Brands are directly impacted whenever the artists they have advertising contracts with become involved in scandals. As a result, when disputes arise, it is often inevitable that collaborative relationships will be terminated and that damages may also result.
The higher the rate, the greater the fine
According to Fastercapital, leveraging celebrity influence to promote products and increase sales can be a double-edged sword. On the one hand, it may attract fans of those celebrities, but when a controversy involving a star erupts, brands often take the brunt of the first impact. Consumers may lose trust and respect for the brand and even boycott its products or services.
Meanwhile, Segye reports that today’s consumers are not easily satisfied. When a celebrity involved in a scandal appears in an advertisement, consumers quickly turn to social media or the brand’s website to air their complaints. They openly express their dislike of seeing that particular star in advertisements. Therefore, advertising brands become more sensitive than anyone else when a celebrity scandal breaks out. The most common action taken is to terminate contracts, remove advertisements, banners and change the homepage display.
SBS says one of the most important indicators of a star’s popularity is their publicity. Yoo Ah In, one of the most famous 30-year-old actors, is a top model in this industry. The actor can receive between 800 million and 1 billion won for each advertising contract in a year. Before the drug scandal broke, Yoo Ah In was the face of about 10 brands, including fashion, food, beauty, pharmaceuticals and outdoors. Not only in South Korea, but he was also a model for a clothing brand in China.
After the drug scandal emerged, brands quickly severed ties with Yoo Ah In. According to SBS, advertisements featuring the “photo emperor” image were removed or replaced.
A typical advertising contract often includes a clause stating that the celebrity must pay a penalty if he or she engages in any behavior that damages the brand’s image or reputation. Each contract provides for different behaviors and sanctions. However, DongA reports that the more valuable the star’s publicity appeal, the greater the penalty for involvement in a scandal. SBS estimates that Yoo Ah In’s advertising fine alone could reach around 8 billion won. However, due to the different terms and conditions of each company’s contracts, the fine may increase or decrease.
It is expected that a lawsuit against Yoo Ah In will take place in the future. The plaintiff may be required to pay advertising penalties. However, since the police investigation and legal repercussions against Yoo Ah In are still ongoing, the matter will take more time.
The controversy surrounding Han So Hee earlier this year wasn’t as bad as in the case of Yoo Ah In. However, it was significant enough to cause some brands to turn their back on her. This illustrates how scandals can affect, and even ruin, a star’s career in South Korea. The same has happened to many other stars, such as Soojin, Lee Na Eun, Seo Ye Ji, T-ara and Lee Soo Geun.
After the success of “It’s Okay Not to Be Okay” in 2020, Seo Ye Ji has become a model in various fields, including masks, cosmetics, dietary supplements, fashion, jewelry and games. Her annual modeling salary is estimated to range between 500 million and 1 billion won. However, the controversy over Seo Ye Ji’s manipulation of her boyfriend has led to many brands removing her images. According to MBN, industry insiders estimate his fine to be around 2-3 billion won.
Paying the price for scandals
In any market outside of South Korea, punishment for celebrities after a controversy, especially in advertising, is difficult to avoid. As part of the ongoing investigation into multi-level marketing group The iCon Group, which is causing a stir in Thailand, popular MC and actor Kan Kantathavorn has had many of his assets seized. Notably, his management company and an electronics brand also announced the termination of their contracts with him. Kan Kantathavorn and 17 others, including actress Min Pechaya, were arrested on October 16 and are currently in custody.
In late 2022, Kanye West lost his billionaire status after Adidas ended their partnership due to his controversial statements. A representative for the brand said it “does not tolerate anti-Semitism or any other form of hate speech” and described Kanye West’s comments as “unacceptable, hateful and dangerous.”
Adidas and Kanye collaborated on the Adidas Yeezy line, famous for its expensive sneakers and clothing. According to the New York Times, the deal was worth billions of dollars and brought huge profits to both parties. In fact, Adidas reported that the decision to end the partnership with the rapper resulted in a sales loss of $246 million in the fourth quarter of 2022.
In the Chinese market, sanctions can be even more severe. Due to the surrogacy and abandonment scandal, Zheng Shuang not only faced trademark rejection but also had his awards taken away, according to HK01. After Prada, Aussie and other brands announced the end of their partnership with Zheng Shuang, the organizers of the Huading Awards also declared the revocation of her awards for Best Actress in Modern and Contemporary Chinese Television at the 19th ceremony and Best Actress at the 13th. ceremony. All of Zheng Shuang’s certificates and trophies were canceled.
At the time, representatives of the prize organization stated: “The incident immediately caused Zheng Shuang’s character to collapse. She has brought this consequence upon herself, which goes against our original intent in rewarding her. Everyone was shocked to hear that he used a surrogate mother. This behavior tramples on citizens’ rights and corrupts human morality. This cannot be tolerated.”
