The chaos of live streaming with goods is coming to an end.
Recently, state media detailed the entire process of counterfeit cosmetics entering the live streaming rooms of internet celebrities. This means that the fig leaf of selling counterfeits in live streams has once again been lifted. In response to this, an industry insider told CHAILEEDO, “Indeed, this is the process; many people may have been using counterfeit cosmetics all along.”
So, how exactly do counterfeit cosmetics enter the live streaming rooms of internet celebrities?
“Send genuine goods to big cities, send counterfeit goods to small cities.”
Recently, according to the official account of CCTV’s “Yangshi Video,” the Shanghai police cracked a case involving the sale of counterfeit cosmetics using live streaming and e-commerce platforms. The report revealed that two main suspects, Li and Lin, were arrested on suspicion of counterfeiting registered trademarks. Notably, this case not only uncovered the unknown side of “counterfeit goods in live streams” but also exposed the entire process of counterfeit cosmetics entering the live streaming rooms of internet celebrities.
According to the report, the individuals involved initially intended to sell sunscreen products through live streaming on the internet. After selecting a brand, they decided to sell counterfeit sunscreen products under that brand. Li, one of the suspects, stated during police questioning that the first step to success was finding a source and obtaining authentic packaging that was convincing enough to pass as genuine. “After confirming the source, we, in the name of distributors, applied through legitimate channels and obtained short-term sales permits for the brand’s products,” said Li.
Regarding the case itself, the legal director of the sunscreen brand mentioned, “The two individuals obtained authorization from our company for three months and purchased around ten thousand yuan worth of sunscreen, claiming it was for sales.” As for the purpose of obtaining authorization, it was revealed in the report that during live streams, the influencers would show the authorization certificate to viewers or potential consumers to confuse them and imply that the products were genuine.
Furthermore, the report by state media indicated that after obtaining authorization from the brand, the two individuals opened a new online store on a short video platform to list product links. To quickly boost the store’s traffic, they approached Xu, a product selection manager at a network live streaming company, offering to split profits evenly. This way, the counterfeit cosmetics smoothly entered the live streaming rooms of internet celebrities.
The network live streaming company had a well-known internet celebrity with millions of fans under its umbrella. This celebrity claimed during live streams that the sunscreen products were shipped from official channels and guaranteed product quality.
It is evident that sales channels, brand authorization, and influencer endorsements are essential elements for counterfeit cosmetics to enter the live streaming rooms of internet celebrities. The influencer conducted two live streams, during which a total of twenty thousand sunscreen products were sold. Due to insufficient stock, Lin and Li purchased seven thousand counterfeit products from their source, accounting for 35%.
Meanwhile, to reduce the risk of detection of counterfeit goods, the criminal group adopted a strategy of mixing genuine and counterfeit products for shipment. According to the report by Yangshi Video, when questioned by the police, the individuals involved stated, “The idea at the time was to mix genuine and counterfeit sunscreen products, having authorization to avoid any issues. Send genuine goods to big cities, send counterfeit goods to small cities.”
In terms of evading regulatory risks, the criminal group employed a strategy of “diversifying their operations.” On one hand, the two individuals received payments through multiple layers of transfers, from grandmother to mother, to aunt, and finally to themselves. On the other hand, after the second live stream, faced with numerous returns, negative reviews, and complaints from the brand, Xu, the business manager of the network live streaming company, instructed the individuals on how to evade law enforcement actions, including taking down all product links, swiftly closing the store, changing WeChat accounts, and switching business contacts.
Yangshi Video’s report also revealed that the criminal group selling counterfeit cosmetics had a complete and highly dispersed operational chain: two customer service personnel were stationed in Guangdong for daily maintenance, extremely similar packaging designs were transported from Shanghai to Chaozhou in Guangdong, where packaging materials and sunscreen cream were assembled, and then sent to a warehouse in Shandong for storage. Lin and Li were based in Hangzhou, Zhejiang, coordinating live streams and remotely directing the criminal group to ship products from the warehouse.
It is clear that the activities of this group spanned across multiple provinces and cities nationwide. As reported, the suspects Li and Lin have been criminally detained for allegedly counterfeiting registered trademarks, while other individuals have been subjected to criminal coercive measures for selling goods with counterfeit registered trademarks.
The cost of counterfeit goods is 10-20 times lower than their selling price
According to statistics released by the State Administration for Market Regulation, in 2023, China’s national platforms received 12.611 million complaints and reports related to online shopping through the 12315 platform, accounting for 56.1% of the total complaints and reports. Complaints and reports related to live streaming sales received by platforms increased by 52.5% compared to the previous year. Furthermore, complaints and reports related to live streaming sales have been increasing annually, with a growth rate of up to 47.1 times over five years, focusing mainly on issues such as purchasing counterfeit or unlicensed products, mismatched goods, and difficulties in after-sales service.
“Many people may have been using counterfeit cosmetics all along, which is very unfortunate,” said a senior industry insider who preferred to remain anonymous when speaking to CHAILEEDO.
So why are counterfeit cosmetics so common in live streaming rooms?
Many industry insiders believe that the fundamental reasons lie in low production costs, high profits, and lax regulation. According to incomplete statistics from CHAILEEDO, in recent years, law enforcement agencies have exposed several large-scale cases of counterfeiting and selling cosmetics, revealing the significant price difference between the production cost and selling price of counterfeit cosmetics and the high profits involved.
