Popular influencer fined US$9.83 million over mooncake scandal

China's top influencer Crazy Little Brother Yang and his company Three Sheep were slapped with a 68.9 million yuan (US$9.83 million) fine by authorities for selling mooncakes they falsely claimed were from Hong Kong.

The 29-year-old influencer, whose real name is Zhang Qingyang, has amassed over 100 million followers on Douyin, the Chinese version of TikTok, and earned more than 1 billion likes.

Known for his loud and flamboyant style, Zhang promoted Mei Sun mooncakes during a livestream on September 16, just ahead of the Mid-Autumn Festival when mooncakes are a traditional treat.

He described the mooncakes as a "luxury brand with over 20 years of history" and claimed they were "made in Hong Kong."

However, it was quickly revealed that Mei Sun mooncakes were neither made in Hong Kong nor ever sold there. In September alone, Zhang's promotions of the mooncakes led to sales exceeding 50 million yuan (US$7.13 million) on a single platform.

The Hefei market regulator fined Three Sheep 68.9 million yuan (US$9.83 million) for false advertising, according to a statement issued late on Thursday.

Three Sheep was also found falsely promoting "Australian Grain-Fed Beef Rolls" as original beef when it was actually processed meat.

The fine comes alongside the confiscation of illegal earnings and an order for the company to suspend operations for rectification.

Three Sheep issued a public apology, admitting to the misleading promotions and pledging to overhaul its operations in line with consumer protection laws.

The scandal once again threw light on how lucrative the livestreaming business is and the void of regulation on it.

In March 2021, the Zhang brothers established Three Sheep Network to enter the live-stream commerce business. Zhang continued using his comedic style, often performing live skits to sell products. This approach fit well with Douyin's viral growth trend at the time.

This type of content has helped Zhang maintain tens of thousands of live-stream viewers at any given time. According to Douyin streaming analyst XD.Newrank's data, Zhang's highest single livestream viewership reached 1.89 million.

Three Sheep has fostered some of China's biggest short-video stars. According to the company's website, the agency has over 100 employees and manages more than 300 accounts, including "Crazy Little Brother Yang"

In 2022, Zhang became the first influencer in the country to reach 100 million followers on Douyin. He earned an estimated 3.12 billion yuan last year, surpassing his peers, according to a list published by the Guangdong E-commerce Summit Forum.

In just two years, Zhang transformed from a comedic content creator into one of Douyin's most powerful live commerce influencers, selling up to 1 billion yuan (US$142 million) worth of goods in a single hour.

Thanks to the rise of of the twin brothers, Hefei, the eatern Chinese city known for its high-tech industries, has now added "e-commerce city" to its list of reputations,

According to local Hefei media reports from February, the city is racing ahead in the live e-commerce sector, with 16.3 new live-streaming businesses emerging every day. As of December 2023, Hefei boasted over 2,000 live-streaming hosts, selling 310 million products throughout the year, with online retail sales nearing 22 billion yuan.

iResearch.com estimated that China's live e-commerce market reached 4.9 trillion yuan in 2023, representing a 35.2 percent year-over-year growth rate. While growth has slowed compared to the early stages of the industry, the market is still signaling potential expansion.

The website also predicted that from 2024 to 2026, China's live e-commerce market will experience a compound annual growth rate of 18.0 percent, indicating a trend toward steady and refined growth in the coming years.