms accountable for hosting illegal or undesirable content.
Technology platforms have been penalized for hosting such content on numerous occasions in the past, and the new regulations would expand the scope of liability and require more scrupulous content moderation mechanisms to be written into the code of companies’ algorithms.
Finally, the stipulations regarding the protection of labor rights stipulated in Article 17 are also not entirely new. Earlier this year, the State Administration of Market Regulation (SAMR) release new policy guidelines protecting the rights of delivery drivers, which among other labor rights demands, required safer and more reasonable employment of algorithms to allocate deliveries and working hours for drivers. The new algorithm regulations serve to prop up the rights of workers, giving regulators another tool with which to penalize companies that violate the rules.
The new regulations would also require algorithms to be updated to adhere to ‘mainstream values’, and mechanisms to promote ‘positive content’ and prevent or reduce the spread of illegal or undesirable content would have to be built into the platform systems.
Below are some of the proposed ethical requirements of algorithm operators:For long-time observers or users of China’s internet, the above articles will likely come as no surprise. China has passed several laws that require platforms and service providers to prevent content that violates laws and crosses the Party line.
The above stipulations expand the scope of responsibilities of algorithm operators from moderating and preventing illegal content from appearing on their platforms to actively promoting ‘positive’ content that follows the Party line. This largely consists of content that is patriotic, family-friendly, and focuses on positive stories in line with the ‘core socialist values’ of the CCP, while refraining from content that promotes undesirable behavior – extravagance and over-consumption, violent or anti-social behavior, sexual promiscuity, excessive adoration of celebrity idols and other public figures, and political activism, to name a few.
While some of these requirements are familiar – China has strict internet censorship laws – others are part of a newer trend. Moreover, content that promotes over-consumption and extravagant lifestyles is seen at odds with the government’s recent push to promote ‘common prosperity and reduce income inequality’. High-profile figures have also been reprimanded for their excessive shows of wealth in recent years, and the prohibition of content promoting such lifestyles can be seen as a continuation of these efforts.
Meanwhile, on the same day as the algorithm regulations were released, the CAC released new rules for platforms to control what the government sees as runaway fan culture – that is, the over-indulgence of celebrity news and information leading to ‘obsessive’ behavior in fans. The rules prohibit platforms from ranked lists containing celebrity names and from using algorithms that reward obsessive behavior among fans or encourage them to over-spend or consume. The rules also specifically outline platforms’ responsibility to protect minors from engaging in this kind of obsessive behavior, which is also reflected in Article 16 above.
The new regulations place tight restrictions on the application of recommendation algorithms, reining in the misuse of these systems to gain an upper hand over competitors or manipulate users to spend more time or money on apps.
Below are some of the activities prohibited in the new regulations. The PIPL, which will come into effect on November 1, 2021, tackles some of the issues mentioned above, such as prohibiting price discrimination and other discriminatory practices for automated decision-making processes. Meanwhile, stipulations in Article 13 adhere to China’s antitrust laws, which prohibit the use of algorithms to restrict market competition or fix prices.
In another significant move, the regulations directly prohibit operators from adding illegal or undesirable keywords to user profiles and from using such tags for discriminatory or biased targeting or recommendations.
The obligations to protect minors outlined in Article 16 will likely mean video formats, such as pranks or internet challenges that encourage viewers to replicate and share similar content on social media – popular among younger users in many countries around the world – will not be welcome on Chinese apps.
It is clear the Chinese government is taking a much more hard-hitting approach than many other countries when it comes to cracking down on illegal and undesirable online content. Although the scope of content targeted by China’s internet regulations covers topics and areas that would be considered acceptable in other countries, it also tackles head-on issues that many around the world are grappling with – fake news, misinformation, online abuse, and so on.
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By placing the responsibility at the feet of the platforms themselves for moderating, China is taking a very different approach from many western countries, such as the U.S., where platforms are largely protected from legal repercussions for content hosted on their platforms, and liability instead falls on the individual.
Under China’s regulations, violators who refuse to correct issues or whose actions have had serious consequences are liable for fines between RMB 5,000 (US$774) and RMB 30,000 (US$4,642) – an insignificant amount for large technology companies. However, as many of the regulations overlap with those outlined in other legislation, some cases could culminate in much larger fines. In addition, public naming and shaming tactics could also bring larger companies to heel.
These new regulations will be difficult for many companies to implement, but they will likely also be difficult for regulators to enforce. Smaller companies with limited development budgets may find it hard to update their systems to comply and employ the manpower needed to moderate the content. It is therefore likely that many will not fully comply in the short term, and that fines will be meted out inconsistently.
It is also possible we will see some amendments to the draft law as companies respond to the request for feedback. Possible sticking points for companies could be some of the technical requirements and rules on the types of content that can be promoted, which would be difficult and costly to implement and may require some companies to change their business models. However, as the majority of these rules adhere to long-term regulatory trends, it is unlikely the CAC will budge on any of the core requirements.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at email@example.com.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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