Costly lesson for private education firms

World | AGENCIES 2 Jun 2021

Fifteen mainland tutoring firms have been hammered with many millions of yuan in fines over alleged fraud as Beijing's chastening of the tech sector seeps into private education.

The groups, including major brands like Zuoyebang, which has Alibaba as an investor, and Tencent-backed Yuanfudao were hit with fines amounting to 36.5 million yuan (HK$44.3 million).

The news came a day after China announced it would allow couples to have a third child amid rising concern about a declining fertility rate that many blame on the high cost of raising families. Most children in China undergo private tuition in addition to public schooling.

The penalized firms included several with Hong Kong or US listings, including TAL, OneSmart, Beststudy and Scholar.

After issuing fines and warnings to companies spanning e-commerce, gaming, video streaming and food deliveries, Beijing has in recent days turned its attention towards tutoring start-ups, many of them online.

The penalties follow a warning by President Xi Jinping in March of problems in the education sector.

A number of potential initial public offerings for companies running learning apps have since ground to a halt, with Bloomberg naming Zuoyebang and Yuanfudao among those holding off preparations.

The education ministry also plans a division overseeing private education.

The market watchdog yesterday said an investigation into the 15 institutions - which include online apps - alleged they engaged in "false advertising," with many also found to have conducted "price fraud."

For example, Bond Education is accused of inflating a package of trial classes to 420 yuan and offering it at an apparent discount of 12 yuan.

Among other wrongdoings were "fabricating teacher qualifications, exaggerating the effects of training ... and fabricating user reviews," the State Administration for Market Regulation said.

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