China issues maximum fines on community group-buy firms - Android

Chinese regulators imposed a RMB 6.5 million (around $1 million) fine on the five biggest community group-buy platforms for irregular pricing.

China has imposed fines totaling RMB 6.5 million (around $1 million) on five community group-buy platforms for irregular pricing.

Why it matters: Beijing is moving to regulate the red hot community group-buy industry as part of a recent campaign to curb the power of China’s internet giants.

• Fines targeting the growing sector comes as the state has stepped up regulation of internet giants over the past few months. China has extended various degrees of penalties on tech majors including Alibaba, Tencent, JD.com, and Vipshop.

READ MORE: Friendly neighbors are the key to China’s community group-buying craze

Details: The State Administration of Market Regulation (SAMR) said Wednesday that it decided to levy fines on five community group-buy companies after more than two months of investigation. The platforms are some of the biggest in the sector, and hold “a large share of the group-buy market,” according to regulator.

• Didi’s Chengxin Youxuan, Pinduoduo’s Duoduo Maicai, Meituan’s Meituan Youxuan, and Alibaba-backed Nicetuan are each subject to a fine of RMB 1.5 million. Wuhan-based Shixianghui was fined RMB 500,000, according to the notice.
• The investigation showed Chengxin Youxuan, Duoduo Maicai, Meituan Youxuan, and Nicetuan leverage their capital advantage to compete for market share by selling products at prices lower than cost, according to SAMR. All of the five falsely advertised discounted prices to boost orders.
• The companies were fined the maximum penalties due to the negative impact of their practices, a SAMR spokesperson said in a press conference (in Chinese) on Wednesday.
• The spokesperson said that using irregular measures to squeeze offline community economies will create market disorder and lead to social instability. At the same time, unfair competition among the tech firms will hurt consumer interests in the long run.

Context: The government summoned representatives from tech majors including Alibaba, JD.com, Meituan, Tencent, Pinduoduo, and Didi for a meeting in December to discuss oversight of the group-buy sector.

• Regulators issued a list of restrictions on group-buy businesses, forbidding predatory pricing to beat out competition as well as falsely advertising discounted prices and posting misleading product information.
• The state-run People’s Daily said in a commentary that tech companies should focus on innovation for bigger benefits instead of “thinking about the traffic of a few bundles of cabbage and a few pounds of fruits” (our translation).