Online retailers' 'price war' cheats consumers: report

Three major Chinese retailers have cheated online shoppers in self-labeled "price wars," according to investigations by China's top economic planner.

"Some online retailers are suspected of fabricating original prices to fool consumers in their promotion activities," the Beijing News quoted the price supervision bureau of the National Development and Reform Commission (NDRC), China's top economic planning agency, as saying on Wednesday.

The official investigation came after Chinese online retailing giants 360buy Jingdong Mall, Suning Appliance and Gome Electrical Appliances started a price wrestle in August as the economic slowdown discouraged consumers from the spending sprees seen in recent years.

The NDRC has sent out three work teams to the companies to probe the promotions and investigations "are still under way," according to the NDRC.

The body's investigations found the online retailers have failed to fulfill their commitment over prices and some managers have lied on their gross profit ratio data.

They turned down online orders with excuses that the designated commodities have "sold out," when in fact the home appliance are still in their warehouses.

At one point during the promotion period, Liu Qiangdong, founder and CEO of 360buy.com, China's second-largest online retailer by sales, wrote in his personal Twitter-like microblog account at Weibo.com that he would keep the gross profit ratio of major appliances at zero in the coming three years, meaning he would not earn a cent of profit from their sales.

But the NDRC's random inspection of 15 appliances sold by those retailers showed they still enjoy a gross profit margin of between 4 percent and 22.43 percent by selling those products.

360buy, Suning and Gome had all pledged to sell major appliances cheaper than their rivals, but investigators found many items on promotion were franchised products under sole-agency agreements, making their promotion commitment meaningless.

The NDRC said it would not rush to reach a conclusion and hand out penalties in the short term before holding a hearing and other procedures.

"Honesty is the fundamental requirement in commercial promotion activities," said You Yunting, a partner of the Shanghai-based DeBund Law Offices. "Many merchants are doing business without integrity in China and the NDRC investigations should sound the alarm bell for those guys."

According to Chinese price law, merchants are subject to fines as high as five times the revenues they gain from false promotion activities, or may even have their business license revoked in severe scenarios.