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Community group buying lets residents purchase groceries in bulk via a community leader, but regulators say some businesses are disrupting market prices. Photo: EPA-EFE

Community group buying: Chinese regulators fine businesses tied to Big Tech for price dumping

  • The State Administration for Market Regulation accuses tech giants involved in community group buying of price dumping in a bid to dominate the market
  • The latest crackdown on Big Tech comes ahead of Beijing’s key political meeting known as the ‘two sessions’

China’s market regulator has fined some of the country’s largest tech players involved in a fast-growing e-commerce model for slashing prices to edge out competitors, marking Beijing’s latest move to rein in China’s Big Tech sector.

Alibaba Group Holding-backed start-up Nice Tuan and the community group buying units under e-commerce platform Pinduoduo, ride-hailing firm Didi Chuxing and online delivery company Meituan were each fined 1.5 million yuan (US$232,000) for breaching the country’s price law, while a start-up backed by Tencent Holdings, Shixianghui, was fined 500,000 yuan, the State Administration for Market Regulation (SAMR) said in a statement on Wednesday. Alibaba owns the South China Morning Post.

“During the second half of 2020, some community group buying businesses used their capital advantage to launch substantial price subsidies, disturbing market price order and arousing widespread concerns from society,” authorities said.

Representative from Pinduoduo and Meituan’s community group buying units confirmed that they have been notified about the punishment.

“The company attaches great importance to the issue and will rectify according to the requirements of relevant regulatory authorities,” a Pinduoduo spokesman said.

“We attach great importance to and sincerely accept the punishment. We will strengthen rectification,” a Meituan spokesman said.

A representative from Nice Tuan also said the company is working to address the issue.

“We have formed a special team immediately to conduct self-examination and comprehensive rectification on the issues involved,” the spokesman said. “We will strictly implement relevant laws and regulations, and while providing users with a high-quality service experience, we will do our best to protect the legitimate rights and interests of consumers.”

A post on the Weibo account of Didi Chuxing’s group buying unit read, in part, “We will strictly abide by relevant laws and regulations, and make every effort to protect the legitimate rights and interests of consumers.”

Shixianghui did not immediately respond to requests for comment.

A warehouse for community group buying platform Chengxin Youxuan, owned by Didi Chuxing, in Nanchang, Jiangxi province, on January 7, 2021. Photo: Orange Wang

Community group buying is an emerging business model that enables residents in a community to purchase groceries and other daily essentials in bulk through a leader appointed by e-commerce platforms. The large-volume purchases allow merchants to offer steep discounts, which have attracted deal-seeking consumers across China. Tech giants and start-ups alike have flocked to introduce their own services.

The new trend, however, has been accused of hurting the livelihoods of millions of people working in China’s traditional wholesale and retail networks.

In December, the Communist Party mouthpiece People’s Daily published an opinion piece questioning whether it was “morally sound” for China’s Big Tech to chase profits by “selling a few cabbages”. Soon after, antitrust regulators summoned Alibaba, Tencent, Meituan, Pinduoduo, Didi Chuxing and to warn them on the issue of “low price dumping and squeezing jobs” in community group buying.

On Wednesday, SAMR accused Didi Chuxing’s Chengxin Youxuan, Pinduoduo’s Duoduo Maicai, Meituan’s Youxuan, Nice Tuan and Shixianghui of using false or misleading price methods to trick consumers into buying from them.

In December, SAMR fined a subsidiary of e-commerce giant Alibaba Group Holding, a unit of social-media and gaming juggernaut Tencent Holdings, and an affiliate of express delivery company SF Holding 500,000 yuan each for a breach of China’s anti-monopoly law.