Kickbacks behind hairy crab holiday discounts

HANGZHOU - Online stores are offering heavy discounts for hairy crabs ahead of two major holidays, upsetting traditional crab outlets and revealing industry kickbacks.

Nineteen types of hairy crabs are being presold at an 80-percent discount for group purchasers on Taobao.com, China's largest online retailer.

More than 100,000 crabs have already been presold, with a total transaction value of 15 million yuan ($2.3 million).

The crabs will be delivered in late September from Yangcheng Lake, a body of water located in the city of Suzhou in east China's Jiangsu province that is known for its hairy crabs.

Hairy crabs are traditionally given as gifts during holidays, such as the upcoming Mid-Autumn Festival and National Day. Their costliness prevents most ordinary people from buying them, although companies and wealthy individuals often purchase them to give to clients and local officials.

But the cheap crabs offered online this year have turned the market upside down, provoking complaints from traditional outlets.

Crab outlet operators based in Hangzhou, capital of east China's Zhejiang Province, gathered at Yangcheng Lake late August to complain to the Hairy Crab Industry Association about a disruption in market order caused by the low prices offered by online vendors.

Zhang Dehong, chairman of Yang Dehong, a well-known crab company, said the cost of his company's crabs currently stands at about 240 yuan per kg, considerably higher than the group purchase prices offered online.

Yang Weilong, head of the industry association, said about 2,400 tonnes of discounted crabs have been sold, most of them in areas near Beijing, Shanghai, Suzhou and Hangzhou.

"I am concerned that they are selling low-quality or short-weighted crabs, which will destroy the brand," Yang said.

An online vendor surnamed Wu said the low costs are the result of a bumper harvest, adding that the low prices he offers online are still profitable.

Zhu Cong, a manager at Taobao, said online crab vendors are required to present certificates proving that their crabs originate from Yangcheng Lake, as well as submit a deposit of 500,000 yuan to guarantee the quality of their crabs.

"To ensure consumers' rights, we will take action if any aftersale problems are found," Zhu said.

Officials from the municipal industrial and commercial departments of Suzhou and Hangzhou said they will supervise the quality of hairy crabs sold online.

One online crab vendor who requested anonymity said the low prices have actually served to expose kickbacks employed by traditional crab vendors.

The expense of buying hairy crabs means they are usually given as gifts from companies to clients, employees or even government officials.

However, when company employees are sent to actually purchase the crabs, traditional vendors often give them personal vouchers, discounts and even cash to convince the employees to make more expensive purchases, which are then charged to the company that sent the employee.

Xinhua reporters called several traditional outlets to inquire about purchasing crabs for the company. All were offered discounts and vouchers, off the record.

"Some state-owned companies or banks will buy a large amount of vouchers and ask for an invoice of greater value than the actual cost. We can do this for them," a salesperson from the "Crab Villa" outlet said.

Some believe the companies purchase crabs to use as bribes for local officials.

"I don't think the company buying the expensive vouchers cares, as they just want to give out them during the holidays so they can run their business with fewer obstacles in the future," said a Hangzhou resident surnamed Huang who received crab vouchers from a Beijing company.

Cheng Xuelin, a lawyer with the Hangzhou Guosheng Lawyer Firm, said flexible discounts and kickbacks have kept prices high.

"If companies buy the vouchers with a group purchase discount, it is normal market behavior. But if purchasers receive kickbacks themselves, it becomes commercial bribery, which should be investigated," he said.