Influencer Agency Faces Heavy Penalty for Misleading Sales Practices
Three Sheep Group Faces Major Penalty for Misleading Advertising
In a significant crackdown, a Chinese influencer agency, Three Sheep Group, has been hit with a hefty penalty amounting to 69 million yuan (approximately US$9.8 million). This action comes after the agency was accused of misrepresenting products by marketing mooncakes as "made in Hong Kong" when they were actually manufactured on the mainland.
Disciplinary Actions Imposed
The Hefei market regulator, located in Anhui province, mandated the suspension of the agency’s live-commerce operations. These operations primarily involve selling products through live-streamed sessions, a method that has become popular across various e-commerce platforms.
Agency's Response to Allegations
In a public apology issued through their Douyin account, Three Sheep expressed regret for “falsely advertising and misleading consumers.” They committed to thorough rectifications within their company to ensure compliance with advertising laws.
Background on Three Sheep and Its Founder
Three Sheep was founded by Zhang Qingyang, widely recognized by his online persona Crazy Xiaoyangge. Zhang has played a pivotal role in the success of numerous short-video stars in China. Notably, he was the first influencer in the country to surpass 100 million followers on Douyin, earning an estimated 3.12 billion yuan in the previous year—making him a leading figure in the influencer economy.
Claims Leading to the Penalty
The controversy surrounding Three Sheep escalated after Zhang began promoting “Hong Kong Meisun Mooncakes.” He touted these mooncakes as a high-end product with a legacy spanning over twenty years. However, investigations revealed that the Guangzhou Meisun Food Company, which produces these mooncakes, was not registered in Hong Kong and had never marketed its products there.
Live-Streaming Sales and Celebrity Endorsements
To bolster sales for the mooncake promotion, Zhang enlisted well-known Hong Kong actor Eric Tsang Chi-wai to co-host a live-streaming session. Tsang’s involvement as a representative of Three Sheep’s subsidiary may have contributed to consumer trust, further complicating the situation once the truth about the mooncakes emerged.
Consumer Compensations and Further Implications
In light of the developments, Three Sheep has promised refunds to customers who purchased the misleading products, along with additional compensations that could amount to three times the original price of the mooncakes and beef sold by the agency.
Recurring Issues in Live Commerce
This incident reflects broader concerns over the quality and authenticity of products sold in the fast-growing live-commerce sector. Similar issues have plagued the industry, such as a case in 2020 involving live streamer Xin Youzhi, who faced fines for selling counterfeit goods.
The Underlying Challenges of Online Sales Models
As online shopping continues to gain traction, maintaining trust and transparency within this industry is critical. Consumers expect accountability from influencers and agencies who promote products, highlighting the importance of compliance with advertising regulations.
The Future of Influencer Marketing
As influencer marketing evolves, the fallout from this incident may prompt agencies to reassess their marketing strategies, ensuring they do not mislead consumers. The increasing scrutiny from regulators might necessitate a shift towards more authentic practices within the industry.
Frequently Asked Questions
What led to the fine imposed on Three Sheep Group?
The fine was imposed after the agency falsely marketed mooncakes as being made in Hong Kong, misleading consumers about the origins of the product.
How much was the penalty for Three Sheep Group?
The penalty amounted to 69 million yuan, which is approximately US$9.8 million.
What action did the Hefei market regulator take against the agency?
The Hefei market regulator ordered Three Sheep Group to suspend their live-commerce operations pending a review.
What is the significance of Zhang Qingyang in the influencer economy?
Zhang Qingyang, known as Crazy Xiaoyangge, is notable for being the first influencer in China to exceed 100 million followers on Douyin and for earning a substantial income from his endorsements.
What kind of compensation is Three Sheep offering to affected consumers?
The agency is promising refunds for the mooncakes and beef they sold, along with additional compensation worth up to three times the product prices.
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