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US$9m fine for Luckin and linked companies
Print Edition
EMBATTLED Chinese chain Luckin Coffee is among a raft of 45 companies hit with a combined fine of nearly US$9 million over a scandal involving false sales figures, China’s market regulator said yesterday.
Luckin had boosted transactions last year through fake coupons by 2.25 billion yuan (US$330 million) and inflated its revenue by some 2.12 billion yuan, according to an earlier probe by the finance ministry.
The scandal led to the company being delisted from New York’s Nasdaq and the removal of top executives.
China’s State Administration for Market Regulation said yesterday investigations found that during the April-December period of 2019, Luckin Coffee had inflated key marketing indicators such as sales revenue, costs and profit margins, with the help of a number of third-party companies, in order to gain competitive advantages and trading opportunities.
It imposed a combined fine of 61 million yuan.
The coffee chain was launched in 2017 and aimed to dethrone Starbucks in China via an aggressive growth strategy, enticing customers with an app-based purchasing model that prioritized takeaway and delivery options, as well as generous mobile coupons.
But its shares went into freefall after the company revealed in April that a top executive had cooked the books.
From August last year to April, it also used false marketing data to “deceive and mislead the public,” going against Chinese unfair competition laws, the market regulator said yesterday.
More than 40 third-party companies, including Beijing Auto World Consulting Service and Beijing Shenzhou Youtong Technology Development, were found to have given “substantive assistance” for the false advertising.
The administration launched the investigation in April, and the fine was issued on September 18.
Luckin said yesterday that it “respects and will resolutely implement” the decision after the investigation.
It also said it had carried out “comprehensive rectification” on the relevant issues, adding that it will regulate business activities in line with laws and regulations to ensure stable operations.
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