How Much Does China’s Consumer Rights Day Hurt Premium Brands?

Jaguar Land Rover was one of the brands targeted for this year's Consumer Rights Day program on Chinese network CCTV. (Courtesy Photo) Chinese state-run news network CCTV’s annual Consumer Rights Day programming hit the airwaves Sunday, with auto firms including Jaguar Land Rover and Volkswagen among the unlucky companies to come under fire this year. The event has created massive fear among foreign brands—which are often CCTV’s main target—but being chosen may not be quite the crisis it seems. Although the program creates very high-profile bad PR for companies chosen, it doesn’t appear to be causing long-term damage for premium brands that have been hit in the past. For this weekend’s “3/15 Gala,” as the program is titled, CCTV accused Jaguar Land Rover of selling defective gear boxes in China and said that Mercedes-Benz dealers were charging too much at service centers. It also went after Nissan dealers with the same accusation, and claimed online that Volkswagen has not acknowledged issues with problematic parts such as the rear axle of its Sagitar sedan. This isn’t the first time that CCTV has gone after auto brands for Consumer Rights Day. In 2013, the network accused Volkswagen of selling cars with gearbox problems. CCTV often goes after premium foreign brands for the gala and throughout the year—others in the unwanted spotlight in recent years have included Apple, Nikon, and Starbucks. Its criticisms have been known to have a detrimental effect on brands: for example, KFC saw a sales slump starting in 2012 when the network accused it of selling chicken laced with antibiotics and growth hormones. There are several key reasons, however, that it holds little credibility with many of the consumers watching. One main reason for viewers’ skepticism is the fact that it overwhelmingly targets foreign brands, which are often seen by Chinese consumers as safer or higher quality than local Chinese brands. Journalism professor Qiao Mu told Financial Times that the show is “controversial” because it “panders to a certain type of nationalism as it tends to target foreign companies and rarely touches large state groups or monopolies.” Foreign brands aren’t exclusively featured, however—this year’s show also called out China Mobile and China Tietong Telecommunications Corp. for allowing scammers to get ahold of customers. In addition, CCTV has been accused of fraudulent behavior itself relating to the program. When it criticized Apple in 2013, a Weibo post complaining about the company by famous actor Peter Ho accidentally left a directive in the text asking him to post it to coincide with the program—implying that he had been paid off by someone to publish it. The suspicious post went viral with Weibo users posting comments mocking CCTV for its ineptitude. Viewers have also accused Chinese media attacks on foreign brands of being too trivial at a time when Chinese consumers face serious issues with food and product safety and pollution. One example of this was its 2013 attack on Starbucks, where it went after the coffee shop for charging around the amount of one U.S. dollar more for its lattes in China than it does in the United States. As a result of the broadcast, commenters on Weibo posted snarky comments criticizing the network for not reporting about serious issues. Apple’s recent success in China demonstrates that the day doesn’t mean long-term damage for the brands attacked. The electronics brand saw 31 percent sales growth in China last quarter and was named as Chinese consumers' favorite luxury brand for gifting in a recent Hurun survey. As for a damage control strategy in the short term, brands have often taken a strategy of deference by offering an apology and promising to fix any problems, and then moving on. In 2013, Apple’s CEO issued an apology and promised to change the company’s warranty policies in China. This year, Jaguar Land Rover and Nissan have followed suit. Jaguar Land Rover issued a statement asserting, “We offer our sincere apologies for any inconvenience and concern this may have caused our customers,” while Nissan stated, “We have paid close attention to CCTV’s reporting,” and “we sincerely apologize for any inconvenience caused to our customers.”

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How Much Does China’s Consumer Rights Day Hurt Premium Brands?