E-Commerce Livestream Scandals Prompt Calls for Tighter Oversight

[para. 1] China's livestream shopping industry, once considered the future of retail, is now facing challenges such as slowing growth and product quality scandals. Regulatory loopholes have been a significant issue as high-profile livestream hosts have been involved in fraudulent advertising.

[para. 2] The industry, valued at 4.9 trillion yuan ($720 billion), relies heavily on celebrity hosts who drive massive sales on e-commerce platforms. However, controversies involving these figures have highlighted the need for more stringent accountability mechanisms.

[para. 3] A notable incident involved a livestream host named Yang, who was fined 68.9 million yuan for promoting products with false claims, including fake "made-in-Hong-Kong" mooncakes. This reflects a broader pattern of misleading advertisements by hosts who often apologize and temporarily step back, only to return later.

[para. 3] Other influencers, like beauty expert Luo Wangyu and a rural lifestyle influencer, have faced similar issues for promoting products that did not match their claims, leading to fines for false advertising.

[para. 4] It is unclear whether these hosts were aware of or complicit in the fraudulent activities, but the aftermath typically involves public apologies and fines, with hosts often resuming business afterward.

[para. 5] The exposure of these scandals coincides with the industry's slowing growth. For instance, Douyin, a major player, saw its growth rate drop from nearly 80% in 2023 to 46% in 2024. Kuaishou, another platform, reported a decline from 28% to 15% in its quarterly GMV growth during the same period.

[para. 6] User numbers are also plateauing. Douyin added only 80 million monthly active users over two years, while Kuaishou saw a decrease in users from 458 million to 437 million in 2024, highlighting stagnation in the market.

[para. 6] The pressure to maintain sales while ensuring product quality is creating unsustainable conditions. Many small brands are taking advantage of this by using a high-volume-low-price strategy, often employing misleading tactics.

[para. 7] To combat reputational risks, some hosts have introduced quality control measures like hiring dedicated staff, third-party product testing, and anonymous purchasing to ensure product consistency, though these measures are costly.

[para. 8] Regulatory challenges exist due to the separation of sales and shipping operations, with companies often located in different regions, complicating quality control efforts.

[para. 9] The classification of livestream selling remains ambiguous, raising questions about whether it should be considered direct sales or advertising. This ambiguity affects legal accountability and consumer recourse.

[para. 10] Chinese regulators have taken steps to address these issues, mandating platforms to implement consumer protection protocols and provide relevant information during disputes.

[para. 11] However, platforms are limited in their pre-emptive oversight capabilities, relying on consumer complaints and public sentiment to detect and address fraudulent behavior.

[para. 12] Influencers like Luo were exposed by other influencers, while netizens revealed false claims by figures like Yang. Experts argue platforms should do more to prevent misleading advertising.

[para. 13] Joint responsibility for compensation in fraudulent cases between platforms and hosts has been suggested, considering platforms significantly benefit from livestream commerce.

[para. 14] There is a counterargument that too much liability could hinder platform operations, as expressed by legal expert Liu Chunquan.

[para. 15] As the industry grapples with these challenges, balancing growth and ensuring consumer protection is vital for long-term success. Although built on rapid sales and minimal oversight, striking this balance is crucial for sustaining industry success.