For instance, in July of this year, the Nanan District police in Chongqing publicly announced that a criminal group engaged in cross-province counterfeiting and selling of cosmetics had been purchasing counterfeit well-known brand cosmetics for prices ranging from 20 to 40 yuan per item, selling them at prices ranging from 200 to 400 yuan, resulting in a cost-to-selling price difference of 10-20 times.
“The low production cost of counterfeit goods and the high return on investment in profits mean that even selling at half the price of genuine products can still be profitable, leading many counterfeit manufacturers to take risks,” said the aforementioned industry insider.
At the same time, the rapid changes in e-commerce channels have increased regulatory intensity, providing loopholes for counterfeit manufacturers. Taking channel regulation as an example, a factory manager told CHAILEEDO, “Previously, counterfeit manufacturers could only sell their goods in physical stores, but now online channel merchants typically change their tactics frequently, significantly increasing the difficulty of enforcement.”
In addition, the highly sophisticated packaging of counterfeit goods has also contributed to the proliferation of counterfeit products. Zou Bin, an advisor to the Hong Kong Trade Development Council, told CHAILEEDO that in a recent anti-counterfeiting operation, a well-known international brand discovered a batch of counterfeit lipsticks worth over $600,000, with the lipstick tubes originating from the genuine production factory of that brand. “After purchasing the same lipstick tubes from this international brand, the counterfeit manufacturers sent them to an underground factory for gold stamping, filling, and packing. The factory owner claimed not to be aware of the intended use of the order, thinking it was for public molds.”
“These underground factories are often very small in scale, ranging from five or six to over a dozen workers, and are mostly located in rural areas. Due to their hidden locations and local protectionism in the villages, it becomes much more difficult to identify these counterfeit operations,” Zou Bin explained. This illustrates that the covert nature of underground filling factories makes them hard to detect, contributing to the prevalence of counterfeit goods.
Reducing counterfeit goods in live streaming still requires multi-party efforts.
In fact, faced with the prevalence of counterfeit goods in online live streaming rooms, regulatory authorities have already taken a strong stance at the policy level. For example, in April of this year, the State Administration for Market Regulation issued the “Special Law Enforcement Action Plan for Safeguarding Intellectual Property Rights,” launching a two-year nationwide special operation. At the operational level, since the beginning of this year, national public security agencies have cracked down on a batch of cases involving counterfeiting and selling crimes using channels such as “live streaming sales” and “online shopping platforms,” with more than 1,900 related cases successfully solved so far.
Regarding the operators of live streaming platforms, in July of this year, the State Council issued the “Regulations on the Implementation of the Law of the People’s Republic of China on the Protection of Consumers’ Rights and Interests,” which states that “operators of live marketing platforms should establish and improve consumer rights protection systems and clarify consumer dispute resolution mechanisms. In the event of consumer disputes, operators of live marketing platforms should provide necessary information such as the identities of the live streaming operators and marketers and relevant business activity records based on consumer requests.”
This means that if consumers purchase counterfeit goods in live streaming rooms, the livestreamers may also bear joint responsibility, following the principle of “responsibility lies with the person who sells.” At that time, an industry insider told CHAILEEDO, “This regulation will force teams to be more rigorous and serious in the product selection stage.”
Furthermore, in September of this year, the State Administration for Market Regulation held a concentrated signing ceremony for the “Self-discipline Convention for E-commerce Platform Operators to Enhance the Level of Intellectual Property Protection,” requiring e-commerce platforms such as Taobao, Pinduoduo, and Douyin to establish convenient and smooth channels for rights protection and inquiries.
In this context, cracking down on counterfeit and infringing goods has become a top priority for platform regulation. According to the “2023 Taobao Live Safety and Compliance Governance Report,” Taobao handled over 10,000 counterfeit goods incidents in 2023, expelling around 600 livestreamers; Video Number dealt with over 77,000 fake sales live streaming rooms in 2023, penalizing more than 25,000 livestreamers; Douyin stated that its IP Pro complaint handling platform has provided rights protection services for over 50,000 rights holders and 80,000 intellectual property filing qualifications since its launch in 2021.
Meanwhile, brands are also cooperating with regulatory authorities to jointly fight against counterfeiting. For example, a former head of a certain international brand in China told CHAILEEDO that when the brand first entered the Chinese market, they collaborated with lawyers, industry and commerce officials, and law enforcement teams to establish a professional anti-counterfeiting team that delved into rural areas to combat counterfeiting and uncovered the hiding places of counterfeiters. According to the source, the brand used to allocate 40 million Hong Kong dollars of marketing expenses each year, with 20% dedicated to anti-counterfeiting efforts, amounting to around 10 to 20 million yuan.
Moreover, in October of this year, Shiseido (China) Investment Co., Ltd. initiated legal action against multiple entities for unauthorized use of trademarks, packaging, and decorations that were similar to or imitated the distinctive features of certain influential products, leading to disputes. The lawsuit involved Shiseido’s well-known sunscreen brand Anessa that had been frequently counterfeited.
Additionally, the founder of a rising domestic brand informed CHAILEEDO that they had learned from regulatory authorities that efforts are ongoing to address the issue of counterfeit goods in live streaming sales. The focus in the future may include: managing and regulating new channels for counterfeiting; regulating the live streaming industry; and further safeguarding consumer rights.
It is evident that with the combined efforts of platforms, regulatory authorities, and brands, issues such as selling counterfeit goods, false advertising, and marketing strategies that skirt the line in live streams will be curbed. This marks the end of the chaos of live streaming sales, heralding a future direction towards high-quality development.
