As the issue of Xinjiang cotton happening, how does the contract termination affect the celebrities involved with the associated brands? From a legal point of view, is there any liability for compensation when celebrities unilaterally propose to terminate the contract? How is the collaboration of Li Ning and Xiao Zhan a successful case study that is hard to be recreated by other marketing teams?
Chinese Entertainment Contract Termination Day
It all started with fast-fashion retailer H&M declaring to stop sourcing cotton from XUAR (Xinjiang Uyghur Autonomous Region) due to concerns over forced labor allegations in the Xinjiang cotton industry. The statement sparked a backlash and started a wave of boycotts from Chinese netizens for spreading misinformation. Following that, other brands connected with the BCI (Better Cotton Initiative) whose forced-labor allegations were referred to in H&M’s statement faced similar boycotts from consumers.
After the incident was exposed on March 24th, H&M spokesperson Huang Xuan was the first to announce that he would stop working with the brand, followed by Victoria Song. March 25 was such a vibrant day in the Chinese entertainment industry to the point that it was called the “Chinese Entertainment Contract Termination Day” when a large number of celebrities announced the termination of endorsement cooperation with the associated brands such as H&M, Nike, Adidas, Uniqlo, etc.
There are more than 50 celebrities from Mainland China, Hong Kong, and Taiwan, including Xinjiang artists such as Dilireba and Gulinazha, who have terminated their contracts to show support to Xinjiang cotton.
|H&M||Huang Xuan, Victoria Song, Jackie Li|
|NIKE||Wang Yibo, Tan Songyun, Zhong Chuxi (contract has expired and no renewal)|
|Converse||Bai Jingting, Ouyang Nana, Zhang Yixing|
|CK||Bai Jingting, Ouyang Nana, Zhang Yixing|
|Tommy Hilfiger||William Chan, Li Zhenning, Cheng Xiao|
|Adidas||Eason Chan, Jackson Yee, Yang Mi, Dilireba, Deng Lun, Chen Linong, Jackson Wang, Song Yanfei, Angelababy, Eddie Peng, Ren Min, Ding Yuxi, Zhao Lusi, Zhang Junning, Qiu Tian, Peng Yuchang, Jin Chen, Xiang Zuo, Li Wanda, Liu Yifei (contract has expired and no renewal)|
|Uniqlo||Ni Ni, Jing Boran, Roy Wang, Lei Jiayin|
|PUMA||Li Xian, Yang Yang, Liu Haoran, Gulinazha, Xu Guanghan, Han Haolin|
|New Balance||Meng Meiqi, Zhang Zifeng|
|Burberry||Zhou Dongyu, Song Weilong|
|Lacoste||Huang Zitao, Yamy|
|Under Armour||Han Geng|
|Hugo Boss||Li Yifeng, Zhu Zhengting, Xiao Gui|
How Does The Contract Termination Affect The Involved Celebrities?
By ditching their lucrative endorsement deals, the involved celebrities have won the favor of netizens and received a large number of praises for their patriotic behavior. However, many fans worry that the celebrities will suffer huge economic losses due to a breach of contract. When celebrities unilaterally propose to terminate the endorsement contracts, they might face a series of legal issues as well as pay a large amount of compensation.
Moreover, once the spokesperson cuts ties with the brand in such a not-so-happy way, he or she is almost guaranteed to be permanently blocked from any future cooperation with the brand. It also has a negative impact on the celebrity’s reputation of future endorsements.
Let’s take Liu Wen’s case with Coach in 2019 as an example. After unilaterally canceling the contract with the fashion brand whose T-shirt design was suspected of violating China’s sovereignty and territorial integrity, the Victoria Secret supermodel was said to face a compensation of up to $22 million. Her follow-up fashion resources such as magazines and fashion week appearances were also significantly reduced.
This Xinjiang issue is even more serious when multiple brands have even formed an alliance. Once the celebrities choose to cancel the contracts, that means they stand against the whole alliance. The scope of influence is too huge. Thus, despite the public pressure that forces them to cut ties with the brands as soon as possible, the celebrities still need to negotiate with the brands to find a solution minimizing loss. But at the end of the day, they have to put their country’s national interests and public opinions above their personal benefits.
It’s hard to say who hurt the most after this incident: Lay Zhang gave up his global title with CK and Asia Pacific title with Converse; Eason Chan canceled his global lifetime endorsement with Adidas; Yang Mi who previously faced the same situation with Versace, and now with Adidas; This is also the second time Jackson Yee and Dilireba broke off relationships with big brands, after the previous controversies with Givenchy and D&G respectively.
Legal Issues Regarding Contract Termination
Although the future impact on resources of the contract termination is hard to avoid, the economic loss due to compensation is not one hundred percent certain as it depends on the terms of each contract.
According to Tian Siyuan, senior partner of Shanghai Bohe Hanshang Law Firm, a celebrity endorsement contract generally contains a clause that states “the brand party shall not harm China’s national interests.” Based on that, the celebrity party can propose to terminate the contract without losing money due to the fact that the brand party has first breached the contract. Moreover, even if the agreement between the two parties is ambiguous, the celebrity side can terminate the contract in accordance with the “Civil Code” stipulation which is “not abuse civil rights that harm the national interest”, and hence, does not have to bear the liability for compensation.
In addition, with the lessons learned from the past regarding public backlash against global brands such as D&G, Coach, Versace, Givenchy, etc., many celebrities have indeed put extra consideration when signing endorsement contracts with major foreign brands in order to protect their own legitimate rights and interests.
Li Ning & Xiao Zhan’s “Right Time, Right People” Collaboration
The rising anger towards foreign brands intensifying patriotism which has naturally become a huge advantage for Chinese domestic brands. Some pictures of Li Ning’s label showing “The fabric is made of Xinjiang high-quality long-staple cotton” began circulating on the Internet, which was highly praised by netizens. After Wang Yibo announced his termination with Nike, Hongxing ERKE publicly issued a cooperation invitation to the actor. Other domestic brands also took this chance to pronounce their support towards Xinjiang cotton. These moves were obviously meant to take advantage of the Xinjiang Cotton incident to actively promote their own brands and won the favor of netizens.
The wave of domestic brand support (probably) hit the peak when popular domestic sportswear brand Li Ning officially announced Xiao Zhan as its global spokesperson on March 26. The news immediately reached the top of the hot search list with an “Exploded” remark and the hashtag #LiNingofficiallyannouncesXiaoZhan gained over 1 billion views. The Li Ning series of products endorsed by Xiao Zhan was quickly sold out after they were put on shelves. Li Ning’s share price saw its rise continuing the previous day’s momentum.
In fact, Li Ning is considered the leader of domestic sports brands while Xiao Zhan is one of the top liuliangs in China at the moment. The two have already formed such a powerful team, that the “right people.” But what made this collaboration become such a big media and sales hit was the “right time” part when the whole “Xinjiang cotton” issue was still hot and the public’s patriotic feelings and enthusiasm strongly influenced their purchasing decisions.
On the other hand, some netizens thought that Li Ning’s marketing tactic was disgusting, and it wouldn’t be able to replace Nike’s or Adidas’ positions in the sports world by just taking advantage of a temporary wave. Nevertheless, it’s undeniable that this marketing campaign was a huge success for both brand and celebrity parties. It didn’t only bring economic benefits but also boost the images of both sides in the public eye. Still, the sustainability and position of a brand or an artist require more than just a successful campaign.