Beauty impact: China moves to ‘regulate’ live streaming e-commerce in July as sector accelerates in wake of COVID-19
Live streaming, a combination of streaming video and e-commerce, have become increasingly popular in China in the last few years, especially for the beauty and personal care category.
“Skin care and makeup were the top two categories of Taobao Live's top 100 single items from October 5 to November 5, 2019, and the total proportion of beauty products accounted for 35% of sales,” said Chemlinked analyst Hedy He.
In the wake of the COVID-19 pandemic, live streaming proved to be a valuable tool for beauty brands and retailers, who leveraged on the platform to engage self-isolated consumers and showcase their products in a more dynamic fashion.
However, the explosion of live streaming also magnified certain issues that were bubbling under the surface for a long time.
“The live streaming e-commerce industry urgently needs supervision,” stressed He.
“As an emerging marketing method, there is no industry threshold. Problems such as vulgar contents, fake data of likes, sharing, watching and transaction volume, false and exaggerated promotion, unqualified products, and poor after-sales service are major challenges facing the sector.”
In addition to protecting consumers, some rules need to be implemented to protect brands as well, He added.
“Second- and third-tier brands and enterprises need standards to protect their rights and interests and define their responsibilities and obligations.”
What the new rules say
At present, China has no laws specifically targeting live streaming e-commerce, but companies need to comply with general regulations such as Advertising Law.
On June 8, the Professional Committee of Media Shopping, China General Chamber of Commerce released two drafts of Group Standards: Basic Standards of Video Live Shopping Operation and Service and Guidelines for the Evaluation of Service System of Online Shopping Integrity.
Both are expected to be implemented in July 2020.
The documents clarify the requirements on industry terms and definitions.
For instance, it specified that products sold by live streaming “should meet the requirements of national laws and regulations for product quality, standards, and measurement, and have production and sales permit certification, product quality certification”
Products, including cosmetics, must have the ID number of relevant approval documents, manufacture date, shelf life, and precautions.
The document also stipulated that live streaming hosts would need to comply with the Advertising Law.
As such, superlative phrases such as ‘lowest price in the whole network’ (全网最低价), ‘best’ (最佳), ‘highest standard’ (最高级) and other similar words and phrases are considered illegal terminology.
Lastly, live streamers and other relevant personnel need to participate in training organised by relevant departments, obtain qualification certificate or working and operation certificate, and register in professional institutions.
Just the beginning
Group Standards refer to standards jointly formulated by social organizations and industry technology alliances such as associations, societies, chambers of commerce, and leagues, to meet market and innovation needs.
As such, these standards have no legal force behind them, and the industry will have to self-regulate for the time being.
“They are voluntarily adopted and have no legal force. Even if the Standard is implemented, it will ultimately depend on industry and platform self-discipline,” said He.
However, the standard referenced laws such as the Advertising Law, Consumer Rights Protection Law, and Radio and Television Advertising Broadcasting Management Measures.
Therefore, practitioners who violate those existing laws still can be punished by relevant departments.
He highlighted that livestreamers will have to bear the consequences of the laws when acting independently or on behalf of a brand.
He explained: “The Advertising Law stipulates that if a false advertisement is issued to deceive or mislead consumers and damage the rights and interests of consumers, the advertiser – in this case the brand – bears civil liability.
“However, advertising operators and advertising publishers, like live streamers, are required to fulfil the obligation to review the authenticity and legitimacy of the advertising content. If live streamers know that the advertisements are false and still publish or make recommendations, they should bear joint responsibility with the advertisers.”
The introduction of these standards is a small step that signals that the Chinese authorities are paying increased attention on the live streaming e-commerce industry.
Moving forward, He believes the authorities will eventually push out stricter laws.
“If the implementation effect is good, it may also be settled as national standards in the future. Stricter and more specialised supervision will come sooner or later.”