Read The Diplomat, get to know Asia-Pacific
As e-commerce has exploded in China, so have sales of counterfeit and misleading advertising practices.
As reported by China’s Ministry of Commerce, in 2023, total online retail sales amounted to 15. 4 trillion yuan ($2. 1 trillion), an increase of 11%, marking China’s eleventh consecutive year as the world’s largest online retail market. The immediate expansion of e-commerce has facilitated the adoption of deceptive methods to target a wider visitor base, raising significant concerns.
Deceptive Practices on Online Retail Platforms in China
The deceptive practices prevalent on online retail platforms in China basically fall into two categories: the sale of counterfeit goods and misleading advertising.
The sale of counterfeit goods proves counterfeits (i. e. , unauthorized replicas of authentic products or logos) and counterfeits (i. e. , reasonable or inferior copies of authentic products or logos). In addition to counterfeit logos, the online sale of counterfeit goods also includes the replacement of reasonable or inferior parts with more expensive or higher-quality ones. For example, duck meat is sold as counterfeit beef.
Selling counterfeit products allows online outlets to reduce their costs while achieving better search ratings and profit margins. As a result, lower-quality products tend to replace higher-quality products, leading to a decrease in product quality, reflecting the economic concept. of “Gresham’s Law. “
Misleading or misleading advertising is described as a “malignant tumor” through the People’s Daily. In the online marketplace, misleading or false claims in promotional materials have long been used to exaggerate the service and/or functionality of products.
“Broshing” (刷单), or the accumulation of fake transactions, is a form of deceptive advertising. To derive variety from a large number of diverse products, online shoppers rely heavily on existing sales volume and visitor reviews. By sending empty packages, online outlets generate fake orders and reviews to increase their sales figures and thus get the outlets to rank higher in customer search results.
During live streaming sessions, it’s not unusual for presenters to rent a “water army” (水军) to like, follow, place orders, and post favorable comments. To attract customers, live streamers also adopt “misleading pricing. “”, offering fake discounts by falsifying the original prices.
For actual orders, according to China Daily, a “cashback for positive reviews” formula has been widely implemented to inspire consumers to leave positive feedback by offering small cashbacks or discounts on long-term purchases.
It should also be noted that the sale of counterfeit goods and misleading advertising involve endorsements from celebrities, influencers, and fake experts. For example, influencer Li Jiaqi promoted a non-stick frying pan when the eggs were obviously stuck to it during their live stream. session. What has been dubbed the “change incident” has raised doubts among consumers about its credibility. Fake doctors, who rely on replicating the content of authentic doctors, may temporarily gain popularity and start promoting low-quality or even counterfeit fitness products on those platforms.
Countermeasures on Online Retail Platforms in China
The Chinese government has implemented measures to combat deceptive practices on e-commerce platforms. In the fight against piracy, counterfeiting and misleading advertising, laws and regulations have been developed, subtle and enacted.
For example, the revised Unfair Competition Act requires e-commerce operators to refrain from misrepresenting features, performance, quality, sales volume, or user reviews of products. The E-Commerce Act defines “brushing” as an illegal activity and also states that retail operators are “directly responsible” for counterfeit products sold on their platforms. Measures to monitor and manage online transactions prohibit online businesses from engaging in deceptive marketing practices.
In terms of law enforcement, in 2022, the State Administration for Market Regulation (SAMR) deployed national anti-unfair competition enforcement measures, which investigated and processed a total of 9,069 cases, adding 739 cases similar to “dryer drying” and fines amounting to around 48. 68 million yuan. The 2023 Iron Fist Action Plan also focused on counterfeiting and misleading advertising as key areas of focus.
In recent years, Chinese Customs has carried out “Dragon Action”, “Clean Network Action” and “Blue Network Action” movements to cover intellectual asset rights (IPRs). In 2023, a total of 62,000 batches of goods suspected of having IPR were seized 82. 899 million pieces for import and export.
At the same time, more targeted measures have been taken through online retail platforms. For example, in late 2015, Alibaba created the Platform Governance Department to safeguard a healthy e-commerce ecosystem. In January 2017, the Alibaba Anti-Counterfeiting Alliance (AACA) was established to strengthen IPR coverage through multi-stakeholder collaboration. Over the years, Alibaba has also frequently innovated in its IPR coverage generation system, integrating synthetic intelligence and blockchain technologies.
