Today, Chinese superstar actress Fan Bingbing, who has long been the famous face of campaigns for Louis Vuitton, De Beers, Guerlain, and Montblanc, was fined by the government for tax evasion, according to a report by the country’s state media Xinhua, citing the State Taxation Administration and its Jiangsu Provincial Tax Service.
Fan and her related companies were ordered to pay around $129 million (approximately RMB 883 million) in fines and unpaid taxes as she was ruled to have evaded about $1.07 million in personal income tax and business taxes when staring in the Chinese film The Bombing in 2017.
What’s at issue for the luxury sponsors that had tied their products to Fan is how long it will take for her reputation to recover, or whether it will at all. And will this affect the contracts, structuring or frequency of KOL endorsements in China going forward?
Over the past two months, a series of government regulations and tax reform proposals inspired by the scandal have been released in succession. The aim is to crack down on the current ultra-high pay earned by the country’s celebrities. This ongoing movement is likely to have a substantial implication on the brand-celebrity relationship. Some experts predict China’s superstars will opt for a lower profile to avoid government scrutiny.
Since 2012, the French luxury powerhouse Louis Vuitton had tapped into Fan’s popularity in China and forged a far-reaching business alliance with her. She attended almost all Louis Vuitton’s events and runway shows and wore the brand’s designs to many significant public occasions. Montblanc, Guerlain and De Beers all named her as their brand ambassador in recent months and pushed out campaigns featuring her.
All these brands have not made official announcements regarding the star, but one Chinese media publication Daily Fashion News said today that several luxury brands had quietly cut ties with Fan, in particular naming Montblanc as ceasing the partnership.
Fan’s fast and steep fall from grace points out the problems for brands who use celebrity endorsement to boost their images, social media, and sales.
Fan disappeared from public view in July when news broke that she was arrested by the Chinese police for investigation. She stopped updating all of her official social media accounts and making public appearances. Breaking a months-long silence today, the actress apologized, posting a long letter on her official Weibo account to apologize for her behavior. She wrote, “I am deeply ashamed of what I did. I sincerely apologize for my behavior and hope to be forgiven by all!”
Will it work? On this front, China’s social media is surprisingly no guide because Fan has blocked the comment feature under her feed on Weibo, and the Chinese government is rumored to have blocked online discussion of this issue.