GSX, online education firm at centre of Bill Hwang storm, fined by Beijing with three other companies
- Beijing fined TAL, Gaosi, Koolearn and GSX for false advertising amid an online education crackdown
- Online learning has benefited from a pandemic-fuelled boom in China, but recent regulatory scrutiny has sent stocks tumbling
The companies include TAL Education Group, Hong Kong-listed Koolearn Technology Holding, Beijing-based Gaosi Education Group, and New York Stock Exchange-listed GSX Techedu, which has seen its share price fall 70 per cent since March 17 after a series of margin calls involving Archegos Capital Management. They were fined for misleading consumers with false advertising, the Beijing Municipal Bureau of Market Supervision said on Sunday.
The four companies used “false or misleading pricing methods to trick consumers into trading with them”, according to the regulator, and were fined 500,000 yuan (US$77,000) each for breaching the country’s price law.
“Recently, the bureau organised special inspections for off-campus education after we received many complaints in this sector,” the regulator said in a statement. “We will continue to strengthen the enforcement of the industry in the next step and to safeguard the interests of the people.”
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A TAL representative said that it would “provide good-quality tutoring content and services for users with stricter standards.”
Koolearn, Gaosi and GSX did not immediately respond to requests for comment. But a Koolearn representative told Chinese media that the company accepted the fine and has “corrected its wrongdoings”. A representative from Gaosi Education told local media that it would cooperate with the regulation and enhance the compliance system of ad review and distribution.
During an online event last week, GSX founder Chen Xiangdong said online education is an important way to push education equality forward because it is able to reach more students.
At the end of March, Lu Yugang, the head of the department of primary education at the country’s Ministry of Education, addressed the importance of the governance of off-campus training institutions and said the ministry would adopt more effective measures to strengthen regulation of the industry.
Amid the heightened, pandemic-fuelled demand for online education, users of such services had surpassed 300 million in China by the end of 2020, and the size of the market was more than 400 billion yuan, according to industry research firm Qianzhan.
However, the tighter regulations have sent education stocks tumbling. GSX and Koolearn Technology have both lost more than 40 per cent of their value since the beginning of the year, and TAL has fallen nearly 12 per cent.