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A delivery worker for online sales orders waits in traffic in Beijing on November 9, 2020. Photo: AFP

China punishes online merchants for fake reviews, inflated sales in latest market crackdown

  • In the first half, the SAMR and its branches investigated more than 3,000 cases of fake reviews and inflated sales, imposing fines totalling US$31.8 million
  • In recent years, a growing number of Chinese merchants have turned to large international platforms to reach consumers beyond their home market

China’s market watchdog is showing the country’s online businesses just how serious it is about reining in the shady conduct that “destroys market order” with its latest crackdown on market behaviour.

In the first six months of the year, the State Administration for Market Regulation (SAMR), along with its local branches in the country’s cities and provinces, investigated more than 3,000 cases of fake reviews and inflated sales numbers, and imposed fines totalling 206 million yuan (US$31.8 million), according to a statement published on the regulator’s website on Thursday.

“These black and grey area practices have developed to the point where it affects the survival of businesses and damages the legitimate rights and interests of consumers,” the SAMR said. “Review manipulation and boosting fake orders has become a ‘tumour’ in the market and [those responsible] must be punished.”

The latest crackdown comes amid efforts by authorities to use almost every regulatory and legislative tool at their disposal to bring the country’s tech sector to heel after more than a decade of virtually unchecked growth.

Alibaba Group Holding, which owns the South China Morning Post, paid a record fine of US$2.8 billion in April for monopolistic behaviour, including a practice known as “picking one from two”, where online merchants are forced to choose one platform as their distribution channel.

China’s antitrust watchdog proves its might with Alibaba fine

On-demand service giant Meituan is also under antitrust investigation while China’s dominant ride-hailing platform Didi Chuxing is the subject of an intense and very public cybersecurity review after its listing in New York.

“The authorities have launched a two-pronged crackdown on China’s e-commerce industry,” said Ding Mengdan, a lawyer at Beijing Yingke law firm’s Hangzhou office. “For platforms, they focus more on monopolistic practices while for smaller players like merchants, they are increasing scrutiny of unfair competition behaviour.”

These practices, which have become common, are not only facing punishment in China, but US e-commerce giant is also cracking down on them.
Shelves of inventory inside a Cainiao warehouse, the logistics subsidiary of Alibaba Group Holding. Photo: Bloomberg

In recent years, a growing number of Chinese merchants have turned to large international e-commerce platforms, including eBay and Amazon, to reach consumers beyond their home market. Some are continuing the shady practices common in China’s e-commerce industry – and are now suffering the consequences.

Amazon closed 340 online stores operated by Shenzhen Youkeshu Technology Co, one of the platform’s largest Chinese retailers in the first half of the year, for allegedly violating Amazon’s rules, according to a filing earlier this month by the merchant’s Shenzhen-listed parent Tiza Information Industry Corp. The statement did not elaborate on what rules were broken.
In June, Amazon banned three consumer brands under Shenzhen-based electronics company Sunvalley Group – RAVPower power banks, Taotronics earphones and VAVA cameras – for offering gift cards to customers willing to write positive reviews about their purchases.
This article appeared in the South China Morning Post print edition as: Watchdog targets shady conduct by online sellers