Scan the QR code in the image to register On July 2, the State Administration for Market Regulation (SAMR) issued the "Regulations on Administrative Penalties for Price Violations (Revised Draft for Comment)" and opened it for public feedback. Responding to calls from all sectors, the draft states that "price violations in new business formats" such as "big data price discrimination" and "low-price dumping" will be subject to warnings and fines ranging from 1‰ to 5‰ of the previous year's total sales, with confiscation of illegal gains if any; in severe cases, the business may be ordered to suspend operations for rectification or have its business license revoked. Specifically, "price violations in new business formats" include:

  1. E-commerce platform operators using big data analysis, algorithms, or other technical means to set different prices for the same product or service under equivalent transaction conditions based on factors other than cost or legitimate marketing strategies, such as consumer preferences or transaction habits;
  2. E-commerce platform operators that do not have market dominance, in order to exclude competitors or monopolize the market, dumping products below cost through subsidies or other means, disrupting normal production and operation order, and harming national interests or the legitimate rights and interests of other operators;
  3. Other unfair pricing behaviors by e-commerce platform competitors as stipulated by administrative regulations or departmental rules. To implement the State Council Executive Meeting's decision on January 20 to "prevent arbitrary charges to enterprises from an institutional perspective," accelerate the revision of regulations on administrative penalties for price violations, promptly amend or abolish unreasonable administrative penalty items, and further stimulate market vitality, the SAMR drafted the "Draft for Comment" and opened it for public feedback. The revised draft adjusts the fine amounts for six types of price violations, adds new upper limits for penalties, introduces penalty provisions for violations by e-commerce platforms, industry associations and chambers of commerce, intermediary agencies, and state administrative organs, and clarifies that price gouging during emergencies will be punished severely. Eight key points of the revised draft:
  4. Low-price dumping " _ The revised draft stipulates that if an operator, in order to exclude competitors or monopolize the market, dumps products below cost, disrupting normal production and operation order, and harming national interests or the legitimate rights and interests of other operators, it shall be ordered to correct the behavior, confiscate illegal gains, and may be fined up to five times the illegal gains; _ If there are no illegal gains, a warning shall be given, and a fine of 1% to 10% of the sales during the period of the violation may be imposed; _ In severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. "
  5. Price discrimination " _ If an operator provides the same goods or services to other operators with equivalent transaction conditions at different prices, it shall be ordered to correct the behavior, confiscate illegal gains, and be fined up to five times the illegal gains; _ If there are no illegal gains, a warning shall be given, and a fine of 1% to 10% of the sales during the period of the violation may be imposed; _ In severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. "
  6. Price collusion " _ If operators collude to manipulate market prices, causing a significant rise in commodity prices, they shall be ordered to correct the behavior, confiscate illegal gains, and be fined up to five times the illegal gains; _ If there are no illegal gains, a warning shall be given, and a fine of 1% to 10% of the sales during the period of the violation may be imposed; _ In severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. "
  7. Price gouging " _ During periods of market supply shortages or abnormal price fluctuations, fabricating or spreading price increase information to disrupt market price order; _ Except for self-use in production, hoarding large quantities of goods without selling or selling only small amounts beyond normal storage quantities or periods, and continuing to hoard after being warned by the price supervision department; _ Pushing prices up too quickly or too high through forced bundling, charging high fees, or significantly increasing other fees, the operator shall be ordered to correct the behavior, confiscate illegal gains, and be fined up to five times the illegal gains; _ If there are no illegal gains, a warning shall be given, and a fine of 1% to 10% of the sales or the value of hoarded goods during the period of the violation may be imposed; _ In severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. "
  8. Price fraud " _ Using false or misleading pricing methods to induce consumers or other operators to transact constitutes price fraud, and the operator shall be ordered to correct the behavior, confiscate illegal gains, and be fined up to five times the illegal gains; _ If there are no illegal gains, a warning shall be given, and a fine of 1% to 10% of the sales during the period of the violation may be imposed; in severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. "
  9. Raising or lowering grades " _ Selling, purchasing, or providing services by raising or lowering grades to covertly increase or decrease prices shall be ordered to correct the behavior, confiscate illegal gains, and be fined up to five times the illegal gains; _ If there are no illegal gains, a warning shall be given, and a fine of 1% to 10% of the sales during the period of the violation may be imposed; in severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. "
