Written by: Xingxing

Source: Beiduo Finance

A fine did not quell the series of controversies sparked by "fake Li Gui mooncakes" from Three Sheep.

On September 26, the Hefei Joint Investigation Group announced that in response to violations found in the live streaming sales of Hefei Sansheyang Network Technology Co., Ltd. (hereinafter referred to as "Three Sheep"), it plans to confiscate illegal income and impose fines totaling 68.9491 million yuan on Three Sheep, order a suspension of operations for rectification within a specified time limit, and hold it accountable for relevant legal responsibilities.

Subsequently, Three Sheep publicly apologized for misleading consumers with false advertising and stated that it would fully accept the investigation and punishment results of the Joint Investigation Group, comprehensively carry out internal rectification in accordance with relevant laws and regulations, operate legally, and effectively protect the legitimate rights and interests of consumers.

However, based on the current situation, Three Sheep faces challenges far beyond the book losses of tens of millions of yuan. The "aftershocks" caused by selling fakes continue to erode Three Sheep's reputation among consumers.

I. The truth about selling fakes is revealed

First, let's look at the "Meicheng Mooncakes," which have attracted significant attention. According to the announcement issued by the Hefei Joint Investigation Group, the selling points emphasized by Three Sheep in its live streams, such as "Hong Kong Meicheng specializes in high-end mooncakes and has been doing so for nearly 20 years," constitute false and misleading commercial advertising.

Beiduo Finance previously mentioned in an article titled "Xiaoyangge's 'Fake Li Gui Mooncakes' Looming Overhead: Three Sheep Network Being Investigated, Not the First Time Selling Fakes" that the "Hong Kong Meicheng" trademark registered by Guangzhou Meicheng, the actual operator of Meicheng Mooncakes, is currently under review for rejection, and the "Meicheng Mooncakes" trademark is awaiting substantive examination.

In fact, while Guangzhou Meicheng is registered in Hong Kong, its marketing center and production base are both located in mainland China, making it a brand that produces products in the mainland under the guise of being "Hong Kong-made." Furthermore, the company was registered in 2019, which obviously contradicts the 20-year brand experience claimed in the live streams.

Netizens have also pointed out that the actual price of Meicheng Mooncakes is only 59 yuan for three boxes, which is one-third of their live streaming price. Additionally, the Sullivan sales volume certificate provided in the live stream is suspected of being forged, and there are doubts about the actual ingredients of the featured product, black truffle. From this perspective, the "Meicheng Mooncakes" strongly recommended by Three Sheep are indeed a complete scam.

The "Xian Duoyu Australian Grain-fed Beef Rolls" recommended by Three Sheep in its live streams are also suspected of false advertising. According to the announcement, the Xian Duoyu brand claims that the product is made from original cuts of meat, but the actual products shipped are seasoned meat. Three Sheep promoted the product based on information provided by Xian Duoyu without obtaining a test report for original cuts of meat.

As the supplier, Xian Duoyu was already fined 500,000 yuan by the Wuhan Qingshan District Market Supervision Bureau for violating the Anti-Unfair Competition Law on July 16 this year for its false claims of "no synthetic ingredients, no water injection, no splicing, no pickling, and no additives" in its Three Sheep live streams.

In addition, there have been disputes over the authenticity of some of the "Year of the Rabbit Moutai" products shipped from Three Sheep's live streams. Currently, the Hefei Joint Investigation Group has transferred relevant clues to the relevant authorities in the location of the shipper for verification and handling in accordance with the principle of territorial jurisdiction.

II. Fines and compensation exceeding 100 million yuan

On the same day the official announcement was released, Douyin E-commerce Security Center also issued a "Penalty Announcement Regarding Three Sheep," stating that the platform has imposed penalties on Three Sheep and suspended its accounts from broadcasting since September 21. It will further urge Three Sheep to actively rectify and properly address after-sales compensation matters for relevant consumers.

Beiduo Finance notes that Three Sheep's official Douyin account, "Three Sheep Network," has opened official refund channels for Meicheng Mooncakes and Xian Duoyu Beef Rolls. Consumers who purchased these products through Three Sheep's talent or authorized accounts will receive a refund plus triple the purchase price after verifying relevant order information through customer service.

According to Chanmama data, the total sales of Meicheng Mooncakes in the live stream of "Crazy Little Yangge," a streamer under Three Sheep, ranged from 50,000 to 75,000 orders. Taking the median of 62,500 orders and calculating at a unit price of 189 yuan, the total sales of this product amounted to approximately 11.8125 million yuan, meaning that Three Sheep needs to compensate consumers with over 35 million yuan.

According to the administrative penalty decision issued by the Wuhan Qingshan District Market Supervision Bureau, Xian Duoyu Beef Rolls sold a total of 42,800 orders in Three Sheep's live streams, with sales totaling approximately 3.8716 million yuan. Following the principle of "refund plus triple compensation," Three Sheep needs to pay consumers approximately 11.6148 million yuan.

