China’s State Administration for Market Regulation (SAMR) has fined five community group buying platforms on Wednesday, March 3, due to their unfair price competition practices, a move showing the country’s strengthening supervision on emerging online businesses.
The top market regulator has issued the “maximum fine” of 6.5 million yuan (US$1.01 million) in total to the five companies, including Chengxin Youxuan, Duo Duo Maicai under Pinduoduo, Meituan Youxuan under Meituan, Nicetuan under Beijing Shihuituan Tech Co, and Wuhan-based Shixianghui.
According to the explanation by the SAMR on Wednesday, these companies used unfair means to squeeze the offline community market. By utilizing the online platforms’ advantages of a large amount of capital and big flow of data, these platforms grasp the market by giving consumers prices lower than costs, resulting in adverse impact to local merchants and convenience stores in communities, according to the regulator.
By competing for market share with unreasonably low prices, giving large amounts of and frequent subsidy vouchers to consumers, these platforms can increase their business volume to explode, creating large pressure for farmers’ markets, offline trade markets, and other small merchants.
In addition, there is a tendency for big online platforms to “spend huge amounts of money in order to acquire market share, monopolize, then raise the prices.” Such unfair competition may hurt the legal rights and interests of consumers, according to the regulator.
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