ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
China tech

China tech crackdown casts pall over June '618' shopping spree

Pinduoduo and Meituan stocks fall after disciplinary action by regulators

A Meituan delivery driver, right, in Shanghai in April. Meituan was cited last week for pressuring partner companies.   © AP

SHANGHAI -- China's antitrust watchdog has ramped up its crackdown on internet companies, raising concerns about Beijing's tightening grip on the tech sector ahead of a major online shopping bonanza held every June.

E-tailer Pinduoduo and food-delivery-app operator Meituan were summoned by the Shanghai Consumer Council last week for what it sees as practices "severely damaging the rights of consumers."

The regulators accused the two companies of pressuring partner companies and listing counterfeit products, among other misconduct. The two were ordered to perform internal probes and rectify operations.

"We plan to issue guidance to other platform operators outside of the two enterprises," the Shanghai Consumer Council said in a May 10 notice.

The June 18 shopping festival, which is simply referred to as "618," was originally established by JD.com to mark the day of its founding. The event has grown to become the biggest online sales day after Singles Day. 11.

Eager to outperform competitors on this crucial sales day, net retailers often impose strict quotas on sales managers, which in turn lead to abusive practices toward vendors. The recent regulatory crackdown indicates e-tailers will be under close scrutiny this year. 

Following the reports of the crackdown, Pinduoduo's share price tumbled more than 9% on the Nasdaq while Meituan suffered a loss of more than 5% in the Hong Kong market. Currently, the two companies are down more than 40% from their most recent peak.

The downtrend has spilled over to other companies. JD.com, China's second-largest e-commerce group, has retreated nearly 40% from its recent peak, as has video streaming giant Bilibili.

When the e-commerce market was beginning to take off in China, internet companies competed furiously to widen their shares. In the interest of encouraging business growth, government officials  "essentially turned a blind eye" to practices that could be in violation of antitrust law, according to an industry source.

Now the tide has turned. Those officials are summoning tech companies left and right for discipline, regardless of whether they are involved in e-commerce, finance, gaming, ride hailing or video streaming. 

Beijing's clampdowns on Alibaba Group Holding and Tencent Holdings grabbed headlines, but the trend is wide-spread throughout the industry. 

"Major [tech] enterprise have engaged in potentially illegal conduct to a greater or lesser extent," said the industry source. "If the authorities get serious, there are more than enough opportunities to crack down on them."

Two years ago during the 6/18 festival, appliance sellers called out Alibaba on its pressure tactics, accusing the e-commerce giant of pushing merchants to sell exclusively on its platform or lose access.

Regulators look ready to flex their muscles a lot more than this year. How net companies will behave and how regulators will respond will likely tell a lot about the future of the sector, perhaps more than the widely watched turnover.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more