Recently, a decision on administrative penalty issued by the Shanghai Municipal Administration for Market Regulation revealed that MT Cosmetics（Shanghai）Co., Ltd. (hereinafter referred to as “MT Shanghai”) was fined 93,000 yuan by the Jing’an District Market Supervision Administration for setting up a prize sales booth during a cosmetics industry exhibition and falsely marking the prize prices. Moreover, the company was fined 5,000 yuan for publishing false advertisements at another industry exhibition.
It is reported that within this month alone, there have been at least 2 large-scale industry exhibitions, and based on past exhibition trends, there may be about 10 more exhibitions to be held this year. Therefore, the consecutive cases of MT Shanghai being fined for violations during exhibitions serve as a warning to all companies preparing to exhibit, reminding them not to “cross the line” at the exhibition site.
Falsely marking prize prices, fined 93,000 yuan
According to the investigation conducted by the Shanghai Municipal Administration for Market Regulation, on April 14, 2023, MT Shanghai, to attract more business cooperation clients, gain trading opportunities and competitive advantages, and sell beauty products and related beauty equipment it represents, during its participation in a cosmetics exhibition, the company utilized new media accounts such as Xiaohongshu, Weibo, Douyin, and WeChat official accounts to publish information about prize sales activities containing content like “Lucky Draw: Zeus Beauty Device, Special Prize worth 93,000 yuan.”
It is reported that MT Shanghai had commissioned A. Global (Shanghai) Beauty Device Co., Ltd. (hereinafter referred to as “A. Global”) to purchase 98 custom co-branded Zeus beauty devices from ARTISTIC & CO. GLOBAL CO. LTD, and imported them through customs on February 15, 2021, at a unit purchase price of 31,083 yuan (tax included). After purchasing the aforementioned Zeus beauty devices, MT Shanghai set a standard retail price of 93,000 yuan, but the highest settlement price for the 15 beauty devices sold was 49,000 yuan (tax included).
According to the “Statement of Facts” issued by A. Global, MT Shanghai had exclusive pricing rights for this batch of Zeus beauty devices, and no other distributors were selling this product on the market.
Until the case surfaced, MT Shanghai was unable to provide a legitimate sales voucher indicating that the Zeus beauty device used in the prize sales activity was valued at 93,000 yuan. In other words, as of the time of the incident, MT Shanghai had never sold this Zeus beauty device for 93,000 yuan.
In addition, according to the evidence provided by MT Shanghai, it was shown that 2 customers signed up and made payments on-site to participate in the lucky draw. They won first-prize products valued at 10,000 yuan and second-prize products valued at 3,000 yuan.
Based on this, the Jing’an District Market Supervision Administration believed that MT Shanghai, while wanting to induce the public to consume through a grand prize sales event and avoid paying high promotion costs, falsely marked the highest prize price during the implementation of the lucky draw activity, leading to deceptive prize sales behavior. This infringed upon consumers’ right to know, causing consumers to misjudge the size of the prizes. This constitutes an illegal act of falsely marking the prize prices in prize sales.
Ultimately, the regulatory authority concluded that MT Shanghai violated Article 10(2) of the “Unfair Competition Law of the People’s Republic of China,” which prohibits “using deceptive methods such as falsely claiming prizes or deliberately allowing predetermined individuals to win prizes in prize sales,” as well as Article 15(1) of the “Interim Provisions on the Regulation of Promotional Activities,” which stipulates that “in prize sales, operators may not use false claims of prizes, prize items, prize amounts, etc.” This constitutes an illegal act of falsely marking prize prices in prize sales. The company was ordered to immediately rectify its illegal behavior and was fined 93,000 yuan as an administrative penalty.
Falsified advertising at industry exhibitions also resulted in penalties
In the penalty decision, in addition to fining MT Shanghai for falsely marking prize prices in prize sales, the Jing’an District Market Supervision Administration also penalized them for engaging in illegal advertising.
According to the penalty decision, in March 2021, the company promoted the “Moisturizing Repair Soothing Series” products of the MT brand at an industry exhibition. They translated, designed, and produced promotional materials based on the brand’s promotional materials in Japan, printing 3,000 single-page advertisements containing medical terms related to the “Moisturizing Repair Soothing Series.” The specific content of the promotional language included statements such as “The Moisturizing Repair Soothing Series has the function of relieving skin inflammation and dryness” and “Improves skin problems caused by inflammation and external pressure, anti-allergic and soothing,” among others.
