L'Oreal Shuts Hong Kong Shops Amid Protests

It's a Cautionary Tale for Brands Doing Business in China

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L'Oreal closed shops throughout Hong Kong as hundreds of demonstrators protested the French cosmetic maker's decision to cancel a concert by a pro-democracy singer.

The company's Lancome brand on Sunday called off a promotional concert featuring Denise Ho Wan-see, a singer known for her support of Hong Kong's Occupy Central protest movement in 2014. China's state-run Global Times newspaper had earlier criticized Lancome for hiring Ms. Ho, sparking an internet campaign against the brand in mainland China.

"There has been varying political pressure exerted by the Chinese government on corporations to self censor, but this isn't even an event inside China," said Avery Ng, chairman of the League of Social Democrats, a pro-democracy party and one of the protest organizers. "This case shows that the Chinese government will use its power to threaten other multinationals."

About 200 demonstrators, some holding signs urging L'Oreal not to "kowtow to Beijing," gathered outside the company's local headquarters at the Times Square mall in Hong Kong's Causeway Bay area. More than 100 then marched through the Lane Crawford department store shouting, "Boycott L'Oreal!" and "Shame on self-censorship!"

Shops closed

All Lancome shops across the city were closed Wednesday, as well as the Causeway Bay outlets of other L'Oreal brands, according to a customer service representative. Stores were scheduled to reopen Thursday. Calls to L'Oreal's Hong Kong office and local spokeswoman went straight to voice mail. Representatives for the company's French headquarters also couldn't immediately be reached for comment.

The cross-border criticism provides a cautionary tale for companies doing business in China of the risk that any action -- marketing or otherwise -- that might offend the government and complicate sales in one of the world's biggest and fastest-growing markets. The ruling Communist Party not only tightly curbs freedom of expression, it commands a legion of bureaucrats who fabricate almost a half billion social media comments each year in an effort to steer public opinion, according to a study last month led by a political scientist from Harvard University.

"Lancome is facing a crisis after it sent the statements on social media, because while it intended to please an interest group, it aroused disputes of other people amid the conflicts between mainland China and Hong Kong citizens," said Adrian Lau, A.Loud Asia Communications' managing director for Greater China. Still, Lau said the impact on the brand's sales would be brief because the boycott wasn't product related.

'Safety Reasons'

Lancome cited "possible safety reasons" in a Facebook post announcing the decision to cancel the June 19 Energizing Factory Event in Hong Hong. Ms. Ho later issued her own statement, saying Lancome had "seriously misled the public" and calling on the brand to explain the decision and clear her own name.

"When a global brand like Lancome has to kneel down to a bullying hegemony, we must face the problem seriously as the world's values have been seriously twisted," Ms. Ho said.

China's color cosmetics markets was worth about 25.1 billion yuan ($3.8 billion) last year, and L'Oreal was ranked No. 1, with a 30% share, according to Euromonitor data. LVMH Moet Hennessy Louis Vuitton SE was No. 2 in the market with 6%.

'Get out'

The incident was reminiscent of the protests in 2012 after luxury retailer Dolce & Gabbana banned pedestrians from photographing its Hong Kong storefronts, suggesting the policy was intended to protect rich mainland Chinese shoppers. The incident was a seminal moment for some Hong Kong people worried about China's encroachment in the former British colony and helped fuel a "localist" political movement, some of whose members have called for independence from the mainland.

Lancome's Weibo page was peppered with comments from mainland Chinese users after the Global Times criticized the concert in a Weibo posting Saturday, citing Ms. Ho's support for the Dalai Lama, who the Communist Party blames for stoking separatism in Tibet. "Lancome, get out of China," one with the handle FredLu52193 said. "Stupid Lancome, you are losing the market from your China daddy," said another named BingbingBingbing.

China's Interests

"If companies wish to participate in the Chinese market and profit from it, they must not do anything that threatens the interests of China; this applies to both inside and outside of the country's borders," the Global Times said in an editorial Tuesday. "This is a universally accepted idea."

James Rice, an assistant professor of philosophy and law at Hong Kong's Lingnan University, described the editorial as "highly inflammatory."

"It shows that the expectations of the Chinese government are that it can have total ideological control over what a company does anywhere else in the world," Rice said.

--Bloomberg News--