According to its latest annual report, as of the end of 2022, Alibaba’s intellectual asset hedging platform had safeguarded more than 730,000 brands, helped the public defense government solve 2,123 cases, and arrested 2,737 suspects.
Among e-commerce platforms, Pinduoduo was the first to introduce a “refund only” policy in 2021, which allows users to get a refund without returning parts that don’t fit sellers’ descriptions. Taobao, JD. com, and Douyin followed suit with similar refunds. policies, prioritizing the rights of customers over the interests of merchants.
It’s also worth noting that independent professional appraisers are also popping up on platforms, fighting counterfeit products and misleading advertising. However, their motivation to denounce merchants’ misconduct may be questionable: is it motivated by a quest for justice or by a preference for greater attention?and network traffic, which in the end can be converted into profit through product promotion?Xin Jifei, known as “China’s top food influencer,” has also started promoting products online.
Challenges and solutions
Despite efforts made through government and e-commerce platform operators, those countermeasures still face limitations that restrict their effectiveness due to challenges.
First, the sheer volume and scale of operations makes the description and quality of each and every product sold online almost more unlikely. According to Taobao, the number of products sold in a single day exceeded 800 million, with an average of 48,000 pieces sold every minute. On Pinduoduo, the number of merchants had reached 8. 6 million by June 2021.
Second, some merchants are adopting new vulnerability-based methods and exploiting new technologies and platforms to advertise counterfeit products and conduct fraudulent activities. For example, “brushers” can easily avoid detection through other accounts and Internet Protocol (IP) addresses.
Big insights and synthetic intelligence are being leveraged to create personalized marketing methods and generate more engaging content to lie to consumers. New formats of the virtual economy, such as second-hand trading platforms and live e-commerce, are hotbeds of deceptive practices due to regulatory loopholes.
Thirdly, there is a need to further improve consumers’ awareness of IPRs and their self-protection, as their attitude towards counterfeit products and other deceptive practices has a particular impact on the market. According to the White Paper on Chinese Consumer Attitudes Towards Brand Protection, published in August 2022, 80% of consumers had some knowledge about brands, while only 69% agreed with the importance of protecting brands and wish they were protegidas. su cover when making purchases.
Consumers, especially vulnerable groups such as the elderly, minors and rural customers, can easily become victims of the purchase of counterfeit and/or poor quality products if they are not aware of preventive methods and self-protection measures. According to the Annual Report on According to the State of Consumer Rights Protection in China (2022), in the context of online promotional activities, customers have shown indifference and default acceptance of behaviors that infringe on their rights.
Finally, some counterfeit products sold on Chinese online retail platforms are produced or distributed overseas. The counterfeit goods industry has a global problem involving several countries in terms of production, sale, distribution, and consumption. Disparities between other countries’ regulatory frameworks and law enforcement These functions magnify the strain and complexity faced by Chinese Customs in terms of IPR protection.
To address those issues, relevant ministries deserve to temporarily address emerging regulatory loopholes, expand foreign collaboration, and additional oversight of online retail platforms, live stream hosts, sellers, importers, exporters, and brands by clarifying their day-to-day jobs and taking further action. . Frequent random checks.
Online retail platforms deserve to actively cooperate with government oversight and strengthen their control mechanisms, impose stricter user authentication, thoroughly verify orders and reviews, and crack down on live stream hosts and distributors involved in deceptive practices.
To mitigate tracking and compliance challenges, government and platforms also deserve to bring together the legal knowledge of distributors and customers, raise awareness about protecting customers’ rights, deepen their understanding of channels to protect their rights, repair their trust, and offer more proactive services. Assistance to customers seeking repair.
Consumers want to be more vigilant, avoid blindly relying on existing promotional fabrics and reviews, be more aware of intellectual property rights and self-protection, and avoid purchasing counterfeit products. Victims deserve to actively pursue legal remedies, not tolerate illegal behavior, and maintain a zero-tolerance attitude toward fraudulent activity.
As stated in China’s Annual Report on Combating Counterfeiting and Counterfeiting of Intellectual Property Rights (2022), “no matter how long the adventure, we will achieve our destiny if we stay the course. “
Understand Asia-Pacific’s biggest issues with a subscription to The Diplomat.
