Leading Chinese cellphone maker Xiaomi is the first target of a new law against false advertising that was passed on September 1st.
The rival cell phone startup Cong brought attention to the practice when its CEO, Tan Wensheng, notified police of Xiaomi’s use of phrases such as “first-class” and “the most advanced” in product descriptions.
Prior to the passage of the new law, Chinese consumers had already become accustomed to the grandiose advertising claims, and gave them little weight. The penalties for violations of the law begin at $31,000.
Industry analyst Zhu Dalin confirmed that superlative advertising was quite common among hardware manufacturers, “The new law will have a certain impact on Internet companies, but not too much- after all, consumers are so accustomed to clichés such as ‘the super phone’ and ‘the omnipotent TV’ that these phrases make no real sense to them now.”
News of the investigation was leaked from the Beijing Ministry of Industry and Commerce, but both they and Xiaomi have yet to release a comment on the case.
Xiaomi recently regained the top position among cell phone manufacturers in China in the second quarter of 2015, dethroning Apple. Attacks from competing firms have increased following Xiaomi’s 48% growth between the first and second quarters, but rival Cong does not even hold one of the top five spots in device sales.
Overall, smartphone sales in the Chinese market have dipped compared to last year, which may have led to more fighting among rival firms than usual.
This is not the first time that Xiaomi has been under investigation for dubious advertising claims after its new smartphone, the Red Mi Note 2, was found to have falsely identified the supplier of the device’s screen. As one of the industry’s leading companies, Zhu argued that the company should have pre-emptively warned consumers about the mix-up.
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