More Trouble for Celebrity Endorsements in China

Last week, state-run China Central Television broadcast an expose on business promotion Web sites that could add to the criticism of celebrities and advertising in China. (The CCTV program can be viewed here, in Chinese.)

The daily program, “Economic 30 Minutes,” looked at Web sites that offer franchising opportunities that include everything from chain stores to fast-food restaurants. The companies offering the franchises pay for the online space. People who are interested in becoming franchisees can get in touch with companies by calling the phone numbers on the sites.

The problem, the program alleged: The Web site operators don’t bother to check whether the companies have business licenses from the central government. Lacking a business license in China and doing business anyway is a serious no-no there. A person in charge of one Web site was quoted saying that 60% to 70%, if not more, of its corporate advertisers failed to get a license from the Ministry of Commerce. According to the government regulation, a franchiser must register the franchise with the governing registration agency within 15 days.

The program pointed out that three mainland celebrities appeared in advertisements for the sites. Endorsement fees topped one million yuan (roughly $150,000) each, according to the CCTV report (more video, in Chinese).

The program is among the most influential business news shows in China, making it likely that its claims will receive wide play. Web sites mentioned in the CCTV program are still up, and neither the celebrities nor the sites could be reached for comments.

There has long been a debate in China over celebrities appearing in ads that make exaggerated or even false claims. In last year’s Sanlu milk scandal, which killed six and sickened nearly 300,000 children, several celebrities were criticized for having endorsed its products. In February, China’s top legislature passed a new food safety law. The law, which goes into effect on June 1, says that celebrities will share legal responsibility for advertising for food products that are found to be unsafe.

The CCTV program quoted one franchisee saying that she believed the information published on the Web sites partly because of the celebrities that endorsed them.

China now has over 2,600 franchise companies, with over 200,000 retail outlets, according to figures from China Chain Store & Franchise Association, the official representative of the industry. More are supposed to enter self-employment after losing their jobs as a result of China’s slowing economy. The Chinese government encourages self-employment for migrant workers and college graduates. And preferential policies have also been offered by the government, including small business loans and training course.

–Juliet Ye