  10. Price violations in new business formats " _ E-commerce platform operators using big data analysis, algorithms, or other technical means to set different prices for the same product or service under equivalent transaction conditions based on factors other than cost or legitimate marketing strategies, such as consumer preferences or transaction habits; _ E-commerce platform operators that do not have market dominance, in order to exclude competitors or monopolize the market, dumping products below cost through subsidies or other means, disrupting normal production and operation order, and harming national interests or the legitimate rights and interests of other operators. _ Other unfair pricing behaviors by e-commerce platform competitors as stipulated by administrative regulations or departmental rules. A warning shall be given, and a fine of 1‰ to 5‰ of the previous year's total sales may be imposed; if there are illegal gains, they shall be confiscated; in severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. "
  11. Clear pricing " _ Failing to indicate prices; failing to indicate prices clearly in accordance with prescribed content and methods; selling goods at prices above the marked price or charging fees not indicated; other behaviors violating clear pricing regulations. _ The operator shall be ordered to correct the behavior, confiscate illegal gains, and may be fined up to 5,000 yuan; if the consumer's or other operator's right to know is not actually harmed and the operator corrects the behavior promptly, a warning or criticism notice may be given, or no penalty may be imposed. " Low-price dumping According to SAMR data, the "Regulations on Administrative Penalties for Price Violations" were revised three times: on February 21, 2006, January 13, 2008, and December 4, 2010. The release of this draft marks the fourth revision. Regarding low-price dumping, the draft clarifies that if an operator violates Article 14(2) of the Price Law by dumping products below cost to exclude competitors or monopolize the market, disrupting normal production and operation order, and harming national interests or the legitimate rights and interests of other operators, it shall be ordered to correct the behavior, confiscate illegal gains, and may be fined up to five times the illegal gains; If there are no illegal gains, a warning shall be given, and a fine of 1% to 10% of the sales during the period of the violation may be imposed; in severe cases, the operator shall be ordered to suspend operations for rectification or have its business license revoked. However, the document notes that selling fresh goods, seasonal goods, or overstocked goods at reduced prices in accordance with the law does not constitute low-price dumping under Article 14(2) of the Price Law. It is worth noting that this draft adds specific provisions for e-commerce platforms. Article 13, targeting "price violations in new business formats," states that e-commerce platform operators that do not have market dominance, in order to exclude competitors or monopolize the market, dumping products below cost through subsidies or other means, disrupting normal production and operation order, and harming national interests or the legitimate rights and interests of other operators, will be given warnings and fines. When it comes to "low-price dumping," community group buying, which had quieted down for a while, immediately becomes the focus again. It is clear that community group buying has left an indelible impression on both online and offline businesses through price wars. On the topic of low-price dumping, community group buying has made headlines more than once. The first time was in December last year when People's Daily made a subtle comment: "Don't just focus on the traffic of a few vegetables and fruits; the vast sea of technological innovation is more exciting." However, the voice of People's Daily was quickly drowned out in public discussion, with interpretations flooding in from all sides, and the platforms, blinded by the battle, had no time to pay attention to these mere discussions. It wasn't until the "Nine No's" regulations were clearly introduced that the entire track faced unprecedented pressure, causing all players in the race to stumble and slow down, pondering the government's attitude toward online business regulation. But everyone knows that "the slapping hand" is only truly frightening when it is suspended in the air. However, this suspended hand seemed different to the major giants, and the "Nine No's" that couldn't be enforced were destined to be a paper tiger. The government's attitude suddenly became ambiguous again, while the group buying war on the other side had already reached a fever pitch, and the temptation of expanding territory ultimately outweighed the threat of the Nine No's. Naturally, this slap came down crisp and loud. The SAMR imposed maximum fines on five community group buying companies: Chengxin, Duoduo, Meituan, Shihuituan, and Shixianghui. Fines of hundreds of thousands were nothing compared to the billions being burned. However, the enforcement of the "Nine No's" brought some clarity to the players racing recklessly in the track, and this incident also served as an emergency brake in the community group buying war. But the good times didn't last long. The internet giants perfectly demonstrated "once bitten, twice shy" by forgetting the pain. It wasn't until a player was penalized for the second time and ordered to suspend operations for rectification that the major platforms finally stopped