Chinese regulators today announced the results of their investigation into Luckin Coffee, which has been embroiled in a financial fraud spiral.
In April, China's General Administration of Market Regulation launched an investigation into alleged unfair competition, including false trading, at Luckin Coffee (China) Ltd. and Luckin Coffee (Coffee) Beijing Ltd.
The investigation revealed that between April and December 2019, Luckin Coffee, with the help of various third-party companies, falsely enhanced Luckin Coffee's key marketing metrics such as sales revenue, costs, and profit margins of relevant goods for 2019 in order to gain competitive advantages and trading opportunities.
Luckin Coffee extensively publicized the use of false marketing data through multiple channels from August 2019 to April 2020 to deceive and mislead the relevant public, in violation of the law and constituting false advertising, the investigation said.
A total of 43 third-party companies provided substantial assistance to Luckin Coffee in carrying out the false promotion, constituting an act of aiding false promotion.
On September 18, 2020, the General Administration of Market Regulation and the market regulators in Shanghai and Beijing decided to impose administrative penalties on 45 companies involved in the case, including Luckin Coffee (China) Ltd. and Luckin Coffee (Beijing) Ltd. for a total of RMB 61 million (about $9 million).
Luckin Coffee subsequently issued a statement saying that Luckin Coffee respected and resolutely implemented the penalty decision and had carried out comprehensive rectification in relation to the relevant issues, and that Luckin Coffee would further regulate its business activities in accordance with the relevant laws and regulations to ensure stable operations.
