Photographer: Qilai Shen/Bloomberg

China's Name-and-Shame TV Show Puts Household Brands on Edge

  • Apple, McDonald’s were past targets of ‘consumer rights’ show
  • Missile system prompted China action against Korean companies

Household brands in China are bracing for the government’s version of public-service journalism -- the annual program on state-run TV that uses hidden cameras to highlight what the network calls companies’ unfair practices against consumers.

China Central Television’s March 15 broadcast for World Consumer Rights Day has targeted some of the world’s biggest companies in the past, including Apple Inc., McDonald’s Corp. and Volkswagen AG. The name-and-shame show not only attracts eyeballs, it also gets results -- Apple’s Tim Cook apologized in 2013 and McDonald’s retrained some workers in 2012.

Breakneck economic growth and rising incomes transformed China into an essential market with 1.4 billion people, and the government’s push for a consumption-driven economy fueled an influx of foreign companies in the fast-food, retailing and automotive industries.

“China’s goal of a consumption-led economy needs to be backed by greater confidence among Chinese consumers in buying locally,” said Catherine Lim, a Bloomberg Intelligence analyst in Singapore. “This includes assurance about the authenticity and quality of their purchases as well as ensuring customers’ satisfaction in the shopping experience.”

This year, Korean companies such as Samsung Electronics Co. and Hyundai Motor Co. also have reason to worry that it’s their turn to be featured in the “3.15 Gala” program that airs Wednesday at 8 p.m. local time. China retaliated against Korean businesses after the government in Seoul allowed the deployment of a U.S. missile-defense system that China said threatens regional security.

“Korea is on the political hot seat right now,” said Shaun Rein, managing director of Shanghai-based China Market Research Group. “I think they would target Korean brands especially.”

Chinese authorities, citing alleged safety violations, suspended operations of 55 stores owned by Lotte Group, the conglomerate that provided land for the system, and shut Lotte Shanghai Foods, a joint venture with Hershey Co. The government also curbed Chinese tourist travel to South Korea.

South Korean cosmetics brands could be a major target given their popularity in China. Amorepacific Corp. is among the top five sellers in the nation, according to Euromonitor International’s latest data.

E-Commerce Scrutiny

Ensuring consumers are adequately informed about the authenticity of online purchases likely would be one focus of this year’s broadcast, said Bloomberg Intelligence’s Lim.

That would dovetail with Chinese Premier Li Keqiang’s call for vigorous investigations of counterfeit products and improving product quality to meet the higher standards demanded by Chinese consumers.

Previous shows targeted homegrown powers Alibaba Group Holding Ltd. and China Mobile Ltd. Alibaba has struggled to keep counterfeit products off its websites, and the U.S. government labeled the company’s Taobao e-commerce platform a “notorious market” for fake goods last year. The China Consumers Association said its theme for 2017 is trust in e-commerce.

Jack Ma, chairman of Alibaba and China’s richest man, said this month he wants lawmakers to impose serious jail time on copycat manufacturers. Alibaba’s struggle with fakes and questionable products is part of a larger issue in China, where piracy is rampant and knock-offs of everything from DVDs to appliances flourish.

“Chinese consumers are becoming more sophisticated now,” Lim said. “They have higher expectations for the products that they receive and the entire service that goes in.”

The highlight on consumer protections comes as the government plans to generate more growth through consumer spending, with the economy transitioning away from a reliance on heavy industry and exports.

Chinese consumers are gaining in clout, with the average urban household income tripling in the past decade, according to the National Bureau of Statistics. The country’s shoppers are expected to push online retail sales to as much as 14 trillion yuan ($2 trillion) in 2021 from about 5 trillion yuan last year, according to market researcher Mintel Group Ltd.

Some companies are trying to head off new criticism from CCTV’s program, said Mark Natkin, managing director of Beijing-based Marbridge Consulting.

JD.com Inc, Tencent Holdings Ltd., Baidu Inc., Wal-Mart Stores Inc., Procter & Gamble Co. and Lenovo Group Ltd. formed an alliance last month to fight against fake goods and internal corruption.

Being targeted in the annual broadcast can lead to additional scrutiny, said Natkin.

“There are enough negative consequences that companies are willing to do things to pre-emptively avoid being in that spotlight,” he said.

— With assistance by Lulu Yilun Chen, and Lena Lee

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