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Beijing slaps edtech unicorns Zuoyebang, Yuanfudao with steep fine over false advertising

  • The State Administration for Market Regulation imposed a maximum penalty of 2.5 million yuan each on Big Tech-funded Zuoyebang and Yuanfudao
  • The two companies are the front runners in China’s pre-college, off-campus education market

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China’s pre-college, off-campus education market is forecast to reach US$115 billion this year. Photo: Shutterstock
Coco Feng
Beijing’s market regulator has slapped education technology giants Zuoyebang and Yuanfudao the maximum penalty of 2.5 million yuan (US$388,591) each for false advertising and misleading marketing campaigns, as authorities tighten supervision of off-campus learning institutions.
The State Administration for Market Regulation (SAMR) said in a notice posted online on Monday that both Zuoyebang, which is backed by Baidu and Alibaba Group Holding, and Tencent Holdings-funded Yuanfudao falsified teachers’ work experience and advertised deceptive discounts to drive up sales, violating pricing and unfair competition laws in China.

The notice also said that Zuoyebang falsely claimed that it was a partner of the United Nations on its website and fabricated user comments. Investor Alibaba is the parent company of the South China Morning Post.

A primary school pupil attends an online class at home in Shanghai. About 90 per cent of the estimated 1 million off-campus education providers in China are small enterprises that train fewer than 1,000 students a year, according to a report published last year by consulting firm Oliver Wyman. Photo: Reuters
A primary school pupil attends an online class at home in Shanghai. About 90 per cent of the estimated 1 million off-campus education providers in China are small enterprises that train fewer than 1,000 students a year, according to a report published last year by consulting firm Oliver Wyman. Photo: Reuters
In response, Zuoyebang said on its official page on microblogging site Weibo that it sincerely accepts the regulator’s punishment. The firm said it will “take active and comprehensive rectification of the improper publicity content and pricing signs, strictly comply with relevant laws and regulations, optimise business processes and serve the users with heart”.

Yuanfudao also said it accepts the fine imposed by the regulator, according to its post on Weibo. The company said it “has started self-review and examination of products and channels” as well as corrected its advertising material. The goal is to raise “study efficiency” through “scientific and technological innovation”, while strengthening its business processes and norms, according to Yuanfudao’s post.

The SAMR’s latest action reflects how China’s US$110 billion K-12 off-campus education market, which has struggled during the coronavirus pandemic, is bracing for increased regulation.

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