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Chinese edtech firms fined for falsely priced advertisements

Written by Song Jingli Published on     2 mins read

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The malpractices were a result of online education firms trying to outperform rivals in a competitive sector.

The Beijing branch of the State Administration for Market Regulation has fined four online education companies RMB 500,000 (USD 77,000) each for their deceptive pricing practices as China tightens its rules for the booming sector, according to a post on the regulator’s website on Sunday.

GSX Techedu (NYSE: GSX) was punished for luring parents to buy a package of courses for RMB 3,880 (USD 600), claiming that the original cost was RMB 11,998 (USD 1,850), although the company never offered or intended to offer them at this price.

Xueersi, which is owned by TAL Education (NYSE: TAL), promoted a product on Tmall for only RMB 20 (USD 3), indicating that the actual price was RMB 799 (USD 123). Koolearn Technology (HKSE: 1797) and Gaosi Education used similar deceptive practices.

“I am fed up with their marketing,” a parent who bought Xueersi courses for her son told KrASIA. The mother explained that soon after her son started the spring classes, Xueersi began coaxing her to buy summer and autumn courses at a discount, causing her stress and anxiety.

Under pressure from shareholders, the companies in this competitive sector seem to have their eyes more on market share than their educational products, causing anxiety among parents who worry that their kids might be left behind, unable to receive high-quality education.

The Beijing branch of the Ministry of Education warned Xueersi, GSX subsidiary Gaotu, Youdao (NYSE: DAO), and Yuanfudao to end their aggressive tactics, including the promotions and sales for autumn courses so far in advance, excessive discounting, and the scheduling of classes after 9:00 p.m. The firms have been criticized for their bold expansion plans that may drain coffers that were filled with tuition fees before classes begin.

GSX Techedu announced on Monday that it will change its ticker symbol on the New York Stock Exchange from GSX to GOTU on May 6.

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