After printing, MT Shanghai distributed these advertisements to unspecified groups such as beauty salons and skincare centers at the exhibition and sent them to customers of cooperating beauty salons and skincare centers along with the products. As of the time of the incident, there were only 835 copies of the “Moisturizing Repair Soothing Series” advertisements remaining.
The Jing’an District Market Supervision Administration investigation confirmed that the products referred to in the “Moisturizing Repair Soothing Series” advertisements were ordinary cosmetics imported and filed by MT Shanghai. However, the use of medical terms in cosmetics advertisements violated Article 17 of the Advertising Law of the People’s Republic of China, which prohibits advertisements other than medical, pharmaceutical, and medical device advertisements from involving disease treatment functions and from using medical terms or language that could be confused with pharmaceuticals or medical devices. This constitutes the illegal act of publishing illegal advertisements.
Ultimately, based on Article 58(1)(2) of the Advertising Law of the People’s Republic of China, regulatory authorities fined MT Shanghai 5,000 yuan. Therefore, with the two penalties mentioned above, MT Shanghai was fined a total of 94,500 yuan.
According to information from Qichacha, MT Shanghai was established in July 2019 with a registered capital of 25 million yuan. It is 100% owned by its parent company and actual controller, the Japanese company MT Cosmetics Co., Ltd. MT Shanghai is the domestic responsible person for the Japanese MT METATRON brand in China. According to the Cosmetics Regulatory App, the brand’s registrant is MT Cosmetics Co., Ltd., which has filed records for multiple skincare products in China, including water, essence, eye cream, and masks, among other categories.
Public information indicates that MT METATRON is a high-end professional line brand under the Japanese company MT Cosmetics Co., Ltd., often referred to as the “Hermes” of Japanese salon lines. The brand was founded in 2004 and is headquartered in Tokyo. As a professional medical beauty brand in Japan, it has entered over 5,000 dermatology clinics, beauty clinics, and salon venues. Meanwhile, MT METATRON also has brand counters in Shanghai’s Shin Kong Mitsukoshi Department Store and Isetan in Meilong Town, as well as an overseas flagship store on Tmall. Its product prices range from 200 yuan to 1,800 yuan.
The atmosphere at industry exhibitions is expected to be cleared up
From the above cases, it is easy to see that MT Shanghai has been penalized twice for violations at exhibitions. In recent years, there have been numerous cases of companies being fined for violations at exhibitions. For example, on June 30, 2023, the Putuo District Market Supervision Bureau in Shanghai found at a beauty industry exhibition hosted by a cosmetics company that one exhibitor was giving away hair mask products without Chinese labels.
As a result, the Putuo District Market Supervision Bureau believed that the cosmetics company, as the organizer of the exhibition, should bear the responsibility for managing the entry of cosmetics operators. However, they failed to fulfill their inspection and management obligations according to the Cosmetic Supervision and Administration Regulation and did not promptly discover the situation where hair mask products without Chinese labels were being given away during the exhibition. Ultimately, the cosmetics company was fined 5,000 yuan.
Similarly, the “cosmetic needle” issue revealed during the 315 Gala last year was also discovered by CCTV reporters at a cosmetics exhibition. In addition, investigations have found that many companies exhibit products at exhibitions that are not registered, violating regulations. Furthermore, false advertising at exhibitions is rampant.
Undoubtedly, exhibitions are important avenues for showcasing products, promoting companies, and expanding markets. Beauty industry exhibitions are especially regarded as industry barometers, with dozens of exhibitions held annually. However, in recent years, there has been an increasing severity of violations such as false advertising at exhibitions, which has brought many negative impacts to participating companies and attendees (including participants and consumers).
Some industry insiders believe that “Although for most exhibitions, participation only requires payment, lax scrutiny of exhibitor qualifications not only affects the reputation of the exhibition itself but also harms other co-exhibiting companies.” With multiple violations exposed and penalized at exhibitions, there is hope that the atmosphere at industry exhibitions will be cleaned up, providing a cleaner environment for the industry as a whole.
