Shares in China’s biggest e-commerce companies fell on Thursday after Beijing’s market regulator called out five of the country’s biggest online shopping platforms over deceptive promotional practices ahead of the annual “618” shopping festival (June 18).
Hong Kong-listed Alibaba shares fell 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 international shopping app Temu, also fell in early US trading.
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 seller information.
The action came days before the “618” shopping festival, one of China’s biggest annual retail events, as Beijing pushes a wider campaign to stamp out what it calls “rat raceCompetition among e-commerce platforms.
This 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 change 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 a few months later, in June 2010, JD.com introduced the “618” festival to mark the founding anniversary, a mid-year event comparable to Amazon’s Prime Day, which was established in 2015 to boost sales ahead of the historic mid-July lull.
“Consumer subsidy and coupon campaigns of Chinese e-commerce platforms failed to display promotional rules in prominent positions. Some did not specify the actual amounts invested or the distribution of funding between platforms and merchants,” the Beijing Municipal Administration for Market Regulation said. “Platforms must move from competing for subsidies and prices to competing for innovation and service.”
Pinduoduo’s business rules were also found to unilaterally exempt the platform from liability in product disputes, which the administration said violates legal obligations.
The administration ordered all five platforms to immediately correct their “618” promotional rules and said it will continue to monitor their activities.
Before that, on May 25, she already had summoned 17 e-commerce platforms to determine a wider set of bans 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 main prohibitions issued through multiple regulators include:
- there are no unreasonable or excessive subsidy promotions during the “618” period;
- no false or exaggerated advertising claims in promotional campaigns;
- no platform terms that unilaterally release companies from liability in consumer disputes;
- not sending marketing messages to consumers without their prior consent;
- no failure to clearly display refund and cancellation conditions for travel and accommodation products.
Dealers bear the cost
The strike dates back to March, when the administration together summoned 12 online platforms, including Ctrip, Meituan, Douyin and Kuaishou, on the first set of violations. Some platforms had enrolled traders in promotions without consent and used technical means to enforce platform-wide minimum prices, depriving traders 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 lowering product prices without their knowledge. One merchant’s pancake and pancake set, originally priced at 19.8 yuan (US$2.74), earned just 2.58 yuan per order after the platform intervened. Another merchant’s dumplings, which normally sold for 18 yuan, were repriced so that the merchant received 1.25 yuan, far below the cost of the ingredients.
Online travel platform Ctrip was found to have weaponized its “customer diversion” rules against hotels, penalizing properties with traffic restrictions and full commission demands even when guests simply extend their stay at reception or switch 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 who check-in through a channel and extend their stay offline should not be treated as customer churn,” the administration said. “Platforms should not penalize hotels for transactions that are not truly facilitated by the platform.”
A columnist based in Xinjiang using the pen name “A Wen” says Platform subsidies are widely misunderstood by the public as acts of corporate generosity.
“Their subsidies are not bounty, but a tool for market dominance. Platforms use them to control compliant merchants and lock consumers into habits that translate into long-term control,” he says. “Money is never just a platform to spend as you please. Behind every subsidy campaign lies the manipulation of traffic, the imposition of rules and the financial survival of merchants.”
“The most destructive model in Chinese e-commerce has been to keep prices low as the only measure of success, then drag everyone into a race to the bottom. Platforms subsidize a little, merchants accept a little, consumers think they got a deal. But no one really benefits. Established brands are squeezed into generics, high-street good, high-street cut-off, and high-street good. Counterfeits The entire supply chain ends up compete on who can stay 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 everyone knows the spiral is unsustainable. He said the regulation was not just a warning shot, but a necessary intervention to determine where legitimate competition ends and destructive disruption begins.
Some analysts ANNOUNCE that curbing aggressive discounting can backfire. If platforms are banned from heavy subsidy campaigns, consumers accustomed to lower prices may simply buy less rather than trade up to more expensive products. A decline in online sales would further slow the growth rate of total retail sales of consumer goods in China, which has already slowed significantly.
NBS data shows total retail sales of consumer goods grew up just 1.9% year-on-year in the first four months of 2026, a major slowdown from growth of 4.7% in the same period in 2025.
Online retail sales of physical goods rose 5.7% year-over-year in the first four months of 2026, roughly in line with the 5.8% recorded in the same period in 2025, and outpacing overall retail sales growth.
Overall, the trend points to a deflationary spiral that policymakers are already trying to stem. Beijing has repeatedly signaled its determination to boost domestic consumption, but with rising household incomes under pressure and fragile consumer confidence, 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 recovered 7.2% that year, but growth has slowed significantly since then.
In March 2024, the State Council GOING a trade-in subsidy program to encourage consumers to trade in old smartphones, home appliances and automobiles for new ones. The scheme contributed in part to retail sales growth of 3.5% in 2024 and 3.7% in 2025. Under the scheme, buyers of smartphones and digital products are entitled to a 15% discount capped at 500 yuan per item. The program has been extended to 2025 and 2026.
Read: Beijing vows retaliation as EU warns of China Shock 2.0
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