Group-buying sites fined for unfair price competition
The fines are the latest move to step up regulations of the country’s digital market, and reign in unfair competition in areas related to daily shopping.
China's market watchdog has penalized leading Internet companies, including Pinduoduo, Didi and Meituan and two community group-buying sites, for price abnormalities and damaging the business environment by offering deep discounts.
Chengxin Youxuan, Duoduo Maicai, Meituan Youxuan and Nice Tuan were each ordered to pay 1.5 million yuan (US$230,769) in administrative penalties, and Shixiang Hui was levied a 500,000-yuan fine.
The five leading community group-buying sites have set their prices much lower than costs by offering huge subsidies for shoppers, which violates the Price Law of the People's Republic of China, the State Administration for Market Regulation (SAMR) announced in a statement on Wednesday.
The fines are the market watchdog's latest move to step up regulations of the country’s digital market, and reign in unfair competition in areas related to daily shopping.
The sites have been offering deep discounts beyond what is considered legitimate to dump fresh food, seasonal products and inventory in order to squeeze out competitors, according to the SAMR.
They also used fake discounts and price tags to trick consumers into buying products, which is considered price deception.
"Internet giants have leveraged their huge traffic and user base to grab market share from grocery vendors and neighborhood stores," a SAMR spokesperson said. "Many have raised prices after monopolizing local markets which hurts consumers. Short-term subsidies might serve shoppers well, but Internet giants are likely to monopolize profits after achieving dominant market shares."
The SAMR cautioned this practice could damage local employment.
The community group-buying market size in China is expected to double to 72 billion yuan this year over 2019 and reach 102 billion yuan in 2022, according to private consultancy iiMedia Research.
Internet giants have recruited community agents to collect orders from neighborhoods and make bulk purchases on their behalf in order to grab market share from less-developed entities.
The SAMR opened its investigation of community group-buying sites last December, and has vowed to keep a close eye on them to tackle unfair competition.
In a press release issued on Wednesday, the China Chain Store and Franchise Association said community group-buying sites should bring real benefits to shoppers and abide by basic commercial rules while paying special attention to food safety. It added that the innovative group-buying retail model has reduced supply chain costs and boosted rural economies.
An antitrust guideline was unveiled by the State Council in early February, a formalization of an earlier antitrust draft law that targets internet platforms to ensure fair market competition.
