Three Sheep Group, a leading influencer agency in China, faces a 69 million yuan ($9.8 million) penalty for falsely marketing mainland-made mooncakes as “made in Hong Kong.” 

According to South China Morning Post (SCMP), Hefei, Anhui province’s market regulator, has ordered the company to suspend its live-commerce operations following the incident.

Courtesy: Handout

Founded by Zhang Qingyang, known online as Crazy Little Brother Yang, Three Sheep has cultivated some of China’s most prominent short-video stars. Zhang, who became the first influencer in China to reach 100 million followers on Douyin in 2022, earned an estimated 3.12 billion yuan (~$445M) last year, according to the Guangdong E-commerce Summit Forum.

The controversy erupted when Zhang promoted “Hong Kong Meisun Mooncakes” as a “high-end brand” from Hong Kong with a two-decade history. Investigations revealed that the manufacturer, Guangzhou Meisun Food Company, is not registered in Hong Kong, and its products have never been sold in the city.

To boost sales, Zhang invited Hong Kong actor Eric Tsang Chi-wai to co-host a live session. Tsang was reportedly appointed as a representative of Three Sheep’s newly opened Hong Kong subsidiary. 

Tsang has not responded to SCMP’s requests for comment on his current relationship with the company.

The Hefei market regulator also cited Three Sheep for misrepresenting seasoned beef as raw cuts during live-streaming sessions. In response, Three Sheep apologized for “falsely advertising and misleading consumers.” 

They promised to refund customers who purchased the mooncakes and beef and offer additional compensation of up to three times the product prices.

This incident follows previous scandals in China’s live-streaming e-commerce sector. 

In 2020, live streamer Xin Youzhi received a 900,000 yuan (~$130k) fine for selling fake bird’s nests, resulting in a two-month streaming ban on Kuaishou Technology.

Separately, police in Hefei High-tech Industry Development Zone stated that a circulating audio clip, allegedly featuring Three Sheep co-founder Lu Qingwen admitting to improper relationships with female employees, was an AI-generated fake.

Over the past year and a half, several Chinese influencers have made millions of dollars selling short video lessons on AI, capitalizing on people’s fears about the technology’s impact on their livelihood. 

Therefore, WeChat and Douyin have begun suspending, removing, or restricting accounts belonging to these “AI gurus.”