Shares in China's leading e-commerce companies dropped on Thursday after Beijing's market regulator summoned five of the country's largest online shopping platforms for deceptive promotional practices ahead of the annual “618” (June 18) shopping festival. Alibaba's Hong Kong-listed shares fell 5.4% to HK$107.40, while JD.com declined 2.9% to HK$108.9. Nasdaq-listed shares of PDD Holdings, which operates the international app Temu, also slid in early US trading.
The Beijing Municipal Administration for Market Regulation accused Taobao, JD.com, Pinduoduo, Douyin, and Xiaohongshu of violations including false promotional claims, non-transparent business practices, and failure to properly disclose sellers' information. The action came days before the 618 festival, one of China's biggest annual retail events, as Beijing pushes a broader campaign to stamp out what it calls “rat race” competition among e-commerce platforms.
Regulator Targets Subsidy Wars and Merchant Exploitation
The crackdown follows a pattern of regulatory intervention in China's e-commerce sector, where platforms have long used aggressive subsidies to capture market share. The Beijing Municipal Administration for Market Regulation stated that platforms' subsidy and consumption voucher campaigns failed to display promotional rules prominently, and some did not specify actual amounts invested or the funding split between platforms and merchants. “Platforms must shift from competing on subsidies and prices to competing on innovation and service,” the regulator said.
Pinduoduo's business rules were found to unilaterally absolve the platform of liability in product disputes, which the administration said violates statutory duties. The regulator ordered all five platforms to immediately rectify their “618” promotional rules and said it would continue to monitor their activities. This follows a May 25 summons of 17 e-commerce platforms, where regulators issued prohibitions including no irrational large-scale subsidy campaigns, no false advertising, no unilateral liability waivers, no unsolicited marketing messages, and clear display of refund and cancellation terms for travel products.
Merchants have borne the brunt of these practices. In March, the administration jointly summoned 12 online platforms, including Ctrip, Meituan, Douyin, and Kuaishou, over violations. Some platforms enrolled merchants in promotions without consent and used technical tools to enforce platform-wide minimum pricing, stripping merchants of pricing autonomy. Taobao Flash Buy was singled out for enrolling food and beverage merchants in discount campaigns without authorization, cutting product prices without their knowledge. One merchant's mutton skewer and stuffed pancake set, originally priced at 19.8 yuan, netted just 2.58 yuan per order after platform intervention. Another merchant's dumplings, normally sold at 18 yuan, were repriced so the merchant received 1.25 yuan, well below ingredient costs.
Online travel platform Ctrip was found to have weaponized its “customer diversion” rules against hotels, penalizing properties with traffic restrictions and demands for full commission even when guests simply extended their stay at the front desk or switched platforms after canceling for personal reasons. Regulators ordered Ctrip to remove a price-tracking tool that monitored hotel rates across all channels and pressured properties to match the lowest price found. “Guests checking in through one channel and extending their stay offline should not be treated as customer diversion,” the administration said. “Platforms must not penalize hotels for transactions that were not genuinely facilitated by the platform.”
A Xinjiang-based columnist using the pen name “A Wen” argues that platform subsidies are widely misunderstood as corporate generosity. “Their subsidies are not generosity, but a tool for market domination. Platforms use them to strong-arm merchants into compliance and to lock consumers into habits that translate into long-term control,” he said. “The money is never simply a platform's to spend as it pleases. Behind every subsidy campaign is traffic manipulation, rule-setting and the financial survival of merchants.”
He described the most destructive pattern in Chinese e-commerce as “holding up low prices as the only measure of success, then dragging everyone into a race to the bottom. Platforms subsidize a little, merchants concede a little, consumers feel they got a deal. But no one actually profits. Established brands get squeezed into generic products, generic products get undercut by street-stall goods, and street-stall goods give way to counterfeits. The entire supply chain ends up competing on who can hold out the longest.”
The regulatory push comes amid broader economic headwinds. The National Bureau of Statistics reported on Wednesday that China's consumer price index rose 1.2% year-on-year in May, unchanged from April but below market expectations of 1.3%. The figure fell 0.1% month-on-month, a sharp reversal from the 0.3% gain in April. This suggests weak domestic demand, which the subsidy wars were partly intended to stimulate, but at the cost of merchant viability.
Alibaba launched Singles' Day in 2009 through its Tmall platform, making it the world's largest online shopping event by gross merchandise volume. JD.com introduced the 618 festival in June 2010 to mark its founding anniversary, a mid-year event comparable to Amazon's Prime Day, established in 2015. The 618 festival has since become a major battleground for Chinese e-commerce platforms, with this year's crackdown signaling Beijing's determination to reshape the industry's competitive dynamics. For more on how Beijing is recalibrating its economic strategy, see Xi Jinping's New US-China Formula Signals Beijing's Self-Confident Shift in Terms.
The crackdown also reflects a broader trend of regulatory tightening in China's tech sector, which has implications for investors across the Indo-Pacific. As Beijing seeks to balance innovation with market stability, the e-commerce giants face pressure to adopt more sustainable business models. For context on how national security concerns are reshaping market logic in Asia, read When National Security Becomes Market Logic: Asia's New Investment Reality.