their frantic pace and realized the track might be changing. Then Meituan was named and ordered to remove its 1-cent flash sale products, and other platforms were summoned for talks and required to further tighten subsidies. Even behaviors that skirted the rules were explicitly prohibited. At this point, the government's stance on online price regulation had become very clear. Now, the penalty standards for low-price dumping in new business formats such as e-commerce have been explicitly updated. Big data price discrimination In the draft, "price violations in new business formats" emphasize that e-commerce platform operators that do not have market dominance, in order to exclude competitors or monopolize the market, dumping products below cost through subsidies or other means, disrupting normal production and operation order, and harming national interests or the legitimate rights and interests of other operators, will be given warnings and fines. This brings "big data price discrimination" back into the public eye. The hottest discussion on "big data price discrimination" was in 2018, when it was not only selected as one of the top ten buzzwords for social life in 2018 but also ranked among the top ten consumer infringement incidents of 2018. The year 2018 is also known as the first year of discussion on big data price discrimination in China. Subsequently, according to a survey on big data price discrimination conducted by the Beijing Consumers Association in March 2019, nearly 60% of respondents said they had experienced being "ripped off," and over 80% believed that big data price discrimination was common. From an economic perspective, "big data price discrimination" is a typical form of price discrimination, that is, using user data to implement price discrimination against regular users. As consumers make more purchases, merchants become clearer about their consumption attitudes, preferences, and patterns, and set prices that are more "suitable" for consumers. According to the degree of price difference, price discrimination can be divided into three levels. Third-degree price discrimination involves setting different prices for different types of consumers, such as discounts for students and the elderly at scenic spots. This type is the most common in daily life. Even among the same type of consumers, there are differences in purchasing power and willingness to pay. Due to technical or cost constraints, merchants cannot determine the price each consumer is willing to pay, so they adopt a versioning strategy, that is, offering a range of related products at different prices and letting users choose the version that suits them. For example, train and airline tickets are divided into seat classes, allowing consumers to choose the appropriate version. This is second-degree price discrimination. The last is first-degree price discrimination, also known as perfect price discrimination, where merchants set prices for each consumer to ensure that each user pays the maximum price they are willing to pay, thereby capturing all consumer surplus. It can be seen that perfect price discrimination has the highest operational cost, which makes it difficult to apply widely in the traditional economy. However, with the widespread use of smartphones and the development of numerous apps, internet platforms have found it increasingly convenient and low-cost to collect data, opening up vast space for merchants to implement "big data price discrimination." Therefore, mainstream e-commerce, online travel, food delivery, and ride-hailing platforms have all been exposed for price discrimination incidents. In fact, coincidentally, shortly before the low-price dumping controversy in community group buying, there was the antitrust controversy. On the day before "Double 11" last year, the SAMR issued the "Antitrust Guidelines for the Platform Economy (Draft for Comment)." The draft consisted of 24 articles, with widely concerned issues such as platforms' "choose one from two" and big data price discrimination becoming key regulatory areas. For platforms, the draft specifically emphasized that "differences in the privacy information, transaction history, individual preferences, consumption habits, etc., obtained by the platform in transactions do not affect the determination that the transaction counterparties have the same conditions." In other words, platforms cannot use the above factors as reasons to treat users differently. Final thoughts: In addition, the draft also lists violations that are subject to "heavier penalties." The draft clarifies that if an operator has committed price violations that are serious or have significant social impact, repeatedly violates after being penalized, forges, alters, transfers, or destroys evidence, transfers funds or goods related to the price violation, refuses to refund overcharged amounts to consumers or other operators as required by Article 21 of these regulations, or other price violations that should be punished more severely, the operator shall be given a heavier penalty. The draft also emphasizes the clause on "heavier penalties after emergencies." It states that after natural disasters, accidents, public health events, or social security incidents, if an operator violates these regulations by hoarding, price gouging, or other price violations, or violates emergency response measures, the price supervision department shall impose penalties quickly and severely in accordance with the law. *Download link for the "Regulations on Administrative Penalties for Price Violations (Revised Draft for Comment)": http://www.samr.gov.cn/hd/zjdc/202107/P020210702552009677490.pdf Review: Asher -END-