REUTERS/Anindito Mukherjee
Lei Jun, founder and chief executive officer of Xiaomi, uses a Mi 4i phone during its launch in New Delhi.
The Beijing Ministry of Industry and Commerce is investigating Xiaomi for using superlatives like "best" to describe its some of its smartphones.
China's new ad restrictions - which also tighten regulations on personal endorsements and count the use of "technical or digital methods" to fabricate or "improve" the real effect of the product or service as false advertising - went into effect on September 1.
Penalties for violations start at RMB 200,000 (£20,000), but can go much higher depending on the severity of the charges.
But according to a report from China's Securities Daily, it was the CEO of a rival smartphone company called Cong that alerted authorities to the alleged use of superlatives in Xiaomi's advertising. Cong CEO Tan Wensheng told Securities Daily that he was concerned Xiaomi customers would be misled by the use of terms like "first-class" and "the king of screens" on Xiaomi's site, and has mentioned it on his official Weibo account too.
But Xiaomi's meteoric rise - it was China's top smartphone firm in Q2 2015, knocking Apple off the top spot - has in part been thanks to its customers. Xiaomi has a pretty devoted fan base - so dedicated, in fact, that the company has been nicknamed the "Apple of China."
This isn't the first time that one of Wensheng's companies has brought allegations against Xiaomi, Tech in Asia writes. He used to own Red Pepper, another smartphone company that was fined RMB 150,000 (£15,000) for making harmful false statements about Xiaomi.
We've reached out to Xiaomi for comment on the allegations, and will update this story with any response.