Nike put in hot seat for false marketing by Chinese TV show

Nike was chided by a consumer-protection show on state-run television in China, giving a black eye to the athletic brand in its second-biggest market.

The annual programme, a “name-and-shame” show that aims to uncover abuses by companies, said Nike had falsely advertised basketball shoes. The sporting-goods giant claimed the sneakers had Zoom Air sole cushions inside when they did not, according to the broadcast.

The unwelcome publicity comes at a time when Nike needs China more than ever for growth. The company is facing heavier competition in the US, weighing on its plans to reach $50 billion in revenue by 2020. Sales in China, in contrast, have been soaring: Excluding currency effects, they jumped 17 per cent in the most recently reported quarter.

The fallout from the name-and-shame show may depend on whether the criticism spreads, said Brian Yarbrough, an analyst for Edward Jones.

“One report is probably not a lot to be concerned about,” he said. “But that could change if it becomes bigger and you see more press about it.”

Nike said Wednesday that it learned in April of last year that 300 pairs of its Hyperdunk 2008 FTB were sold in China that inaccurately stated the shoe contained airbags. The consumers were contacted and offered compensation and an apology, the company said.

“Nike is committed to providing consumers with the highest product quality and service, and we will fully cooperate with the government regulators regarding their inquiries,” the Beaverton, Oregon-based company said in a statement.

The programme, which aired Wednesday, also accused the Japanese retailer of Muji-brand products of selling food from areas that showed signs of radioactive contamination. The products were mislabelled and didn’t reveal that some came from Japanese areas that were affected by radiation, according to the show.

Representatives for Ryohin Keikaku, which owns the Muji chain, couldn’t be reached after regular office hours.

The China Central Television broadcast, which coincides with World Consumer Rights Day, is a reflection of the growing clout of China’s 1.4 billion consumers, who have transformed the country into an essential market for foreign companies in the fast-food, retailing and automotive industries. The show has targeted some of the world’s biggest brands in the past, including Apple, McDonald’s and Volkswagen AG.

Foreign companies haven’t adjusted to the higher scrutiny they’re facing in China, said Congcong Zheng, an associate professor of management at San Diego State University.

“What used to be tolerated is no longer tolerated,” she said. “Chinese consumers are empowered by the information available on the internet and they have higher expectations and standards now. Foreign companies should be extra careful when operating in China.” Reaction was swift to the “3.15 Gala” show, which relied in part on hidden cameras and reporters disguised as shoppers. Immediately after the program, the state-run broadcaster aired a live televised segment at Nike’s office in Shanghai, where authorities questioned the staff.

A trade official said the government has started an investigation after finding that the company sold the 300 pairs of falsely advertised sneakers.

Shortly after the program, Chinese e-commerce giant Alibaba Group Holding Ltd. said it has been tracking and blocking “abnormal” Japanese nuclear-contaminated products since 2011, according to a Weibo post from the company. Alibaba has deleted 22,000 links to suspected products and has taken actions against 4,108 businesses in 2016, it said. The show also targeted two e-commerce sites that sold Japanese products ranging from rice to milk powder from radiation-contaminated areas in violation of Chinese customs rules, it alleged. One of the sites was backed by By-Health, a local maker of nutritional supplements.

Bloomberg