As reported by China’s Ministry of Commerce, in 2023, total online retail sales amounted to 15. 4 trillion yuan ($2. 1 trillion), an increase of 11%, marking the eleventh consecutive year that China is the world’s largest online retail market. At the same time, the immediate expansion of e-commerce has facilitated the adoption of deceptive methods to target a wider visitor base, leading to significant concerns.
Deceptive Practices on Online Retail Platforms in China
The deceptive practices prevalent on online retail platforms in China basically fall into two categories: the sale of counterfeit goods and misleading advertising.
The sale of counterfeit goods proves counterfeits (i. e. , unauthorized replicas of authentic products or logos) and counterfeits (i. e. , reasonable or inferior copies of authentic products or logos). In addition to counterfeit logos, the online sale of counterfeit goods also includes the replacement of reasonable or inferior parts with more expensive or higher-quality ones. For example, duck meat is sold as counterfeit beef.
Selling counterfeit products allows online outlets to reduce their costs while achieving better search ratings and profit margins. As a result, lower-quality products tend to replace higher-quality products, leading to a decrease in product quality, reflecting the economic concept. of “Gresham’s Law. “
Misleading or misleading advertising is described as a “malignant tumor” through the People’s Daily. In the online marketplace, misleading or false claims in promotional materials have long been used to exaggerate the service and/or functionality of products.
“Broshing” (刷单), or the accumulation of fake transactions, is a form of deceptive advertising. To derive variety from a large number of diverse products, online shoppers rely heavily on existing sales volume and visitor reviews. By sending empty packages, online outlets generate fake orders and reviews to increase their sales figures and thus get the outlets to rank higher in customer search results.
During live streaming sessions, it’s not unusual for presenters to rent a “water army” (水军) to like, follow, place orders, and post favorable comments. To attract customers, live streamers also adopt “misleading pricing. “”, offering fake discounts by falsifying the original prices.
For actual orders, according to China Daily, a “cashback for positive reviews” formula has been widely implemented to inspire consumers to leave positive feedback by offering small cashbacks or discounts on long-term purchases.
It should also be noted that the sale of counterfeit goods and misleading advertising involve endorsements from celebrities, influencers, and fake experts. For example, influencer Li Jiaqi promoted a non-stick frying pan when the eggs were obviously stuck to it during their live stream. session. What has been dubbed the “change incident” has raised doubts among consumers about its credibility. Fake doctors, who rely on replicating the content of authentic doctors, may temporarily gain popularity and start promoting low-quality or even counterfeit fitness products on those platforms.
Countermeasures on Online Retail Platforms in China
The Chinese government has implemented measures to combat deceptive practices on e-commerce platforms. In the fight against piracy, counterfeiting and misleading advertising, laws and regulations have been developed, subtle and enacted.
For example, the revised Unfair Competition Act requires e-commerce operators to refrain from misrepresenting features, performance, quality, sales volume, or user reviews of products. The E-Commerce Act defines “brushing” as an illegal activity and also states that retail operators are “directly responsible” for counterfeit products sold on their platforms. Measures to monitor and manage online transactions prohibit online businesses from engaging in deceptive marketing practices.
In terms of law enforcement, in 2022, the State Administration for Market Regulation (SAMR) deployed national anti-unfair competition enforcement measures, which investigated and processed a total of 9,069 cases, adding 739 cases similar to “dryer drying” and fines amounting to around 48. 68 million yuan. The 2023 Iron Fist Action Plan also focused on counterfeiting and misleading advertising as key areas of focus.
In recent years, Chinese Customs has carried out “Dragon Action”, “Clean Network Action” and “Blue Network Action” movements to cover intellectual asset rights (IPRs). In 2023, a total of 62,000 batches of goods suspected of having IPR were seized 82. 899 million pieces for import and export.
At the same time, more targeted measures have been taken through online retail platforms. For example, in late 2015, Alibaba created the Platform Governance Department to safeguard a healthy e-commerce ecosystem. In January 2017, the Alibaba Anti-Counterfeiting Alliance (AACA) was established to strengthen IPR coverage through multi-stakeholder collaboration. Over the years, Alibaba has also frequently innovated in its IPR coverage generation system, integrating synthetic intelligence and blockchain technologies.
According to its latest annual report, as of the end of 2022, Alibaba’s intellectual asset hedging platform had safeguarded more than 730,000 brands, helped the public defense government solve 2,123 cases, and arrested 2,737 suspects.
