(Yicai Global) May 28 -- Chinese regulators have penalized the owner of Nice Tuan, a group buying platform which raised USD750 million at the end of March from investors that included Alibaba Group Holding, for selling products below cost to squeeze out competitors.

The State Administration for Market Regulation fined Beijing-based Shihui Technology CNY1.5 million (USD235,350), according to a document the watchdog posted on its website yesterday. Shihui Technology also used false or misleading pricing methods to trick consumers or other operators, the SAMR said.

The watchdog also called in businesses in the sector to issue a warning. The SAMR said that it would maintain a high level of awareness about competition in the community group buying market and resolutely maintain market price order.

The SAMR also ordered Shihui Technology to stop doing business in Jiangsu province for three days in order to carry out “rectification.”

It is not the first time that the operator of a community group buying platform has been punished. The SAMR has handed out administrative penalties to many such platforms for improper pricing practices, while telling them to get their houses in order.

Big internet platforms have poured into the group buying market since the second half of last year, dumping goods at below cost by taking advantage of capital, traffic, and data so as to expand rapidly, the SAMR has said.

Such practices have destroyed the normal market pricing order, harmed fair competition, impacted the offline community economy, and hurt the interests of law-abiding small- and mid-sized firms and individual businesses. Consumer interests will also be damaged in the long run, the regulator has said.

After early-stage development, cash subsidies play a less and less important role in group buying, said Ji Diying, a tech analyst with China Renaissance, adding that it will further test the supply chain and warehouse distribution capabilities of individual businesses in future.

Editor: Peter Thomas