Carrefour finds the going tough in China

Authorities fine French retailer for using misleading price tags, fake discounts to attract customers

French retailer Carrefour may find the going tough in China, its second-biggest market outside France, as it continues to reel from a barrage of charges that has seriously impinged its credibility with both consumers and suppliers.

It was recently fined for using misleading price tags and fake discounts to attract customers. The fines were up to 500,000 yuan (55,700 euros) and were accompanied by a blitz of bad publicity both in the local press and on the Internet.

The retailer has already started taking steps to spruce its image with customers and suppliers and made public apologies for its actions.

Chen Bo, a spokesman for Carrefour China, says that the company has come up with short and long-term measures to address the issue. "We have set up a special control group to conduct internal price inspections," Chen says.

Carrefour entered China in 1995 with a shop in Shanghai. Since then, the retailer has grown its China business considerably and has more than 150 stores in various cities.

The unbridled expansion of Carrefour has also irked other retailers who believe the company has a stranglehold on the supermarket retailing business, particularly in big cities like Shanghai, Beijing and Guangzhou. Though Carrefour does not disclose region-wise sales, it notes that China is still its fastest growing market.

Carrefour's tough posture vis--vis suppliers also contributed to some of its present problems. Most of the suppliers are irked with the company's stand and sought official intervention to smooth things over.

The French company, however, defends its perch and says its actions are aimed to lower prices for consumers. The tactic seems to have backfired as authorities have hauled up the company for unfriendly consumer practices.

On Jan 26, the National Development and Reform Commission said in a statement that 11 Carrefour stores and some other retailers were overcharging customers and urged local authorities to take action.

The practices included referring to normal prices as sales prices, charging more than what was listed on price tags, and misleading customers with price figures typed in different point sizes.

Following the statement, 11 Carrefour stores in six cities, including three in Shanghai, three in Central China's Hunan province and two in Southwest China's Yunnan province, were fined 500,000 yuan each, a fine which was the highest in China for such a wrongdoing.

The three stores in Shanghai were ordered to correct their illegal pricing and refund customers who were overcharged.

The two stores in Kunming, capital of Yunnan, were found to have cheated on prices for tea, rice, chocolate and other goods, with rates nearly twice the label price.

On Feb 1, a Carrefour store in Beijing was handed down a 500,000-yuan fine for fraudulent pricing.

A snack box found in Carrefour's Fangzhuang store misled consumers into believing the price was 16.90 yuan instead of 169.0 yuan by putting the first two numbers "1" and "6" in a larger point size compared with "9" and "0".

The Beijing Fengtai District Development and Reform Commission gave this Carrefour store a 500,000 yuan fine for violating the Price Law of The People's Republic of China. The law clearly specifies that any false or misleading price measures that deceive consumers are forbidden.

Two Carrefour stores in Guangzhou were found to have overcharged customers during the Spring Festival holiday, which began on Feb 3.

Lin Xi, a well-known photographer based in Beijing, wrote in his blog on Feb 4 that Carrefour Shuangjing store charged a box of eggs at 20.2 yuan at the cashier, 3.4 yuan higher than the label price, and refused to explain the difference between the two prices.

Lin was also frustrated to find the refund procedures were quite time-consuming, although the retailer has promised customers to provide refunds of five times the difference between advertised prices and incorrect prices charged at cash desks.

The retail giant seems to be turning a deaf ear to most of the charges as it leads peers in a fiercely competitive market, says Yang Yu, a commentator with CCTV.

The deceptive pricing shows that "there is room for improvement in law enforcement", says Zou Rong, a law professor at East China University of Political Science and Law.