Are Ad Blockers really on the consumer’s side?

Almost every internet user has had some negative experience with advertising.

The majority of consumers, 82 percent, also say that too much advertising interrupts their online experiences, particularly ads that pop-up and cover content, pre-roll video ads, and ads that are delivered through push notification.[i]

11% of the global internet population is blocking ads on theweb[ii]

Negative perceptiontowards ads

Considering this turbulence ad business level, we wish to borng to your attention a few recent cases on software whose aim is to stop theadvertising. Are they legal?

LeTV v. Damo

In 2016, the Shanghai Intellectual Property Court ruled in favor of LeTV, a well-known video sharing website in China, in a case against ShanghaiDamo Network Technology Co., Ltd., the company who runs an ad-blocking software named Adsafe. The main issues of the dispute, as the Court concludes, lies in two aspects: (1) whether the business model of LeTV, i.e. “free + ads” and paying for no ads, is legitimate, thereby should be protected by law; and (2) whether the Adsafe software is a neutral technical tool, and if not, whether it constitutes infringement.

The Court decided to offer legal protection for the commercial interests obtained through ad revenue since it held that the ad based model of the video website is in no way against the law. It held that using technical means to intercept ads that appear prior to videos would interfere with the normal operation of the video site, which falls under the provisions of Article 2 of the Anti-Unfair Competition Law before the revision.

Tencent v. Star World

The Beijing Chaoyang District People's Court dissented in finding ad blocking software anti fair competition in the case brought by internet giant Tencent against Beijing Star World Technology Company Ltd., who developed the World Browser that blocks the commercials on Tencent video website.

The Chaoyang Court pointed out in its judgment that market competition, with its confrontation nature, would inevitably lead to damage, which shall not constitute a propensity to evaluate the legitimacy of competitive practice, unless the damage is directly targeted at a particular victim. The public has the right to benefit from changes in business models and technological innovations brought about by advances in science and technology. In the case of a browser with ad filtering features, it does not target a specific video operator, nor does it cause fundamental damage to competitors. Therefore, the development and operation of the browser involved in the case is not sufficient to establish unfair competition.

The Chaoyang Court seems to share the opinion of the German Federal Supreme Court in Springer v. Eyeo that ad blocking per se is part of free online competition, ruling that Eyeo, vendor of popular ad-blocking solution AdBlock Plus, does not violate the German Unfair Competition Act.

Dissatisfied with the first-instance judgment, Tencent appealed to the Beijing Intellectual Property Court. In the second-instance procedure, at the request of the Court, Tencent submitted an economic analysis report on the impact of ad blocking on the online video industry.

Earlier this year, the Beijing Intellectual Property Court has delivered its final ruling, overturning the first-instance judgment, and found that the act of Star World did violate the provisions of Article 2 of the Anti-Unfair Competition Law. Meanwhile, the Court has ordered a compensation of 1.89 million RMB to be borne by Star World.

What we have to admit is that ad blockers really improve our surfing experience. But the negative impact they have on content providers, especially those rely on ad revenue to provide free contents, shall not be ignored. 

What is your view on the legitimacy of ad blocking? Share your opinions in thecomments below.

[i] https://rakutenmarketing.com/press-articles/rakuten-marketing-advertising-insights-consumers-associate-online-advertising-fake-news-company-commits-save-web

[ii] https://pagefair.com/blog/2017/adblockreport/

Emma Qian

HFG Law&Intellectual Property