Xiaohongshu has filed a lawsuit against four companies behind several ghostwriting broker sites in an attempt to restore consumer trust.
In an announcement on Wednesday, the lifestyle-focused social platform accused the four companies of setting up marketplaces for merchants and gig writers to carry out fraudulent practices, including the production of fake reviews and click farming.
Xiaohongshu has asked for RMB 10 million (USD 1.57 million) in damages for a bruise to its reputation and the infringement of consumer rights on its platform.
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Xiaohongshu’s success was based on its stature as a trusted resource for product recommendations and reviews. User-generated content accounts for 97% of the media on Xiaohongshu, and it has 130 million monthly active users, according to data shared by the company.
However, over the past several months, Xiaohongshu has been scrambling to respond to a crisis of trust as more users have started to question the authenticity of the content that it hosts.
Chinese media outlets reported details related to the publishing of fake reviews. Anyone with an account on Xiaohongshu can receive compensation for creating content that masquerades as genuine product reviews. One of the broker sites was “Tomato billboard,” which exhibited a price list for ghostwriters to meet merchants’ demands. The charges range from RMB 5 to RMB 2,000 (USD 0.80 to USD 315), depending on the ghostwriters’ follower counts.
In December 2021, Xiaohongshu formed a dedicated team to identify and remove fraudulent content. It has also implemented a system that uses algorithms and human checks to block falsified content. Since December 2021, the platform has banned 81 brands and merchants, deleted 172,600 fake reviews, and disabled 53,600 accounts, according to the company.
A representative of Xiaohongshu said in a public statement on Wednesday that on top of the content takedowns, the company will take legal action against ghostwriter brokers that supplied merchants with large volumes of bogus reviews, so that sham reviews are kept off the platform. The representative said that broker sites that connect fake reviewers with brands and merchants are the root cause of Xiaohongshu’s declining reputation.
For many small Chinese cosmetic brands with limited budgets, Xiaohongshu is an effective channel for marketing through KOCs, or key opinion consumers. Xiaohongshu’s algorithm prioritizes originality when it presents content, with the number of followers of a user being a secondary factor. Brands often send products to users with a few thousand followers. These users then generate organic reviews and recommendations. This is more cost-effective than collaborating with KOLs (key opinion leaders) who have massive fan bases.
But inauthentic reviews pose a threat to the platform’s credibility. According to Xiaohongshu’s 2020 report on the beauty industry, nearly 90% of its users are women, and 70% of the platform’s user base were born after 1990. They tend to spend more on beauty products and trust recommendations from influencers over advertisements.