China is expanding its far-reaching tech campaign into online education, issuing the maximum penalties to two of the country’s fastest-growing tutoring apps for violating competition and pricing laws.
The State Administration for Market Regulation imposed fines of 2.5 million yuan ($389,000) each on Yuanfudao, backed by Tencent Holdings Ltd., and Zuoyebang, which has received funding from Alibaba Group Holding Ltd., according to a statement Monday. The firms were penalized for making misleading claims about their businesses from falsifying the qualifications of teaching staff to faking user reviews, the antitrust watchdog said.
Yuanfudao and Zuoyebang said they accepted the penalties and will rectify the relevant problems.
The explosive growth of private education providers during the pandemic has drawn increased scrutiny over the sector. Last month, Beijing’s market regulator fined four private education providers including GSX Techedu Inc. as well as a TAL Education Group unit for pricing violations. China’s education ministry also issued a statement reiterating limits on after-school study programs in order to ensure that students get enough sleep.
“The fines are closely related to the recent crackdown on after-school tutoring institutions, focusing on their illegal activities and potential for stirring anxiety in society,” said Ye Le, Shanghai-based analyst with China Securities. “The regulatory pressure will keep building for the rest of the year.”
Going forward, the SAMR will intensify its regulatory supervision of after-school educational groups and crack down on illegal activities, according to the statement. The two apps are the latest in a slew of Chinese firms from giants like Alibaba and Tencent to smaller outfits like online grocery provider Nice Tuan that have fallen afoul of the antitrust watchdog in recent months, as Beijing reins in its once-freewheeling internet sector.
Both startups are said to be eyeing initial public offerings. Earlier this year, Yuanfudao was seeking at least $1 billion in fresh funding ahead of a possible initial public offering in 2022, people with knowledge of the matter have said. Bloomberg News reported in March Zuoyebang, whose backers also include SoftBank Vision Fund, Goldman Sachs Group Inc. and Sequoia Capital China, was set to recruit former Joyy Inc. chief financial officer Bing Jin to aid in its preparations for a potential listing.