China proposes rules to punish illegal e-commerce pricing

Brahm Buck

A woman checks her phone as passengers arrive at the Beijing Railway Station in central Beijing, China February 1, 2018. REUTERS/Damir Sagolj/File Photo BEIJING, July 2 (Reuters) – China’s market regulator issued draft rules on Friday to punish illegal pricing activities, including heavy subsidies and the practice by online platforms […]

A woman checks her phone as passengers arrive at the Beijing Railway Station in central Beijing, China February 1, 2018. REUTERS/Damir Sagolj/File Photo

BEIJING, July 2 (Reuters) – China’s market regulator issued draft rules on Friday to punish illegal pricing activities, including heavy subsidies and the practice by online platforms of charging different prices based on customers’ purchasing behaviour.

The rules are the latest in an effort by the State Administration for Market Regulation (SAMR) to rein in China’s free-wheeling platform economy, which has seen it levy fines, launch investigations and issue warnings to booming e-commerce giants.

“The pricing practices have been widespread among online platforms and it is a hidden problem to ordinary consumers because it’s not very easy to notice,” said Lu Zhenwang, chief executive officer of Shanghai-based Wanqing Consultancy.

Consumers over the years have complained on social media that e-commerce platforms don’t charge the same price for the same offerings.

Among the practices banned in the rules proposed on Friday are subsidies that cut the price of a product to below cost.

Violation of the rules could incur a fine of 0.1% to 0.5% of a business’ annual sales or even suspension of operations, SAMR said.

In an April meeting with the market regulator in the southern metropolis of Guangzhou, platform companies including JD.com , Meituan (3690.HK), Alibaba’s (9988.HK) food delivery arm Ele.me, Trip.com (9961.HK) and Didi Chuxing (DIDI.N) pledged not to take advantage of big data to charge loyal customers more.

In March, state news agency Xinhua reported that Alibaba’s online travel agency Fliggy offered different ticket prices for the same flight, with more loyal users getting a higher price. In the same article, Xinhua said Meituan charged different prices for the same pet care product.

Alibaba and Meituan did not immediately respond to requests for comment from Reuters on Friday.

In October, the Ministry of Culture and Tourism imposed a rule banning the practice of differentiated pricing by online travel services.

In April, SAMR fined Alibaba a record 18 billion yuan ($2.78 billion) for abuse of its dominant market position and announced an antitrust investigation into Meituan.

($1 = 6.4808 Chinese yuan renminbi)

Reporting by Sophie Yu, Yingzhi Yang, Tony Munroe in Beijing; Editing by Andrew Heavens

Our Standards: The Thomson Reuters Trust Principles.

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