Among e-commerce platforms, Pinduoduo was the first to introduce a “refund only” policy in 2021, which allows users to get a refund without returning parts that don’t fit sellers’ descriptions. Taobao, JD. com, and Douyin followed suit with similar refunds. policies, prioritizing the rights of customers over the interests of merchants.
It’s also worth noting that independent professional appraisers are also popping up on platforms, fighting counterfeit products and misleading advertising. However, their motivation to denounce merchants’ misconduct may be questionable: is it motivated by a quest for justice or by a preference for greater attention?and network traffic, which in the end can be converted into profit through product promotion?Xin Jifei, known as “China’s top food influencer,” has also started promoting products online.
Challenges and solutions
Despite efforts made through government and e-commerce platform operators, those countermeasures still face limitations that restrict their effectiveness due to challenges.
First, the sheer volume and scale of operations makes the description and quality of each and every product sold online almost more unlikely. According to Taobao, the number of products sold in a single day exceeded 800 million, with an average of 48,000 pieces sold every minute. On Pinduoduo, the number of merchants had reached 8. 6 million by June 2021.
Second, some merchants are adopting new vulnerability-based methods and exploiting new technologies and platforms to advertise counterfeit products and conduct fraudulent activities. For example, “brushers” can easily avoid detection through other accounts and Internet Protocol (IP) addresses.
Big insights and synthetic intelligence are being leveraged to create personalized marketing methods and generate more engaging content to lie to consumers. New formats of the virtual economy, such as second-hand trading platforms and live e-commerce, are hotbeds of deceptive practices due to regulatory loopholes.
Thirdly, there is a need to further improve consumers’ awareness of intellectual property rights and their self-protection, as their attitude towards counterfeit products and other deceptive practices has a particular impact on the market. According to the White Paper on Chinese Consumer Attitudes Towards Brand Protection, published in August 2022, 80% of consumers had some knowledge about brands, while only 69% agreed with the importance of protecting brands and wish they were protegidas. su cover when making purchases.
Consumers, especially vulnerable groups such as the elderly, minors and rural customers, can easily become victims of the purchase of counterfeit and/or poor quality products if they are not aware of preventive methods and self-protection measures. According to the Annual Report on According to the State of Consumer Rights Protection in China (2022), in the context of online promotional activities, customers have shown indifference and default acceptance of behaviors that infringe on their rights.
Finally, some counterfeit products sold on Chinese online retail platforms are produced or distributed overseas. The counterfeit goods industry has a global problem involving several countries in terms of production, sale, distribution, and consumption. Disparities between other countries’ regulatory frameworks and law enforcement These functions magnify the strain and complexity faced by Chinese Customs in terms of IPR protection.
To address those issues, relevant ministries deserve to temporarily address emerging regulatory loopholes, expand foreign collaboration, and additional oversight of online retail platforms, live stream hosts, sellers, importers, exporters, and brands by clarifying their day-to-day jobs and taking further action. . Frequent random checks.
Online retail platforms deserve to actively cooperate with government oversight and strengthen their control mechanisms, impose stricter user authentication, thoroughly verify orders and reviews, and crack down on live stream hosts and distributors involved in deceptive practices.
To mitigate tracking and compliance challenges, government and platforms also deserve to bring together the legal knowledge of distributors and customers, raise awareness about protecting customers’ rights, deepen their understanding of channels to protect their rights, repair their trust, and offer more proactive services. Assistance to customers seeking repair.
Consumers want to be more vigilant, avoid blindly relying on existing promotional fabrics and reviews, be more aware of intellectual property rights and self-protection, and avoid buying counterfeit products. Victims deserve to actively seek legal remedies, not tolerate illegal behavior, and maintain a zero-tolerance attitude toward fraudulent activity.
As stated in China’s Annual Report on Combating Counterfeiting and Counterfeiting of Intellectual Property Rights (2022), “no matter how long the adventure, we will achieve our destiny if we stay the course. “
As reported by China’s Ministry of Commerce, in 2023, total online retail sales amounted to 15. 4 trillion yuan (2. 1 trillion US dollars), an increase of 11%, marking the 11th consecutive year in which China is the world’s largest online retail market. At the same time, the immediate expansion of e-commerce has made it easier to adopt deceptive methods to target a broader visitor base, raising significant concerns.
Deceptive Practices on Online Retail Platforms in China
Dr. Xue Zhang is a Research Fellow at the Centre of Excellence for National Security, S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore.