It is a strange thing that the foundation of P&G’s success as a consumer goods company began with a man who specialised in the intense (and fraudulent) manipulation of the public mind. To appreciate the full flavor of this, you might care to read the details in ‘The Anger Campaign Against China’. (1)
Edward Bernays was widely-promoted in the US as "the father of public relations", but was instead the father of the most contemptible forms of propaganda deliberately meant to deceive entire nations of people. Bernays claimed,
"If we understand the mechanism and motives of the group mind" it will be possible "to control and regiment the masses according to our will without their knowing about it".
He called this scientific technique of opinion-molding the 'engineering of consent'. Bernays' contempt for humanity was legendary, stating that no member of the public “bewildered herd” ever had a wise idea about anything and that their thoughts needed to be controlled by superior men like him. He believed he could, through propaganda, totally infiltrate and control the minds of a nation and, in America at least, he certainly succeeded. He stated:
"So vast are the numbers of minds which can be regimented, and so tenacious are they when regimented, that [they produce] an irresistible pressure before which legislators, editors, and teachers are helpless."
After using his psychiatric manipulation to push America into the first World War, Bernays turned his attention to the manipulation and control of public attitudes toward advertising and commerce, teaching corporations of the vast potential for sales and profits if they could condition emotional responses into the subconscious of the American population without the awareness of the people, and thus control the purchasing attitudes and habits of an entire nation. Bernays had set up shop on Madison Avenue in New York, and by the early 1920s was already doing for American products and branding what he had done for war marketing, that is to say, using propaganda to manipulate and control public perception, in this case to not only create millions of mindless American consumers but to fabricate and permanently instill in the American mind the myth of brands. Bernays quickly attracted more corporate clients than he could handle, with most large firms tripping over themselves to take advantage of the power of propaganda and mind control to loot the nation's bank accounts with the hundreds of new products to be sold to the 'bewildered herd'.
Bernays' first corporate client wasProctor and Gamble (P&G), a company with which he had a relationship that lasted more than 30 years, and a client that wholeheartedly adopted his methods not only for marketing manipulation but eventually for recruiting and staff training as well.
P&G is an anomaly in the corporate world in some ways, one of which is their unusual marketing model that permits their products to enjoy a largely artificial demand driven by what is essentially propaganda supported by massive advertising spending. In terms of media expenditures, P&G has for many years been the biggest spender in the world, spending twice as much as the number two company, Unilever, and in many categories spending five times or more than its nearest rival. With disposable diapers, for instance, P&G spent in one recent year about $70 million on Pampers compared to about $10 million by Kimberly-Clark for Huggies. It is that huge advertising assault on consumers that props up demand which would otherwise not exist. Many P&G executives have in confidence confirmed my suspicion that the company's sales would rapidly fall by perhaps 70% if the incessant media blitz were to cease. Of course, many firms use advertising to produce sales, but their sales are much nearer to what I term a natural demand level, and might not appreciably change with a reduction in advertising expenditures.
Their marketing of Pampers in China is an excellent example of P&G’s manipulation of societies to change existing values and perceptions to create fabricated markets for their products. Chinese mothers did not often use diapers, and preferred washable cloth diapers in any case, strongly resisting P&G's marketing efforts for what was seen as an expensive, wasteful, and unnecessary product. P&G's then-CEO, Robert McDonald In 2010:
"One of the things that interests me about China's many markets ... is observing Western consumer goods companies take a proven product from overseas and introduce it in an emerging market with no prior knowledge of the products’ use or existence. ... I’m talking about taking a product and literally changing consumer behavior to create a market for it." (2)
In that article, Forbes wrote that P&G conducted "some research to identify the qualities that might make a disposable diaper attractive in China", but that statement is an enormous lie meant to disguise the essential truth. What P&G actually did was to conduct extensive psychological and psychiatric research in attempts to identify the hidden fears and weaknesses in Chinese mothers so as to prey on those. And they found what they needed: the mothers' concern for their baby's health and his longer-term development and success in life. P&G then first created a scenario based on claims that increased sleep would not only improve a baby's health but would result in "improved cognitive development and academic achievement", thereby presumably guaranteeing wealth and a successful career. The second step was to produce so-called "studies" with "scientific results" that appeared palpably fraudulent, with either fabricated or cherry-picked data, claiming that Chinese babies wearing Pampers fell asleep 30% faster than babies wearing cloth diapers, and further that their sleep while wearing Pampers would experience "50% Less Disruption". (3)
To add to the appeal, P&G then attached the insinuation that the parents would also receive much more sleep thereby transforming the earning power of a lower-middle-class family. So, if your baby wears my diapers, not only will you obtain so much extra sleep that your income will magically double, but your baby will become so smart he will earn a Ph.D. from an elite university. As a mother, how can you refuse? P&G were very proud of themselves for this manipulation. In an internal P&G staff promotional video, one Pampers brand manager boasted about his psychological fraud, saying, "We really had to change the mindset and educate [Chinese mothers] that using a diaper is not about convenience for you - it's about your baby's development."
P&G were "educating" mothers to believe that wearing disposable diapers would dramatically enhance their child's mental development. And boasting about their cleverness in doing so. There is a hidden issue here, critical to the understanding. This kind of marketing is psychological propaganda and, like all propaganda, it functions and survives only in the dark, meaning that the basic tenets cannot be openly stated. If P&G were to make the open claim as stated above, that using disposable diapers would increase a child's IQ and guarantee his future and your income, the statement is so obviously foolish it would be openly ridiculed. So P&G, and all marketers, are careful to only awaken the fears, then independently associate their product with a solution, permitting consumers to connect the dots themselves. This is not clever marketing; it is evil manipulation. P&G had a head start with Bernays and became masters of this manner of kind of deception.
But it is elsewhere that Bernays' principles have permeated P&G in interesting ways. P&G have typically accepted new recruits only from the graduating classes of various universities, rarely hiring individuals with prior work experience. Whatever their stated reasons, it is apparent that indoctrination succeeds most easily with empty minds, those yet unformed and uninformed, those without experience with which to compare the elements of their training. Just as American society has for generations been indoctrinated with the religious myths of democracy, freedom and capitalism, so P&G employees have been infected with their own brand of 'nationalism' that has penetrated so deeply as to reach the core of their psyche.
Readers may not be aware that P&G is perhaps the only firm that has a huge active alumni association in virtually every country where it sells its products, consisting of a large percentage of those who were once employed by the firm but have since moved on. Withdrawal from P&G employment left a void not so easily filled since the propaganda reinforcement was now absent. The Alumni Association fills this void admirably. These people believe they share something unique that binds them together even in the absence of shared employment. And they're correct, even to the extent of attributing this adhesive to "shared values", but they would be at a loss to document the exact content of those values which consist of a kind of sticky religious ideology that defies easy description. It seems apparent to me that P&G function as a kind of religious cult, with all that this implies; it is not for nothing that Proctor and Gamble employees are often dismissingly referred to as "Proctoids". (4)(5)(6)
P&G had long been admired for its superior ability to brand products, its marketing strategies and the intense loyalty of its employees, but that was then. There is no shortage of waving red flags telling us something is very wrong with P&G today, and equally no evidence that the company's executives have any intuitive understanding of the root cause and even less an idea of what to do about it. After some decades of (partially, but not entirely criminal) activity in China, P&G obtained a dominant position in many brand categories, all of which are now failing, with the company experiencing a steadily declining market share month after month after month in recent years. The declines are not precipitous, but they are resilient and increasing, and therefore serious, indicating the cause as an internal structural failure rather than disagreeable market conditions. (7)
However, P&G executives are attempting market-condition cures rather than internal-structure cures, taking medicine for an illness they don't have. A few years ago, the company brought back A. G. Laffley, its former (and formerly adored) CEO, in an attempt to stem the decline. He failed. Laffley eliminated fully half of P&G's 160 brands, slashed tens of thousands of jobs, then left. In an interesting twist on the topic of spinning history, the corporate story after Laffley's departure was that he hadn't returned to save the company but merely to choose his successor (who is even less likely to save the company). (8)(9)(10)
An article in the Wall Street Journal on August 2, 2016, stated that P&G was "clawing its way out of a hole in China", and that the company's CEO admitted P&G "had lost ground in all categories in China".
P&G and other MNCs blame this phenomenon on a slowing Chinese economy or increased competition or a move to online shopping, but the primary reason is the increasing abandonment of low-quality and high-priced foreign brands and a return to Chinese products with lower prices and higher quality. (11)
My friends at P&G tell me their careers are now increasingly disheartening and that an exit is on the horizon. They are not rushing to leave, but even five years ago those thoughts would never have existed and yet are now constant. They describe the depressing environment of watching their marketing efforts produce increasingly fewer sales each month, knowing their very best efforts will do no more than moderate the eventual collapse. They tell me that ten and even five years ago, no one in an attractive job left P&G except those for whom promotions were limited, and that perhaps only one senior person might have left in one year. They claim that today there is at least one senior person leaving every week, and some weeks many more than one, that it has become almost a ritual to read the announcements of exits "for personal reasons". The Chinese media often carry reports of significant numbers of P&G China staff departing. In one reported case, nearly 40% of new recruits for the company's management training program were gone in one year, another stating that of all new staff recruited in Beijing for P&G's marketing management program, none remained after a year. P&G apologists have attributed this exodus to hiring freezes or unwelcome transfers, but those conditions have existed before. (12)
They also, to a man, inform me that one of the major reasons for the decline in sales and market share in all categories, is the very perceptible drop in quality that has been recently engineered into most or all P&G products, at least in China, but perhaps in all countries.
I cannot precisely recall the timing, but in 2013 or 2014, the rumor mills in China were flooded with P&G, with essentially the same story emerging from many independent sources, and rather uniformly from executives of the many international ad agencies in China. The details appeared at first to indicate the possibility of a massive internal fraud at P&G China, but subsequent events discarded this theory. Briefly, the story was that a large section of P&G China's factories had subcontracted the manufacture of P&G products to smaller, unrelated firms who substituted lowest-grade materials and constituents in the manufacture of visibly lower-quality products but which were packaged in perfect P&G packaging and with the correct requisite bar codes. These essentially counterfeit products were then quietly delivered to P&G warehouses and shipped from there to the market while the genuine P&G products from the P&G factories were exchanged with these other factories to be distributed elsewhere, most likely for export to the West. Given that these details were so widely known and apparently confirmed, had this been a fraud, heads would have rolled very quickly - but no heads rolled anywhere, which meant this was not a case of P&G executives defrauding the company, but the company involved in an elaborate plan to defraud consumers in China by quietly degrading the quality of its products. Interestingly, it would by definition have also been a plan to defraud the local staff, designed to prevent them from awareness of the quality degradation.
As explained to me, the scheme unraveled when some major retailers experienced difficulties with the POS codes and eventually discovered the identities of the manufacturers. Volumes of customer complaints emerged almost immediately, the quality degradation appearing obvious to average consumers especially in some products like Pampers. And thus the slide in sales and market share increased and continued. My P&G friends tell me the lower-quality products remain as the new standard, with no expectation of change. And of course, local brands are benefiting handsomely from this P&G foolishness. It is true that all MNCs are suffering from the same disenchantment of their Chinese customers, who are en masse finally realising foreign goods are not better or of higher quality than similar domestic products, but are in many cases worse and yet invariably carry an unjustified much higher price. However, P&G appears to be suffering the brunt of this decline which carries strong indications of being irreversible. According to AC Nielsen, P&G's share of its vital shampoo market has fallen by 10% from its peak, with some prime brands like Rejoice having plunged by 35%, while domestic competitors are experiencing large increases. One senior FMCG official was reported in the media as stating,
"Sooner or later the crushing dominance of foreign brands in China will come to an end, particularly when our domestic brands start to focus more attention on their marketing efforts. Hence P&G's market share in China will be further squeezed." (13)
Perhaps the oddest element is that P&G are inexplicably reducing their media spending while sales and market share are declining. Chinese media have been reporting for example that P&G China's range of laundry products have been steadily disappearing from the TV media. This would appear to be a suicide plan since the company's still-large market shares are largely artificial and supported only by excessive media spending. Without that incessant promotion, there is reason to expect further and even more rapid declines in the future. Another indication of this decline is that P&G are suffering heavily in the US as well, with serious concerns about loss of market share. In P&G's defense, the US market is still suffering hugely from the 2007 financial meltdown and consumer spending is weak, the situation having become so dire that P&G created an entire new line of low-cost brands in the hope of tapping the wallets of the hundred million or so of America's once middle class but now newly-poor.
Killing China's Brands
P&G is one of the companies most famous for entering a merger or joint venture with a renowned Chinese brand, primarily for the purpose of killing it, to eliminate any domestic competition for its North American products. For many years, Panda detergent was by far the market leader, and one of the best-selling brands in China. Then, in 1994, P&G set up a JV with the Beijing brand owner to produce and sell Panda detergent, the Beijing firm receiving a 35% share of the equity in the JV in return for access to its manufacturing facilities and the Panda brand name. P&G had no sooner obtained control of Panda, than it immediately set out to freeze, and then kill, the brand, their first act being to raise Panda's retail shelf price by 50%, effectively killing the sales to make room for its own brands. (14) In only four years, Panda sales declined by 95%, the brand having virtually disappeared from the market and P&G's Tide having become a family name, leaving the JV worthless. The Beijing original owner bought back the brand, but by that time its market position and value were virtually zero - P&G's original intent, and rebuilding a brand is extremely difficult after years of absence and facing a powerful competitor that controls the market. As noted in my article on Killing Chinese Brands, (1) this precise fate has been inflicted on hundreds of famous and treasured Chinese brands by Pepsi and other American MNCs, but we also have a long list of similar stories of excellent and well-established Chinese brands being purchased and quietly killed by P&G, not only irrevocably damaging portions of China's cultural heritage but putting thousands of people out of work. One former P&G employee confided to me that for every person P&G hired in China, there were "probably another three or four who lost their jobs" because of the company's predatory version of capitalism.
SK-II Cosmetics - How to Shoot Yourself in the Foot
In 2015, during routine import inspections, China's national Quality Supervision personnel discovered unacceptable levels of heavy metals (neodymium and chromium) in about ten of P&G's SK-II cosmetic products that had been manufactured in Japan. China's safety standards prohibit the import and sale of cosmetics containing these metals, due to potentially serious health issues. The Shanghai Food and Drug Administration then discovered the same contaminants in additional SK-II products, and demanded that sales cease for all those items totaling a dozen or more. After repeated refusals, protracted delays, denials, mis-statements, false statements, insults and challenges that succeeded in infuriating almost everyone, P&G were forced to recall the contaminated brands and offer refunds to all purchasers. But due to the company's outrageous intransigence, the brand value had been virtually destroyed and in the end all SK-II skincare counters were closed and the entire SK-II product line was removed from sale in China.
When Chinese officials discovered these contaminants, P&G's response was at first to repeatedly and publicly deny their existence, essentially claiming to the media that the Chinese lab scientists were incompetent. When the facts could no longer be denied, P&G executives then airily claimed the contaminants may indeed have been present in SK-II products but P&G didn't put them there, the contamination presumably being someone else's fault. When that explanation drew ridicule, P&G shifted tack with the bizarre claim that this contamination was perfectly natural, since "Neodymium and chromium exist in nature". Executives further angered everyone by airily claiming, "We believe only a small batch of products suffered the problem", when it was already evident the contamination was widespread. As the incident intensified, P&G changed its position with a claim that although the chemicals were present, the levels were not dangerous. Company executives then claimed the US permitted these heavy metals in cosmetics and the company was adhering to American, i.e. "world" standards, and could therefore safely ignore China's safety standards. In response to government claims that these heavy metals were prohibited for health reasons, P&G infuriated virtually everyone by denying the government's claims and insisting their cosmetics were safe. Even worse, P&G began their media battle by insisting that all their cosmetics had been tested and inspected in Japan before export to China, and contained no contaminants. A few days later, the company endured more public ridicule when the Japanese embassy in China informed the authorities that P&G's SK-II products had in fact not been inspected before export. (15) (16) (17) (18) (19) (20)
Even when it had become obvious the situation was beyond repair, P&G China executives persisted with an arrogance that became increasingly surreal. Company executives repeatedly refused government demands to recall the contaminated products, much less to offer customer refunds. After authorities issued a demand by law that P&G recall their contaminated SK-II products and provide reimbursement to all customers, company executives claimed in the media that the product withdrawal was 'voluntary' and that their refunds would be based on 'goodwill' only, since they were (apparently) not legally required to obey China's laws.
But the move that actually outraged consumers was a two-part demand by company executives that (1) consumers produce signed testimony from a doctor stating they were allergic to the products being returned, and (2) consumers sign a full waiver absolving P&G of all legal liability, what many customers called "a dictatorial statement", a so-called "safe product" agreement in which consumers were forced to agree the SK-II products they purchased were safe, had no quality problems, and had caused no medical concerns. The company's switchboard operator informed customers that without the physician's testimony and waiver document, P&G would perform no product recall and offer no refunds. The demand was of course was not only an illegal act in itself, but the refusal to withdraw and refund were also in contravention of law. To add insult to injury, consumers were informed any refunds would require at least a month to process. Of course by this time there was a tide of product returns for SK-II everywhere, P&G responding (as usual) with deliberate and visible efforts to ensure consumer complaint channels were imperfect and that neither returns nor refunds could be made in a timely manner.
The result was direct confrontation between consumers and P&G outlets everywhere, serving to make the incident a very visible public affair. Consumers were of course outraged, flooding the social media with condemnation, and even with angry physical alterations at SK-II outlets and shop windows being smashed. But even at this point P&G China executives arrogantly ignored the waves of protest, apparently deluding themselves the entire mess was just "an emotional discharge" that wouldn't damage P&G's corporate interests in any meaningful way. Even after finally announcing that all SK-II products would be removed from all stores in China, P&G executives still refused to acknowledge either quality or any other problems, and still stubbornly refused compensation, persisting to the end with arrogant claims that China's National Quality Inspection laboratory staff were somehow either incompetent or untrustworthy, and insisting their products were safe by American standards.
SK-II was a billion-dollar brand for P&G, yet the company insistently and repeatedly pushed the 'self-destruct' button until the brand value literally reached zero and they succeeded in having their products disappear entirely from stores in China, a country that was to have been SK-II's largest market. Every action by the company seemed designed to infuriate the government, its consumers, or the media, sometimes all three simultaneously. Instead of making logical attempts to resolve the problems, company executives instead chose inexplicably to escalate all issues until they were beyond resolution, with the brand seriously damaged and consumers swearing to never purchase another P&G product. Each company response was false, irrelevant, insulting, or illegal, with all being arrogant and often stupid.
After this never-ending fiasco, a Sina online survey of hundreds of thousands of respondents showed that 87% believed P&G to be lying, 96% said they would never purchase SK-II products again, and 70% said most foreign-branded cosmetics products were untrustworthy. The almost unanimous opinion of Chinese consumers was: "P&G are so bad, we should ban them from selling in China". I concur wholeheartedly. P&G's executives declined to provide data on company losses from the SK-II incident, though industry insiders estimated them at about $180,000 a day. And P&G executives still didn't learn anything.
In reading Chinese newspapers and magazines, the words most frequently used to describe P&G's handling of the SK-II case were "arrogant" and "defiant." Not only arrogant, but inexplicably senseless. By the time P&G were done shooting themselves in the foot, in more or less the same manner as Tim Cook at Apple, we had media articles carrying headlines such as "The Arrogance of Procter and Gamble: SK-II product scandal in China". Hardly a surprise, with foreign brands boasting incessantly of their high quality and world-class status. One marketing consultant said, "According to P&G's statement, the administration's inspection result was wrong and came out of nowhere. Why couldn't the company just respect the government's inspection and admit its problem immediately?" Correct on all counts.
However, P & G must assume Chinese customers have a very short memory, since SK-II is back. Surely there are no consumers in China who would ever be foolish enough to trust P&G and begin purchasing this brand again. SK-II should be subject to a total boycott and disappear from China forever.
As an addendum, I can recall reading US media reports at the time which claimed that at least some of the SK-II cosmetics on sale in China had been shipped from the US, not from Japan, and had been ordered removed from the American market due to chemical toxicity. And, rather than accept the loss of all that destroyed product, P&G shipped it all to China. Later, I saw several Chinese media reports claiming these same cosmetics removed from sale in China were shipped to Africa for sale there. Many US and European cosmetic, food, and pharmaceutical companies do the same thing: products determined to be substandard or toxic in a Western country are simply shipped to another less-developed country where the toxicity may not be discovered.
Finally, it may be that SK-II was badly substandard from inception. In the late 1990s P&G marketers took one of their cheap 'Oil of Olay' products, created new packaging, added "special ingredients" that sounded scientific, and began marketing it in Japan as a "Japanese" product. It was so successful they progressed to China where their "special ingredients" combined with corporate arrogance killed it.
This wasn't the first time P&G had a crisis with their cosmetic products. The previous year saw a lawsuit where a customer claimed physical damage from the caustic soda in an SK-II anti-wrinkle cream, the company receiving a large fine and paying substantial damages. This was not only a case of dangerous cosmetics but fraudulent advertising, in which P&G claimed the cream would remove 50% (more or less) of all wrinkles in less than a month and make the user’s skin appear 12 years younger. P&G's China advertising failed to note that the product contained sodium hydroxide, a dangerously alkaline compound, and neglected to mention that advertising for the US market made no such clearly ridiculous claims about effectiveness. The product not only failed in its claims but left the customer in pain and resulted in a lawsuit. P&G executives were not only arrogant and defiant, but publicly slandered the customer with claims the lawsuit had been filed only as a spiteful act to draw media attention to herself and damage the company by unfavorable public exposure. The courts disagreed, the company was fined, company officials were forced to apologise, sales of the SK-II brand plunged by nearly 30%, and P&G executives learned nothing from the experience. At the time, a public relations executive listed SK-II's "caustic soda scandal" as one of the year's 10 most notable crisis management cases or, more properly, 'crisis mis-management' cases.
In addition to repeated fines for illegal price-fixing, false advertising and patent violations, P&G have had many product recalls in various countries, some of which have resulted in lawsuits or class action lawsuits against the company, but these seldom become widely-known. This is true because of the company's good relations with the media and because P&G the newspapers and TV networks are loathe to publish negative news about one of their major source of advertising revenue. Being one of TV's largest advertisers and therefore able to dictate program content, P&G has long had a policy that instructed TV networks as follows:
"There will be no material that may give offense either directly or by inference to any commercial organization of any sort. There will be no material on any of our programs which could in any way further the concept of business as cold, ruthless and lacking in all sentimental or spiritual motivation." Not only that, P&G have a vested interest in maintaining the utopian mythology that so controls American consumers. From their policy statement again: "If there is any attack on American customs, it must be rebutted completely on the same show". (21) (22)
Readers (and local government officials) should be aware that when a product of a multi-national company is discovered to have a problem in one country, it is almost certainly experiencing those same problems in other countries, a fact the MNCs try hard to conceal. Similarly, if a large MNC is discovered conducting a consumer or tax fraud in one country, it is almost certainly doing the same in most or all nations where it operates. This applies to all categories of companies, from cosmetics to automobiles and from health care to education.
The pharmaceutical division of P&G was sued for false advertising for its drug Prilosec, with another major dispute over Actonel. Some years back, the US State of Georgia filed a class-action lawsuit against P&G when its Crest toothpaste caused consumers to suffer stained teeth and a loss of their sense of taste. P&G arrogantly dismissed the results as trivial, claiming only a small percentage of consumers suffered health damage. Another large lawsuit concerned Gillette’s Mach3 razor, and there were further issues with P&G's Always sanitary napkins causing serious rashes and allergic reactions, and P&G's Clairol hair coloring causing many consumers to discover it made their hair fall out. The picture is similar with P&G's Pantene shampoo and conditioner, Clairol hair dyes, Sure deodorant, IAMS pet food, Pampers diapers and more.
P&G paid $30 million to settle a false-advertising class action lawsuit for its Align probiotic supplement as being beneficial for digestive health without any clinical proof to support its claims. The lead lawyer claimed he expected “hundreds of thousands” of consumers to seek “tens of millions” in refunds for P&G's Align which was claimed useless in terms of health benefits. This is probably a good place to warn consumers that most vitamin pills, dietary supplements and similar, are fraudulent in many if not most cases. Canada's Health Agency did a large investigation a few years ago and discovered that almost all of these products were simply concocted of "powdered weeds".
There have been many consumer complaints and recalls about seriously-degraded quality in many P&G products, from hair treatments to Pringles potato chips, Olay products, Vicks Nasal Spray, Pepto-Bismol products, Oral-B mouthwash, and many recalls of pet food due to risk of salmonella poisoning. Consumers also complained that P&G's Dawn detergent and some other products had been reduced in volume by more than 50% in some cases, while maintaining the original prices, and many further complaints about dishonest advertising. There were multiple reports that P&G's Pampers diaper products contained chemicals that caused vomiting, diarrhea and dehydration in infants. P&G have suffered lawsuits over their Tide detergent, Charmin wet wipes and Old Spice deodorant.
And the company doesn’t go down without a fight, having a reputation as a vicious litigator. "[P&G] certainly litigate hard,” said Tim Blood, a San Diego lawyer whose false-advertising claim over P&G’s Align brand was stalled for two years, while the company appealed a class-certification ruling all the way to the U.S. Supreme Court. "It certainly indicates a more aggressive stance than the other defendants have taken", he said. (23) And, as with their SK-II fiasco in China, P&G's standard response is to ignore the facts and arrogantly state that all its products are "safe and effective".
From all this, P&G have come to be increasingly despised by many sectors of government in China. When the City of Shanghai forced the return of its Maxam cosmetics brands from the US company S. C. Johnson, to put it into Chinese hands, Shanghai Jahwa said, "The company that would like to acquire Jahwa the most is Procter & Gamble Co. But we will never give our company to [them]."
And of course, Westerners and the Western media were quick to smoke up the room with distracting irrelevancies in attempts to deflect blame from P&G. One such ideologue named Sam Fleming, of a Shanghai-based research company named CIC Data, claimed the following:
"Foreign brands seem to be more of a target when consumers have some sort of problem. After decades of suffering poor-quality products made by state-owned companies, Chinese consumers expected much higher standards from foreign companies. In the case of the SK-II brand, the fact the products were manufactured in Japan could have aggravated the consumer reaction."
According to our American genius, this was just 'some sort of consumer problem', nothing of significance, and occurred only because Chinese authorities always target innocent foreign brands. Note the clever sentence about 'decades of suffering' from 'poor-quality products' made by 'state-owned companies', where Fleming manages to shoot everyone with one bullet, but with claims that are outright lies. Rather than suffering from domestic cosmetics and skin-care products of poor quality, China had many beloved brands like Maxam and Ruby, Mini-Nurse, DaBao, Panda, Tianfu, Nanfu, and so many others that were of enviable quality, with histories spanning 80 years in some cases, and commanding a huge market share - until American companies entered JVs and killed the brands. And most of those popular and high-quality products were produced by state-owned companies like Shanghai Jahwa. Fleming is correct in stating that Chinese consumers did indeed have high expectations from American brands, primarily because American product marketing was done on the basis of high quality that proved to be a fiction. Then, as the coup de grace, Fleming reduces the entire SK-II matter to simple racism: the products were made in Japan, which 'aggravated' the consumer reaction. Fleming ignores the fact that in no Western country would a company commit such a low-class and stupid act, to say nothing of being unlawful, as to demand a legal waiver as prerequisite for a refund, and nowhere does the man provide even a hint of admission of a fault with P&G or its products. Instead, the fault lies with unfair targeting of American firms, low-quality Chinese products, incompetent state-owned companies, and apparent Chinese racism. Blame the victim.
Lastly, a practice now universally adopted by American MNCs everywhere when embroiled in a legal or consumer affairs dispute is the infuriatingly low-class attempt known as the "Good Corporate Citizen" defense, meant to shroud crimes with the smoke of charity. In P&G's SK-II scandal, we were treated to the information that the company had (in the past) sprinkled about $10 million in donations to various charities in China, this revelation serving to delete all current sins and even leave a small surplus of goodwill in anticipation of the next consumer fraud. These PR statements are invariably delivered with a hinted admonition that the Chinese people should more properly respect and even honor a generous company like P&G for its philanthropy instead of focusing on minor negatives like shoddy products and fraudulent marketing.
P&G Potato Chip Imperialism
Some years back, P&G were forced to recall more than 800,000 tubes of Pringle's Potato Chips in Japan because they were made from Monsanto's genetically-modified potatoes, which are against the law in Japan. It isn't possible P & G executives would have been ignorant of the GM content of their products, nor of Japan's food laws, so we can safely assume the shipments and sales were made in contempt of Japanese regulations. Naturally, the Japanese government ordered a full recall of the product. P & G's response? The standard defense made by every American MNC in every country: company executives stated that they followed American regulations which were by implication morally superior to those of Japan, leading to the obvious conclusion that Japanese laws could be safely ignored. They stated that their products were approved for sale in the US, and further that, "As proved in the United States and Canada, our products are safe". But US approval has no bearing on what can be sold elsewhere. Japan is not the US or Canada; it is a sovereign country with the right to make its own laws.
It was from this twisted supremacist morality that P&G executives had no hesitation in shipping these banned food products to Japan, regardless of the country's laws. In a further display of arrogance meant to highlight the relative status of an American MNC compared to any national government, P&G claimed the recall of their product was 'voluntary'. This topic of course received media attention in Japan, but an extensive internet search of Western media produced only a single reference by the BBC. Nowhere did it appear in any of the major American news sites, and Google had never heard of it.
And Much Else
It wasn't only for its SK-II products that P&G China executives conspired to create a deliberately difficult and very inconvenient refund process. In fact, this appears to be the standard P&G procedure in all such events. A few years ago, P&G recalled some 40,000 bottles of Oral-B mouthwash products for bacterial contamination. In order to obtain a refund, customers were required to complete an "application form", return the product to P&G through the mail rather than to the point of purchase and, rather than providing cash refunds, required customers to provide full bank account information for a deposit. The process was further complicated with a strict time limit and other criteria. In the meantime, retailers were at a complete loss in knowing how to deal with the flood of requests for refunds or replacements, since P&G apparently chose to make the process as non-transparent as possible. The inconvenient process was certainly the design and not a by-product.
Furthermore, it wasn't only P&G's SK-II products that contained interesting substances that 'existed in nature'. Researchers in both Canada and the US discovered that many of P & G's other cosmetics brands and products contained harmful chemicals or heavy metals. P & G's Cover Girl contained beryllium, cadmium, nickel and lead, and the company's Maybelline products were also found to be contaminated. In fact, P&G have often been criticized for failing to remove unsafe and potentially carcinogenic ingredients from their personal care products.
P&G's Crest toothpaste was on a list of products containing the antibacterial and antifungal chemical triclosan, which is a probable carcinogen and endocrine-disruptor that is dangerous if ingested. In this regard, P&G executives have incurred condemnation from environmental groups for their lobbying of the Chinese government to weaken China's health laws, and have also been heavily criticised for attempts to pressure European officials to weaken Europe's laws regarding toxins in household products. The company has also reportedly been funding an organization that fought disclosure laws for genetically-modified products. P&G have been repeatedly accused by labor organisations of labor violations such as forcing "temporary" employees to work 12 hour days, and company executives deserve public exposure and condemnation for its lobbying of Chinese government officials against establishing minimum labor standards in China.
Like many other American corporations, P&G has faced a lot of heat over what is called "slack-fill", the deceitful practice of making a large package or container which is then only partially filled with product, leading consumers to believe they are getting more than they really are. P&G's Old Spice deodorant was one such product that aroused media attention, the practice being universal in products where the packaging is not transparent, like shaving cream, deodorants, all spray cans, printer ink. And it isn't only in China where SK-II executives specialise in misleading or fraudulent advertising. A few years ago, Korea’s Fair Trade Commission fined P&G about $100,000 after SK-II executives were discovered to have posted on nearly 120 different Internet weblog sites, paid advertisements that were falsely disguised as consumer reviews.
American MNCs and their apologists are always frantic to deny any suggestion of 'double standards' in their products and advertising in China, but these double standards do in fact exist and are apparent everywhere. As one not entirely amusing example: in the US, P&G executives claim a Crest tooth-whitening strip will bleach teeth within 14 days with the effect lasting for six months. But in China, Crest's magical power is magically doubled: the product will work within 7 days, with the effect lasting a full year. Of course the claims were nonsense, but P&G mounted a major ad campaign to promote their magic, resulting in the company being fined more than 6 million RMB for false and deceptive advertising and consumer fraud, upon discovery their ad campaign used photoshopped images to deceive customers about the 'whitening effect' of Crest. In this case, P&G used a popular Taiwanese hostess Dee Hsu to proclaim, "The magical MICA whitening particle in the tooth paste really made my teeth white with luster", which is a physical impossibility for a toothpaste. This is not a small thing, and not the same as touching up the skin appearance of fashion models in TV ads or adding blue sky and white cloud to an auto commercial. It was a planned and deliberate attempt to deceive. (24) (25)
P&G's response was to completely ignore the illegality of its actions and treat the matter as a PR problem, issuing, as do all American firms in this situation, a flood of ideological nonsense about non-existent core values to which they never adhere. We had a claim that all the firm's products experience rigorous testing in order to comply with Chinese law, but testing was clearly irrelevant since the issue was fraudulent advertising. P&G added the requisite "Crest has always done its utmost to produce and sell high-quality, safe products for consumers", then adding the incredible statement that its "standards were the same all around the world". That last part is certainly true. P&G violated Chinese advertising law, made patently false claims of product effectiveness, then airily claimed their actions conformed to the American standard, the Reuters News Agency going so far as to state P&G were arbitrarily fined "for what (Chinese) regulators say is false advertising". The insinuation is clear; P&G's advertising was not false, but the Chinese arbitrarily chose to categorise it as such, and to punish chaste American P&G for having done nothing at all. American white supremacy, moral superiority, and racist colonisation all in one little phrase.
It was refreshing that consumer authorities stated that celebrities participating in these fraudulent commercials most often know the truth of what is being done but conceal it for the sake of the high payments for endorsement, and can face legal punishment along with the client. Chinese law essentially states that "Celebrities cannot use their popularity to promote fake advertisements." I would point out that the advertising agency producing those ads was fully complicit in the fraud since it produced those images and planned the campaign. My view is that the agency should have been fined double that of P&G, since most consumer frauds of this kind could never proceed without the willing cooperation of the ad agencies. To be fair, it is often difficult for the agencies to express morality in their dealings with MNCs that are fundamentally immoral, since objections to a client's intent will often mean the loss of a client and potential corporate suicide. This is where government authorities can make a valuable contribution to cleaning up consumer frauds, by threatening the ad agencies with heavy fines and even loss of license for participation in any form of deceit. All agencies will then uniformly have a firm ground for declining at least the more outrageous requests from their clients. But it also needs to be said that all of the large ad agencies in China are foreign MNCs who are often no less deceptive than their clients, which gives us even more reason for the double fines.
P&G also have a collection of much more serious brushes with the law. In 2013, European Union regulators fined P&G and Unilever almost $500 million for criminal price-fixing, P&G paying the greater share of that total. (26) Evidence was that P&G and Unilever executives made an illegal agreement covering most of Western Europe, on market share and the maintenance of high prices, agreeing further to not reduce prices as the product packages were made smaller. The European Commission executive stated they needed "to pursue a relentless fight" against these cartels designed in every case to avoid competition and "extract the highest possible prices from consumers". And in 2014, the government of Argentina totally suspended P&G's operations in the country, (27) (28) (29) (30) accusing the company of engaging in major tax fraud by overbilling hundreds of millions of dollars in imports to get money out of the country, thereby hiding income that was subject to tax in Argentina. The company will be able to resume operations in Argentina once it has paid its tax bill and fines. P&G denied ever having employed aggressive tax policies, and spokesman Paul Fox said the company was "working to understand fully the allegations ...” From my experience, I would say there is no MNC anywhere that does not engage in 'aggressive' tax policies, and it is a certainty that P&G executives "understood fully" their actions long before the Argentine government discovered them. I should note that the US media are almost always totally silent on matters like this, unfavorable news of anti-social or criminal corporate conduct totally censored in America. Another item closer to home that failed to make the news was that P&G were discovered to have been polluting a major US river with more than 50 million gallons of toxic waste water each day from one of its cellulose plants, contaminating all the seafood and apparently rendering local water wells unsafe for consumption.
I think it is worthy of note that the same executives and staff of P&G China who all contributed to the SK-II fiasco are the same individual people who concocted the plan to quietly degrade the quality of their company's products while maintaining the price levels and hoping nobody (including their own staff) would notice. They are the same individuals pressuring China's government to either relax or abandon labor protection laws and to soften consumer protection legislation. They are the same people who have purchased and killed dozens of treasured Chinese brands, destroying in the process important parts of China's cultural heritage and putting tens of thousands of Chinese out of work from those acquisitions. They are the same individuals who knowingly distributed contaminated products, who concocted the fraudulent advertising schemes, who insulted their consumers, the government and the public, and who insisted on their right to be above the law. What does that tell you about the characters of the individual executives running P&G in China, and what does it tell you about their opinion of the Chinese people? And, if you're Chinese, why would you want to purchase their products? Even more to the point, why would you want to work for P&G and contribute to the success of this criminal organisation?
Larry Romanoffis a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai's Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. His writing has been translated into more than 20 languages and is available on more than 100 foreign-language websites around the world. He can be contacted at: firstname.lastname@example.org.