Source: China.com.cn Finance, Author: Zuo Er Wahaha's e-commerce has been led astray by its dealers. Wahaha's leader, Zong Qinghou, once publicly stated on CCTV that he was "not optimistic about Jack Ma's e-commerce model," not only calling Ma's remarks "nonsense" but also claiming that e-commerce undermines and suppresses the real economy. However, in the past two years, Wahaha has ventured unexpectedly far into e-commerce. After collaborating with Hangzhou Zhongnan Tianyan Technology Co., Ltd. the year before last to launch the "Jingjing" fermented milk exclusively for WeChat business channels, Wahaha last year partnered with Hangzhou Hadodo Network Technology Co., Ltd. (hereinafter referred to as "Hadodo"), with Hadodo's WeChat mall fully selling its health products on a consignment basis. Hadodo even refers to itself as "Wahaha Brand Social E-commerce" in its external promotions. However, recent media reports have revealed that "Wahaha Brand Social E-commerce" Hadodo has engaged in various violations while selling Wahaha's health product line. These include exaggerating effects and making false claims in the sale of ordinary foods such as Jianghuang Xingsu drink, red yeast rice and quinoa meal replacement biscuits, and Xiao Ya'er probiotic solid drink. Additionally, in developing WeChat mall members, there have been practices of developing multi-level downlines through agents (dealers), which is suspected of constituting a pyramid scheme. In response, a Wahaha company representative told China.com.cn Finance that Hadodo is merely a national distributor for some Wahaha products and has no equity or management relationship with Wahaha. Hadodo, in its reply to China.com.cn Finance's interview request, stated: The company does not engage in "head-hunting" behavior and is not suspected of pyramid schemes. Regarding allegations of exaggerated and false advertising, Hadodo claimed, "We have never promoted the efficacy of our distributed products on our official website. If any individual dealer, or even individuals who are not our dealers, engage in improper conduct during promotion, it is unrelated to our company." According to Tianyancha, the "Hadodo" trademark belongs to Hangzhou Hadodo Network Technology Co., Ltd., established in October 2018. The legal representative is Song Tigang, with a registered capital of 10 million yuan. The company has two shareholders: the major shareholder Feng Chao holds 66.50%, and the second shareholder Guangzhou Dingzhi Investment Management Co., Ltd. holds 33.50%. From the equity structure, the Wahaha Group has not actually invested in Hadodo, but Hadodo has always used the "Wahaha" brand for endorsement in its external promotions. -01- Suspicion of "False Advertising and Pyramid Scheme" Public information shows that the Wahaha series products sold by Hadodo include red yeast rice and quinoa meal replacement biscuits, probiotic series, Wahaha collagen peptide, and Jianghuang Xingsu. According to promotional materials publicly posted by some Hadodo dealers on WeChat, the red yeast rice in Wahaha's red yeast rice and quinoa meal replacement biscuits can block external fats and regulate human cholesterol levels; the Lactobacillus rhamnosus in the Fubu red yeast rice probiotic solid drink can enhance immunity; the Lactobacillus salivarius in the Xiao Ya'er probiotic solid drink can stimulate the immune system and improve allergic constitutions; and the Lactobacillus helveticus in the Qili probiotic solid drink has exclusive female health benefits. Additionally, a WeChat subscription account named "Hadodo Mall Official Website" claimed that Jianghuang Xingsu drink can "control diabetes," "prevent senile dementia," "prevent Alzheimer's disease," and "fight tumors and inhibit tumor cell growth." Wahaha collagen peptide's main effects include anti-aging, anti-radiation, strengthening the body's defense system, and enhancing resistance to smog. In essence, the above products are all ordinary foods. According to national laws such as the Advertising Law, they cannot claim any efficacy, let alone medicinal effects. In response, Hadodo stated that the "Hadodo Mall Official Website" account is not owned by the company, and the company has repeatedly filed complaints with the WeChat system; "individual dealers, or even individuals who are not our dealers," who engaged in improper conduct during promotion, "are all unrelated to our company." In addition to false advertising, Hadodo's business model has also been accused of suspected pyramid scheme activities. According to a document released by a Hadodo agent, Hadodo agents are divided into multiple levels, such as district agents, city agents, and provincial agents. Qualification for different levels can be directly obtained by purchasing goods (gift packages) from an "upline," with the lowest level, district agent, requiring only a purchase of 98 yuan worth of goods. According to the widely circulated "Hadodo distribution model," higher-level agents can easily earn a monthly income of one million yuan by continuously having "downlines" "pull in heads" to sell. According to industry insiders, Hadodo's aforementioned advancement levels and tiered compensation model closely match the characteristics of pyramid schemes, which involve "paying entry fees, pulling in heads, and team-based compensation." In response, Hadodo told China.com.cn Finance that the company does not have any rebate schemes, does not offer performance-based commissions, has never collected any deposits, does not engage in "head-hunting" behavior, and is not suspected of pyramid schemes. -02- Wahaha Products Not Found on "Official Channels" It is understood that after the aforementioned media reports were published, Hadodo issued a public statement through lawyers, denying all the content involved in the reports. The statement pointed out that Hadodo recognizes only four promotional channels: the WeChat public accounts "Hadodo Welfare Bar," "Hadodo Mall," "Hadodo Product Experience," and the official WeChat account named "Hadodo·Wahaha Product Material." There are no other promotional channels. When China.com.cn Finance reporters visited these channels one by one, they found: "Hadodo Mall" had no content at all—whether it never published information or was urgently cleared is unknown; "Hadodo Welfare Bar"'s latest post was from November 3, 2019, and whether it has not published since or was cleared is also unknown. Moreover, the posting frequency before November 3 was irregular—sometimes every two days, sometimes every three days, sometimes weekly—which does not resemble the behavior of a professional WeChat ecosystem marketing company. What is even more suspicious is that in the WeChat public account "Hadodo Welfare Bar," which claims to be the official designated promotional channel for "Wahaha Brand Social E-commerce," there are recommendations for almost all well-known WeChat business products, but not a single recommendation for Wahaha products can be found. Is it possible that the "official designated promotional channel" of "Wahaha Brand Social E-commerce" has never recommended Wahaha series products? Or were the non-compliant messages urgently cleared due to public pressure? Even so, clicking on the recommended WeChat business products in "Hadodo Welfare Bar" reveals many products suspected of false advertising. For example, a product called "Huahong Xiaoheigao" claims: "It contains some traditional Chinese medicine ingredients, and more than a dozen relatively precious Chinese medicines are selected, mainly targeting old lumbar disc herniation, cervical spondylosis, frozen shoulder, lumbar muscle strain, hyperosteogeny, rheumatism, rheumatoid arthritis, sciatica, joint lesions, bursitis, etc. Therefore, patients troubled by these conditions can use Huahong Xiaoheigao to meet their needs." According to a previous report by our reporter titled "Huahong Xiaoheigao Claims to Use More Than 30 Precious Miao Medicines; Manufacturer Responds 'No Precious Miao Medicines Used, Exaggerated Advertising Exists'," the manufacturer of "Huahong Xiaoheigao," Guizhou Miao Medicine Pharmaceutical, clearly replied to our reporter: The ingredients of "Huahong Xiaoheigao" consist of "far-infrared micropowder, magnetic powder, matrix, anti-stick layer, and medical non-woven tape," and no "precious Miao medicines" are used. "Huahong Xiaoheigao" is a medical device product whose effects are mainly achieved through physical means. It is mainly suitable for the adjuvant treatment of rheumatoid arthritis and the pain, numbness, and joint swelling caused by it. The description of effects "does indeed constitute exaggerated and false advertising, according to national advertising regulations and the actual situation of our product." -03- Emergency Statement Accused of "Scapegoating" Agents It is understood that after the media raised questions, Hadodo quickly issued a public statement through lawyers, denying all the content involved in the reports, or stating that it was the behavior of dealers (agents) and unrelated to the company. In this regard, professionals in the social e-commerce and WeChat business field said that "scapegoating" dealers (agents) is a common practice in this industry. "Social e-commerce (WeChat business) is a brand-new distribution model, and its marketing behavior is vastly different from traditional enterprises. Traditional enterprises need to advertise extensively through public media (such as TV, radio, elevator light boxes) to build brand awareness for the enterprise and products, doing business based on public traffic. Due to the huge advertising costs, all promotional activities are planned and executed by the manufacturer or a strong sales company. In contrast, social e-commerce (WeChat business) operates on private traffic, where dealers (agents) are mostly individuals with limited resources, and promotions are conducted through free personal social media platforms (such as WeChat and Weibo)." The above-mentioned person said that individual WeChat business agents, due to their weak individual strength, find it difficult to plan complete product promotional copy and customer acquisition processes. Most companies, in order to boost promotion and sales, often provide quite specific guidance to dealers (agents) on promotional content, promotion processes, and how to guide purchases. "It is precisely because dealers (agents) are mostly natural persons scattered across the country and numerous, making it difficult to hold them accountable compared to companies—since the law cannot punish everyone—once market regulators investigate violations, companies often quickly 'cut ties' and shift all responsibility to dealers (agents)." The above-mentioned person said that with the rise of private traffic, WeChat business economy, and influencer economy, suspected pyramid schemes and false advertising have become the "hardest hit" areas for violations in this field, and national laws and regulations urgently need to be improved to strengthen the management of business activities in this area. China.com.cn Finance will continue to monitor the follow-up developments of the "false advertising and suspected pyramid scheme" incident involving Hadodo. Tips will be paid 400-2000 yuan upon adoption.