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Chinese internet giants get government warning in group-buying spree

Written by Song Jingli Published on 

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Alibaba, Tencent, JD.com, Meituan, Pinduoduo, and Didi have been summoned by the regulators.

China’s State Administration for Market Regulation and the Ministry of Commerce on Tuesday held a meeting with representatives of Alibaba, Tencent, JD.com, Meituan, Pinduoduo, and Didi, to address the importance of maintaining good order in the neighborhood group-buying sector, according to Xinhua News Agency.

The authorities set nine directives for the players in this market, preventing them from predatory pricing, algorithm manipulation, and improper personal data collection in their neighborhood group-buying business. None of these six companies have replied to KrASIA‘s requests for comment.

The meeting comes at a time as the big-name internet companies are flooding the sector, competing for consumers in China’s smaller cities. Alibaba, which is a key investor in group-buying startup Nice Tuan, went live with its own platform Hema Youxuan in Wuhan, Hubei province, in October.

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Tencent and JD.com are backers of the startup Xingsheng Youxuan, with JD pouring USD 700 million into it recently. Meituan has planned to expand its Meituan Youxuan business to 1,000 cities and counties by the end of this year.

Pinduoduo started its Duoduo Maicai in August in Wuhan and Nanchang and raised USD 6.1 billion in bond sales in November to boost its agricultural business, including the new grocery group-buying service. Didi, the largest ride-hailing platform in China has witnessed its daily orders exceed 10 million in November, up from 2.8 million in September, according to Bloomberg.

“The directive indicates that the government thinks these companies have done something wrong and expects them to correct,” Zhuang Shuai, a retail veteran and founder of Bailian Consultancy, told KrASIA.

Li Chengdong, founder of the Dolphin think tank, considers the directives as a way to protect physical supermarkets, especially small individual vendors who can’t afford to compete with internet giants in a price war. “These directives signal that the government does not ban these companies from doing neighborhood group-buying business, but would like them to run them in a normal way,” he told KrASIA.

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