Chanel faces repeated fines; where does its brand reputation go from here?
Compiled from: Shanghai Consumer Protection Commission
According to the website of the Shanghai Municipal Administration for Market Regulation, Chanel (China) Trading Co., Ltd. was recently fined 212,957.71 yuan and had 52,143.44 yuan of illegal gains confiscated for passing off substandard products as qualified ones. The penalty was imposed by the Jing'an District Administration for Market Regulation of Shanghai.
Case review
On August 26, 2019, the Jing'an District Market Supervision Administration of Shanghai conducted a quality spot check on a dress of the brand CHANEL sold by the Shanghai Jing'an Branch of Chanel (China) Trading Co., Ltd. in the circulation sector. After testing, Shanghai Textile Group Testing Standards Co., Ltd. issued a Test Report on September 6, 2019, with the following conclusion: of the 17 items tested in this product quality supervision spot check, the fiber content of the dress (upper lining) and the fiber content of the dress (lower lining) did not comply with the above testing basis and relevant provisions, and the product was comprehensively judged to be non-compliant. The party concerned raised no objection to the inspection conclusion and did not apply for a re-inspection within the prescribed time limit.
Given that the party's conduct is suspected of violating the provisions of Article 39 of the Product Quality Law of the People's Republic of China, and pursuant to the provisions of Article 17, Paragraph 1 of the Interim Provisions on Administrative Penalty Procedures for Market Regulation, a case was filed against the party for investigation on May 24, 2021.
Investigation revealed that in January 2019, the party purchased 6 of the aforementioned dresses that failed sampling inspection from Chanel Hong Kong. The party distributed all of the aforementioned dresses to its subordinate Shanghai Jing'an Branch for sale at a retail price of RMB 52,500 per dress. As of the date the party received the nonconformity report, 3 dresses had been sold, with total sales amounting to RMB 126,443.61, and 3 dresses remained in inventory (including 1 sample). The total value of the goods involved in this case amounted to RMB 283,943.61, and the total illegal gains amounted to RMB 52,143.44.
The administrative penalty decision stated that the dresses were sold in small quantities, caused no harm to human health or damage to personal or property safety, and had minimal social impact. Additionally, the party involved actively cooperated with the market regulation authorities' investigation, truthfully stated the facts of the violation, and voluntarily provided materials. In accordance with relevant provisions, a lighter penalty was imposed on the party. First, the party was ordered to cease selling substandard products; second, three dresses bearing the CHANEL trademark were confiscated; third, a fine of RMB 212,957.71 was imposed; fourth, illegal gains of RMB 52,143.44 were confiscated.
Product Quality Law of the People's Republic of China
Article 39
When selling products, sellers shall not adulterate or mix impurities, shall not pass off fake products as genuine or inferior products as superior, and shall not pass off non-conforming products as conforming products.
Article 49
The production and sale of products that do not meet the national or industry standards for safeguarding human health and personal and property safety shall be ordered to cease production and sale, with the illegally produced and sold products confiscated, and a fine of not less than the equivalent value but not more than three times the value of the illegally produced and sold products (including both sold and unsold products, the same below) imposed; if there is illegal income, it shall be confiscated; if the circumstances are serious, the business license shall be revoked; if a crime is constituted, criminal liability shall be pursued according to law.
[1] The author's perspective
In the past two years, the economic downturn has taken its toll, and the luxury market has been “no exception”. Many international luxury brands have resorted to closing stores and dismissing senior executives to stay afloat. Behind the seemingly glamorous facade of luxury goods lie numerous hidden problems. Value determines price. The high prices of luxury items are not solely due to premium materials; they may also be influenced by factors such as labor and brand reputation. What is disappointing is not only the deteriorating service of luxury brands but also the lack of assurance for even the most basic product quality. This is not the first time Chanel has been penalized; as early as 2017, it was fined 1.3 million yuan for the same reason. By repeatedly testing the law in this manner, Chanel will only end up suffering more losses than gains.
It is not only Chanel; recently, another international luxury brand, FENDI, was also subject to administrative penalties for passing off inferior goods as high-quality ones, and Estée Lauder was penalized for false advertising. These numerous examples prompt us to reflect: as luxury goods repeatedly expose quality issues, does the exorbitant price tag behind them represent a commitment to quality, or merely brand premium? Whether for a brand or a product, quality is a factor that cannot be overlooked. If a brand abandons its image solely out of greed for profit, the result will inevitably be that it suffers the consequences of its own actions.
