Taking Cues from the Past: Evolution of Celebrity Endorsement Regulations in China
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www.shiminlaw.com Taking Cues from the Past: Evolution of Celebrity Endorsement Regulations in China In recent years, celebrity endorsement has become one of the most popular and remunerative marketing strategies in the world of marketing. Brands often want to be identified with famous celebrities and use their status to attract customers. By associating their names with famous actors, models, sports personalities or other public figures, companies aim to improve their brand image and build customer loyalty. China is no exception. In China, celebrity endorsement is widely used in advertisements and represents the leading marketing strategy for many brands. It is not uncommon to find celebrities who endorse more than 20 brands at the same time.i Strolling about Chinese cities, consumers see the faces of Yao Ming and Jackie Chan everywhere, featured in a wide variety of advertisements. The reasons behind such aggressive use of celebrity endorsement can be identified by looking at Chinese cultural values. Since childhood, Chinese consumers have been taught to follow role models.ii At the same time, values such as elitism, status, and success reign supreme among the youngest generations. iii Since these values are stereotypically embodied in celebrities, many brands are convinced that celebrities’ influence is the trump card in today’s marketplace. In fact, 40% of the advertisements of products targeting young people feature at least one celebrity.iv As a result, some brands and celebrities now face a problem of over-endorsement.v This happens when the same celebrity promotes an incredibly wide range of products. Jackie Chan, for instance, has endorsed products ranging from smartphones to anti-baldness shampoo.vi This trend has a negative impact on customers as they may become confused by all the brands and products endorsed by the same celebrity.vii Endorsers themselves face certain risks as well, as over-endorsement may cause a decline in credibility and attractiveness. When seeing a celebrity in a wide range of completely unrelated products, consumers tend to doubt the celebrity’s integrity and consider him or her as only driven by financial gains. For instance, a large percentage of people find Yao Ming too money-minded due to his over-endorsing activities.viii This article illustrates the evolution of the legal framework governing potential liabilities of celebrities by discussing several episodes of misleading celebrity advertisements that occurred in China in recent years. 1 Newsletter | Shimin Law Offices www.shiminlaw.com Risks for Celebrities and Consumers Despite the recent tendency of over-endorsement, many Chinese consumers still associate celebrities with high-quality products. For example, many teenagers buy a facial cream endorsed by the attractive actress Fan Bingbing, probably thinking that the cream is the secret of her beauty. The reality, however, is much harsher. Celebrities are often lured by high remunerations to put their faces on products they know little about. Sometimes, this may lead to false or deceptive advertising which causes bodily or property damages to consumers.ix Under Chinese law, a celebrity can be held liable if he or she intentionally or negligently endorses a defective product that causes harm to the consumers. Some celebrities have begun to conduct due diligence on the products before they endorse them by reading the quality test reports and certificates of honor.x As discussed in the later sections, however, such checks alone might not be sufficient. False advertisements have been a problem in China for years, and the number of claims of false or misleading advertising is vast. In 2014 alone, China’s State Administration for Industry and Commerce (“SAIC”) reviewed 27,700 cases of false advertising.xi The cases below demonstrate the potential dangers of celebrity endorsement, both for celebrities and consumers. The Sanlu Milk Scandal and Other Cases In 2008, the Sanlu brand milk powder was found to be contaminated with melamine, a toxic industrial compound. The toxin caused kidney stones in 300,000 babies, of which more than 50,000 were hospitalized, and six died.xii Although the main culprit was certainly Sanlu Group Inc., a state-owned Chinese dairy products company, two celebrities associated with the brand were also pilloried by the public. Deng Jie, a renowned Chinese drama actress, and Ni Ping, a famous CCTV host, passionately endorsed Sanlu milk powder before the incident.xiii Deng’s advertisement went so far as to swearing that Sanlu products were safe and trustworthy. “I am very picky when it comes to baby milk powder. It has to be professionally manufactured; its quality has to be guaranteed; it has to be a famous brand because that would reassure me; it must also be economical. I trust Sanlu baby milk powder!" she declared in the advertisement.xiv In September 2008, Huang Zhengyu, a presumed victim