The law comes for celebrity endorsements

The Chinese government is cracking down on the celebrity endorsement business: Yesterday, the State Administration for Market Regulation, the Cyberspace Administration of China, and five other government bodies issued new regulations regulating the use of famous entertainers in advertising.

The new regulations prohibit celebrity endorsements for any products that are illegal or unapproved. No endorsements are permitted for tobacco and tobacco products (including electronic cigarettes), off-campus education, medical care, medicines, medical devices, and health and formula foods.

The regulations specifically require celebrities to take responsibility for their endorsements:

• Endorsements must not exaggerate the qualities of the product.
• Celebrities who endorse products should themselves make full use of the product during the endorsement period — not merely a few symbolic uses — to verify the quality of the product in question. In the case of electronic products, automobiles, and other products making use of technology, celebrities must use the actual version of the product they are endorsing.
• If a celebrity endorses a product aimed at children or the opposite sex, then the close relatives of the celebrity should also make full and reasonable use of the product.
• Celebrities and the agencies that manage them will be punished and exposed publicly for making false or misleading endorsements.

Brands and the scandals of their celebrity endorsers

Companies that use celebrities are also targeted: Brands that seek endorsements are required to fully verify the celebrity’s employment record and personal credit history. Companies must resist the temptation of selecting “illegal and unethical celebrities” for their promotions. But this is where the problem comes in: A star with a stellar reputation can have his or her reputation overturned overnight.

The drama that preceded the publication of the new regulations revolved around the singer and actor Evan Li (李易峰 Lǐ Yìfēng). Li’s rise to fame was a common experience for celebrities in China: He first appeared as a singer on a nationally televised talent show. Although he didn’t win (he came in eighth place), Li released a single right after the contest and his career was up and running. In 2009, he started to act in television dramas, and made his cinema debut in 2011. By 2014, Li was a mainstream celebrity, regularly appearing on the small and big screen.

But then, on September 11, 2022, Li Yifeng’s career and reputation instantly evaporated when he was arrested by police in Beijing for “soliciting prostitutes.” Li was then mercilessly erased: He disappeared from the lineup of China’s most prestigious television show — the Spring Festival Gala — his name was deleted from websites of cinema industry awards, his films and shows were removed from public view, and all his advertisements were scrubbed off the television and internet. Yet at the time of his arrest, Li was contracted to more than a dozen brands, including Prada, Mengniu 蒙牛, Lukfook Jewellery 六福珠寶, L’Oréal, and Honma Golf. As soon as Li fell from grace, these brands cut all ties with him. According to one estimate, the various brands involved with Li collectively lost around 100 million yuan ($13.71 million).

Li was the latest in a long line of fallen celebrities whose disgrace was a financial and reputational loss for all the brands they worked with, for example:

• Before getting caught up with the Li Yifeng incident in 2022, in 2021, Prada was contracted to Zhèng Shuǎng 郑爽, who in January of that year reportedly abandoned her kids with her ex-boyfriend in the U.S. (The children were born in the U.S. via surrogacy, which is illegal in China.) Zheng’s career was destroyed by the reports. Later in 2021, she was investigated for tax avoidance.
• In 2021, dairy brand Mengniu had a spectacular but brief flameout with Show Lo Chih Hsiang (罗志祥 Luó Zhìxiáng), a Taiwanese singer and actor. On April 22, the brand signed an endorsement contract with Show Lo, but within 24 hours, the celebrity’s reputation was destroyed instantly when his girlfriend of nine years exposed him as a serial cheater in a post on Weibo.
• In 2021, Taiwanese-American singer Wang Leehom (王力宏 Wáng Lìhóng) was involved in very public divorce proceedings with his wife, reportedly including extramarital affairs and harassment. Wang was then dropped by the brands he was endorsing, which included Chow Tai Seng Jewellery 周大生 and Infiniti.
• Actor Zhāng Zhéhàn 张哲瀚 found himself instantly canceled in August 2021 after photos appeared online of him near the Yasukuni Shrine in Tokyo, which honors Japanese people who died in wartime, including 1,068 convicted war criminals. Zhang published an apology on his Weibo account, claiming he was merely ignorant of buildings in Japan and their historical significance, but he was still boycotted by China’s entertainment industry and labeled a traitor online.

High risk, high reward

Despite the risks, celebrity endorsements can be very rewarding for companies. While there are many cases of fallen celebrities, there are also various celebrity endorsement success stories, for example:

• In July 2022, French luxury fashion brand Yves Saint Laurent launched an advertising campaign featuring singer and actor Sean Xiao (肖战 Xiāo Zhàn). Within three hours of the ad going out, the product — Yves Saint Laurent Pure Shots Night Reboot Serum — had sold 50 million items online, and within two days, some offline malls had sold out altogether.
• According to the spokesperson of Israeli skincare brand Sabon, sales had increased by more than 5,000% a few days after the launch of an advertisement with actor and basketball player Dylan Wang (王鹤棣 Wáng Hèdì).
• In April 2021, sportswear brand Anta 安踏 signed an endorsement deal with actor, dancer, singer, and motorcycle racer Wáng Yībó 王一博. By the end of 2021, Anta reported an increase in revenue of 42.92% year-on-year and over 50% for profit, and the company ascribed some of this success to its partnership with Wang.

A shrinking industry

But even before the publication of the strict new rules this week, there were signs that China’s celebrity endorsement market is shrinking. According to AIMan Data Technology 艾漫数据, a data service provider focusing on China’s entertainment industry, during the third quarter, there were a total of 359 announcements of new celebrity brand endorsements in China, which is significantly fewer than in the second quarter.

The new regulations will now cast further doubt on the celebrity endorsement industry and raise the stakes for the celebrities.