Chanel faces repeated fines; where does its brand reputation go from here?
Compiled from: Shanghai Consumer Protection Commission
According to a notice on the Shanghai Market Supervision Bureau website, recently, Chanel (China) Trading Co., Ltd. was ordered to confiscate illegal gains of 52,143.44 yuan and fined 212,957.71 yuan for passing off substandard products as qualified ones, with the penalty imposed by the Jing'an District Market Supervision Bureau of Shanghai.
Case review
On August 26, 2019, the Jing'an District Market Supervision Administration of Shanghai conducted a commodity quality spot check on dresses sold by Chanel (China) Trading Co., Ltd. Shanghai Jing'an Branch, bearing the CHANEL brand. After testing by Shanghai Textile Group Testing Standards Co., Ltd., a "Test Report" was issued on September 6, 2019, with the conclusion: a total of 17 items were inspected in this product quality supervision spot check, among which the fiber content of the dress (upper lining) and the fiber content of the dress (lower lining) did not comply with the relevant testing standards and regulations, resulting in a comprehensive judgment of non-conformity. The party raised no objection to the test conclusion and did not apply for a retest within the specified period.
Given that the party's actions were suspected of violating Article 39 of the "Product Quality Law of the People's Republic of China," in accordance with Article 17, Paragraph 1 of the "Interim Provisions on Administrative Penalty Procedures for Market Supervision and Administration," an investigation was initiated on May 24, 2021.
Upon investigation, in January 2019, the party purchased 6 of the above-mentioned non-conforming dresses from Chanel Hong Kong Company. The party distributed all these dresses to its subordinate Shanghai Jing'an Branch, selling them at a retail price of RMB 52,500 per dress. As of the date the party received the non-conformity report, 3 dresses had been sold, with a total sales amount of RMB 126,443.61, and 3 dresses remained in stock (including 1 sample). The total value of the case amounted to RMB 283,943.61, with illegal gains totaling RMB 52,143.44.
The administrative penalty decision stated that the number of dresses sold was small, no harm was caused to human health or personal and property damage, the social impact was minor, and the party actively cooperated with the market supervision department's investigation, truthfully stated the illegal facts, and voluntarily provided materials. In accordance with relevant regulations, a lighter penalty was imposed on the party. First, the party was ordered to stop selling non-conforming products; second, 3 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 trend has been sluggish, and the luxury market has also been "doomed." Many international big brands have been closing branches and dismissing senior executives to survive. Behind the seemingly glamorous luxury goods, there are actually many hidden problems. Value determines price; the high price of luxury goods is not only due to high-end materials but may also be influenced by factors such as labor and brand. However, what is disappointing is not only that luxury services are getting worse, but even the most basic product quality is hard to guarantee. Chanel is not being punished for the first time; as early as 2017, it was fined 1.3 million yuan for the same reason. Repeatedly testing the law like this, Chanel will only gain more loss than gain.
Not only Chanel, but recently the international big brand FENDI was also administratively punished for passing off inferior products as good ones, and Estée Lauder was punished for false advertising. These numerous examples make us reflect: luxury goods repeatedly have quality issues; behind the high price, is it a commitment to quality or simply brand premium? Whether it is a brand or a product, quality is an important factor that cannot be ignored. If the brand image is abandoned solely out of greed, the result is bound to be self-inflicted consequences.