In other words, after the "flip" in sales of Meicheng Mooncakes and Xian Duoyu Beef Rolls, Three Sheep faces fines and compensation costs exceeding 100 million yuan. The "Year of the Rabbit Moutai," which is still under investigation, also hangs like a sword of Damocles over the already troubled Three Sheep.

In response to the penalties, there are still many voices outside suggesting that the punishment is insufficient. Before the public opinion fermented, Three Sheep's development was booming. According to data from the Hefei Yaohai District Investment Promotion Center, its live streaming sales in 2023 will exceed 30 billion yuan, with operating service revenue of 1.5 billion yuan and tax payments exceeding 450 million yuan.

The founders of Three Sheep, Big Yangge and Little Yangge (Zhang Kaiyang and Zhang Qingyang), firmly occupy the top positions among streamers. The account of "Crazy Little Yangge" has generated nearly 8 billion yuan in GMV through live streaming sales since 2022, and in November 2023, they invested 30 million yuan to host the "Little Yang Selection Concert," inviting numerous entertainment stars to perform alongside them.

As netizens put it, for a company with annual sales exceeding 10 billion yuan, the 68 million yuan fine is just one night's live streaming sales revenue. As long as Three Sheep can successfully navigate this storm, it's only a matter of time before it bounces back.

III. Internal control loopholes abound

However, the problems facing Three Sheep go beyond fines and compensation losses. They extend to the devastating blow to its brand reputation amid negative public opinion. According to Feigua data, the "Crazy Little Yangge" account has lost a cumulative 3.81 million followers in the past 30 days, with an average daily loss of 127,000 followers. The average sales volume per broadcast has also dropped to between 250,000 and 500,000 yuan.

Amid a crisis of trust, issues with Three Sheep's internal operating mechanisms in its live streams are also exposed. On the evening of September 24, Li Xiaona, a newly signed streamer for Three Sheep, accused the company during a live stream, claiming that Three Sheep coerced her to lie during the official investigation into the "Meicheng Mooncake incident."

According to a recording provided by Li Xiaona, personnel from Three Sheep's legal department instructed her to deny the existence of a contract with Three Sheep and claim that she was merely an anchor invited by the brand to participate in the program. They also instructed her to attribute the claim of "best-selling for 20 years" to a slip of the tongue on her part.

Li Xiaona sobbed in the live stream that she had no intention of deceiving consumers and did not want to become a "scapegoat" for Three Sheep. She has already entrusted a lawyer to handle the contract termination. After the incident escalated, a screenshot of an internal Three Sheep notice was exposed, requiring the removal of relevant videos featuring Li Xiaona. According to Phoenix Tech, Li Xiaona is currently unreachable.

Just as one wave subsides, another rises. It was revealed that another Three Sheep streamer, "Qi Laoban," requested that the mask brand "Miga" falsify product sales data when discussing live streaming scripts. In the video, Qi Laoban even bluntly stated, "Set a high price, create a sense of exclusivity, sell as many as possible, with each sale equivalent to ten ordinary sales."

Third-party data shows that Qi Laoban sold masks from the Miga brand multiple times in 2023, generating cumulative sales of nearly 5 million yuan. As of now, Three Sheep has not officially responded to the authenticity of the video content. If the situation is true, Three Sheep may once again find itself in the midst of public opinion swirling around consumer deception.

In addition, Three Sheep's core streamer, Little Yangge, has been frequently embroiled in "scandals." Recently, a photo of Little Yangge allegedly kissing a woman in a nightclub was widely circulated. Furthermore, according to revelations from top streamer Xinba, Little Yangge is allegedly involved in an improper relationship with "Mo Mo," another Three Sheep streamer, and even "framed" her, leading to her imprisonment.

Going further back, Little Yangge's father, "Yang Dad," once accidentally sent an indecent video to the community group of their residential area, causing significant controversy online. Although Little Yangge publicly stated that the incident was caused by his father being filmed while intoxicated and mistakenly sending the video, and that he had reported the matter to the police, many netizens still condemned him for his collapsed persona and the adverse impact.

IV. Conclusion

According to iResearch's "2023 China Live E-commerce Industry Research Report," the Chinese live e-commerce market reached 4.9 trillion yuan in 2023, with a year-on-year growth rate of 35.2%. However, looking across the e-commerce live streaming market, top streamers monopolizing traffic are driven by profit to cross legal lines, leading to numerous "flips."

As the saying goes, "Water can carry a boat, but it can also capsize it." The suspension of broadcasts due to consumer fraud undoubtedly serves as a wake-up call for Three Sheep and Little Yangge to prioritize user-centricity. Only by clarifying their industry ethics and legal responsibilities within the vast pool of traffic can they embark on a sustainable path of trust and compound returns.

However, for Three Sheep, whose reputation has taken a significant hit, there will be more uncertainties if it hopes to "rise from the ashes."