Shares in China’s biggest e-commerce companies fell on Thursday after Beijing’s market regulator summoned five of the country’s largest online shopping platforms over deceptive promotional practices ahead of the annual “618” (June 18) shopping festival.
Alibaba’s Hong Kong-listed shares dropped 5.4% to HK$107.40 (US$13.8) while JD.com fell 2.9% to HK$108.9. Nasdaq-listed shares of PDD Holdings Inc, which operates the international shopping app Temu, also declined 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” shopping 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.
It came after the National Bureau of Statistics (NBS) said on Wednesday that China’s consumer price index (CPI) 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 recorded in April.
Alibaba launched Singles’ Day, or Double 11, on November 11, 2009, through its Tmall platform, making it the world’s largest online shopping event by gross merchandise volume. Just months later, in June 2010, JD.com introduced the “618” festival to mark its founding anniversary, a mid-year event comparable to Amazon’s Prime Day, which was established in 2015 to boost sales before the historically quiet mid-July period.
“The Chinese e-commerce platforms’ subsidy and consumption voucher campaigns failed to display promotional rules in prominent positions. Some did not specify the actual amounts invested or the funding split between the platforms and merchants,” said the Beijing Municipal Administration for Market Regulation. “Platforms must shift from competing on subsidies and prices to competing on innovation and service.”
Pinduoduo’s business rules were also found to unilaterally absolve the platform of liability in product disputes, which the administration said violates statutory duties.
The administration ordered all five platforms to immediately rectify their “618” promotional rules and said it would continue to monitor their activities.
Before this, on May 25, it had already summoned 17 e-commerce platforms to spell out a broader set of prohibitions ahead of the “618” festival. Platforms were told to avoid irrational large-scale subsidy campaigns and to keep pricing and advertising practices in line with fair competition rules. The key prohibitions issued across multiple regulators include:
- no irrational or oversized subsidy promotions during the “618” period;
- no false or exaggerated advertising claims in promotional campaigns;
- no platform terms that unilaterally absolve companies of liability in consumer disputes;
- no sending of marketing messages to consumers without their prior consent;
- no failure to display refund and cancellation terms clearly for travel and accommodation products.
Merchants bear the cost
The crackdown dates back to March, when the administration jointly summoned 12 online platforms, including Ctrip, Meituan, Douyin and Kuaishou, over a first batch of violations. Some platforms had enrolled merchants in promotions without consent and used technical tools to enforce platform-wide minimum pricing, stripping merchants of their right to set their own prices.
Taobao Flash Buy was singled out for enrolling food and beverage merchants in discount campaigns without authorization and cutting product prices without their knowledge. One merchant’s mutton skewer and stuffed pancake set, originally priced at 19.8 yuan (US$2.74), netted just 2.58 yuan per order after the platform intervened. Another merchant’s dumplings, normally sold at 18 yuan, were repriced so that the merchant received 1.25 yuan, well below the cost of ingredients.
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” says platform subsidies are widely misunderstood by the public as acts of 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 says. “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.”
“The most destructive pattern in Chinese e-commerce has been to hold up low prices as the only measure of success, then drag 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,” he says.
He describes the subsidy war as a classic prisoner’s dilemma, in which no single player dares to stop first even though all of them know the spiral is unsustainable. He said regulation was not simply a warning shot but a necessary intervention to define where legitimate competition ends and destructive attrition begins.
Some analysts warn that curbing aggressive discounting could backfire. If platforms are barred from heavy subsidy campaigns, consumers accustomed to rock-bottom prices may simply buy less rather than trade up to more expensive products. A drop in online sales would further slow the growth rate of China’s total retail sales of consumer goods, which has already decelerated sharply.
NBS data show total retail sales of consumer goods grew just 1.9% year-on-year in the first four months of 2026, a steep deceleration from 4.7% growth over the same period in 2025.
Online retail of physical goods rose 5.7% year-on-year in the first four months of 2026, roughly in line with the 5.8% recorded over the same period in 2025, and outpacing overall retail growth.
Generally, the trend points to a deflationary spiral that policymakers are already struggling to contain. Beijing has repeatedly signaled its determination to boost domestic consumption, but with household income growth under pressure and consumer confidence fragile, spending is unlikely to recover on its own.
In December 2022, Beijing announced the end of its nearly three-year nationwide Covid-19 lockdown policy, with a full reopening taking effect in 2023. Total retail sales of consumer goods rebounded 7.2% that year, but growth has slowed considerably since then.
In March 2024, the State Council launched a trade-in subsidy program to encourage consumers to replace old smartphones, home appliances and automobiles with new ones. The scheme partially contributed to retail growth of 3.5% in 2024 and 3.7% in 2025. Under the scheme, buyers of smartphones and digital products are eligible for a 15% rebate capped at 500 yuan per item. The program has been extended to 2025 and 2026.
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