of the melamine-contaminated milk, sued Deng in the Municipal Court of Chongqing, demanding 10,000 yuan ($1,500 USD) in compensation.xv In her defense, the actress pleaded innocent and argued that she had always checked every product that she endorsed to be sure they met all the standards set by the relevant government authorities. The Court refused Huang’s appeal due to her failure to show causation between the tainted milk and her sickness. As a result, Deng was found not guilty.xvi Also in 2008, a Beijing resident sued Feng Xiaogang, a famous film director, for his endorsement of a new luxury housing development. Feng told viewers on TV: “I can confidently tell you that everything you see is real.” The plaintiff paid 1.6 million yuan ($240,000 USD) for a house in the development, the quality of which turned out to be subpar and far from the images portrayed in Feng’s commercial. As a result, the disgruntled home buyer sued the director for an apology and 80,000 yuan ($12,000 USD) in monetary compensation for emotional damages. “I bought this apartment because I trusted Feng Xiaogang, but he had not done the necessary due diligence on what he was endorsing, so he engaged in false advertising,” said the plaintiff.xvii The Beijing Court rejected the claim and found that an endorser could not be deemed responsible for the 2 Newsletter | Shimin Law Offices www.shiminlaw.com advertisement itself as he was not “objectively wrong.”xviii Zhao Zhongxiang, a veteran CCTV host, was another celebrity to tarnish his own reputation by endorsing a fake blood pressure medicine in a TV commercial. Sun Shuying, a retired woman, was one of many consumers lured by Zhao’s endorsement to spend hundreds of dollars on the fake medicine in the hope of healing cardiovascular diseases. Although no suit was filed against Zhao, he had to issue a public apology in November 2009.xix Previously, the China Advertising Association had issued a notice that the crosstalk star Hou Yaohua endorsed ten false or unregistered products, including health care food, medicines, and medical devices. When interviewed by CCTV about the scandal, Hou denied his involvement while asking: “Who said I should try the products before I promoted them?”xx Back in 2007, another famous crosstalk star, Guo Degang, became the center of attention for having endorsed a “miraculous Tibetan tea.” Guo said he had lost three kilograms since drinking this slimming tea, and his slogan “no belly after three boxes of tea” soon gained popularity. xxi Unfortunately, it was discovered that the product had not received any approval from any regulatory authority and there was no Tibetan tea among the ingredients. As a result, the Beijing Administration for Industry and Commerce removed the tea from medicine stores. A cheated consumer sued Guo, the tea producer, a sales agency, and the advertising company in the Xuanwu District People’s Court in Beijing, seeking apologies and damages for 172 yuan ($30 USD).xxii The plaintiff said she bought three boxes of the “magical tea” because of Guo’s endorsement. However, she experienced nothing but nausea after drinking the tea.xxiii In 2006, the Suzhou-born actress Carina Lau Ka-Ling was featured in a commercial for the Japanese skincare brand SK-II, claiming that after using the anti-aging cream for 28 days, lines and wrinkles would be reduced by 47 percent. After the product had been discovered to contain chromium, neodymium, and other chemical substances, Lau did not suffer any legal consequences except for dropping her sponsorship agreement with the brand without issuing any apologies.xxiv Other examples involve Gong Li and Fan Bingbing, who endorsed a diet pill found to contain a chemical likely to increase the risk of heart disease, and Jackie Chan, who endorsed a chemical- free shampoo that turned out to contain potentially cancer-causing ingredients.xxv The Legal Framework A majority of the lawsuits discussed above failed due to the lack of legal basis. When these cases took place, the previous Advertisement Law of the People’s Republic of China (the “Previous Advertisement Law”) was still in force, and it took into consideration solely the endorsements by companies or social organizations, without any reference to individual endorsements.xxvi Since the celebrities mentioned in the cases above were neither companies nor social organizations, they were immune from liabilities associated with inaccurate endorsements. Moreover, the Previous Advertisement Law did not offer a proper definition of false advertisement. It simply stated that a false advertisement is one that deceives or misleads consumers or damages 3 Newsletter | Shimin Law Offices www.shiminlaw.com consumer interests.xxvii Due to these deficiencies and the loophole exposed by the Sanlu Milk scandal, the Chinese government initiated a series of reforms on health safety and advertising law. The Food Safety Law On February 28, 2009, China’s National People’s Congress Standing Committee passed the Food Safety Law, which took effect on June 1, 2009.