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NDRC launches probe into online price war

Updated: 2012-09-06 09:22
By Gao Yuan ( China Daily)

The National Development and Reform Commission has launched an investigation into an escalating price war between China's major online retailers.

Analysts said that although the announcement was likely to cool the ongoing spat, it would do little to stop what has become a cutthroat battle between the market's top players.

Officials at the commission said the investigation will involve three online retailers: Jingdong Mall, Suning Appliance Co and Gome Electrical Appliances Holding Ltd.

As part of the probe, it has ordered the companies to modify their behavior, particularly the practice of increasing prices immediately prior to launching high-profile price-cutting campaigns.

Jingdong Mall, blamed as the main instigator of the war, said it will "actively cooperate" with the investigation.

Wu Sheng, its senior vice-president, said: "We will wait until the results of the investigation, and then decide our next move."

Sun Weimin, vice-president of Suning, admitted on, that some of its price moves had not followed the company's high standards, adding it is conducting its own internal probe of procedures. Gome did not comment on the government investigation.

The three companies attracted considerable public criticism after customers found that they had hiked product prices, a day before official price cuts were announced.

Jingdong CEO Liu Qiangdong had earlier dismissed criticisms, saying his website had never deceived consumers by lifting prices before dragging them down.

"It was a transparent price war among online retailers, and we were offering the lowest prices compared to other players," Liu said on Aug 29 in a video interview with Pan Shiyi, a renowned real estate developer and chairman of SOHO China Ltd.

Analysts said customers were unlikely to be fooled by such methods, and had become familiar with the tactic. "It's common for e-commerce websites to increase prices before large promotional campaigns. All the big players in the industry have done it in the past," added Chen Shousong, an analyst at information technology research firm Analysys International.

Crystal Zhang, finance director of Shanghai-based consulting company Robert Walters China, added: "Consumers are shrewd and well-educated enough to compare prices between websites, and if offers end up being too good to be true, then they can always take retailers to court."

However, experts said regulators might find it difficult to punish such behavior because it is also reasonable for large e-commerce sellers to regularly adjust prices of products.

"The government should declare the rules first, so that it will be easier to punish those who do not obey them," said Chen, adding he believed the price war was likely to continue.

The turnover of the nation's online retail sector hit 98.8 billion yuan ($15.6 billion) in the second quarter, a jump of 20.7 percent compared to the previous quarter, according to the latest data from Analysys International.

The NDRC is not the only government organization paying close attention to pricing in the industry. On Aug 17, the Ministry of Commerce also vowed to introduce more specifications to better guide the nation's e-commerce market.