In the lead-up to China’s annual high-stakes 618 mid-year shopping festival, shares of the country’s largest e-commerce firms dropped sharply on Thursday, after Beijing’s top municipal market regulator summoned five major online platforms to address allegations of deceptive and unfair promotional practices.
Leading the sell-off, Alibaba’s Hong Kong-listed stock fell 5.4% to close at HK$107.40 (US$13.8), while rival JD.com declined 2.9% to HK$108.9. PDD Holdings, the parent company of domestic platform Pinduoduo and global shopping app Temu, also recorded losses during early trading on the Nasdaq exchange.
The Beijing Municipal Administration for Market Regulation named the five platforms under investigation as Taobao (owned by Alibaba), JD.com, Pinduoduo, Douyin and Xiaohongshu, citing multiple confirmed violations: misleading promotional claims, opaque operating rules, and inadequate disclosure of third-party seller information. The action marks the latest step in a months-long nationwide campaign to curb what Chinese regulators describe as cutthroat “rat race” competition that erodes fair market conditions.
Regulators specifically flagged that many platforms failed to post the full terms of subsidy and consumer voucher campaigns in visible locations for shoppers. In multiple cases, platforms did not disclose how much total funding was allocated for promotions, or how costs were split between platforms and participating merchants. “Platforms must shift from competing on subsidies and prices to competing on innovation and service,” the administration stated in its public notice. Pinduoduo was additionally cited for including unilateral clauses in its business terms that shielded the platform from legal liability in product quality disputes, a practice that violates mandatory Chinese consumer protection regulations.
The regulator has ordered all five platforms to immediately revise their 618 promotional rules to meet compliance standards, and confirmed ongoing monitoring of the platforms’ activities throughout the shopping event. This most recent summons is not an isolated action: regulators first gathered 17 major e-commerce platforms on May 25 to outline a full set of prohibited practices ahead of 618, and launched the first wave of the crackdown back in March, when 12 major platforms including Ctrip, Meituan, Douyin and Kuaishou were summoned over earlier violations.
Regulators have outlined five core prohibitions for this year’s 618 event: no irrational, oversized subsidy campaigns; no false or exaggerated advertising; no platform clauses that unilaterally shift all consumer dispute liability to third-party merchants; no unsolicited commercial messaging to consumers; and no failure to clearly post refund and cancellation policies for travel and accommodation bookings.
During the March crackdown, investigators uncovered multiple harmful practices that shifted the entire cost of promotional pricing onto merchants. Taobao Flash Buy was singled out for enrolling food and beverage merchants into discount campaigns without their explicit consent, and cutting listed product prices without notifying sellers. In one documented case, a merchant’s mutton skewer and stuffed pancake set, originally priced at 19.8 yuan (US$2.74), left the merchant with just 2.58 yuan in revenue per order after platform-imposed discounts. A second merchant saw its 18-yuan order of dumplings repriced to leave just 1.25 yuan per sale, a figure far below the cost of ingredients.
Online travel giant Ctrip was also found to have violated fair trade rules, penalizing hotels with traffic restrictions and demanding full commission for bookings that were not actually facilitated by the platform. For example, the platform classified guest extensions of stays arranged directly at a hotel front desk, or re-bookings made through other channels after cancellation, as “customer diversion” and penalized properties accordingly. Regulators ordered Ctrip to remove a proprietary price-tracking tool that monitored hotel rates across all sales channels and forced properties to match the lowest available price, a practice that squeezed merchant profit margins.
This regulatory crackdown comes one day after the National Bureau of Statistics released May consumer inflation data that fell short of market expectations. China’s consumer price index rose 1.2% year-on-year in May, matching April’s growth rate but below analyst forecasts of 1.3%. Month-over-month, CPI dropped 0.1%, a sharp reversal from the 0.3% gain recorded in April. Weak inflation data has added to broader concerns over soft domestic consumption, with total retail sales of consumer goods growing just 1.9% year-on-year in the first four months of 2026, a steep drop from 4.7% growth in the same period of 2025. While online retail of physical goods recorded 5.7% year-on-year growth over the same period, outpacing overall retail expansion, the broader economic trend points to a slow-building deflationary spiral that Chinese policymakers have struggled to counter.
Many industry observers and commentators have framed the regulatory crackdown as a necessary correction to a harmful market dynamic. A Xinjiang-based columnist writing under the pen name A Wen argued that public perceptions of platform subsidies as acts of corporate generosity are deeply misplaced. “Their subsidies are not generosity, but a tool for market domination,” he explained. “Platforms use them to strong-arm merchants into compliance and to lock consumers into habits that translate into long-term control. 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 added that the industry’s obsession with low prices as the only metric of success has dragged the entire sector 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 described the ongoing subsidy war as a classic prisoner’s dilemma, where no single platform dares to stop offering deep cuts even as all players recognize the downward spiral is unsustainable. He noted that the current regulatory intervention is not just a warning, but a necessary step to draw a clear line between legitimate competition and destructive market attrition.
However, some market analysts have warned that curbing aggressive discounting could carry unintended economic consequences. Consumers who have grown accustomed to deeply discounted online prices may choose to reduce overall spending rather than shift to higher-priced, higher-quality products, they argue. A pullback in online sales would further weaken China’s overall retail growth, which has already slowed sharply in recent quarters.
The crackdown comes against a long backdrop of shifting Chinese consumer policy. After ending nearly three years of nationwide Covid-19 lockdowns in late 2022 and fully reopening the economy in 2023, China saw a 7.2% rebound in total retail sales that year, but growth has slowed steadily since. In 2024, the State Council launched a national trade-in subsidy program to encourage consumers to replace old smartphones, home appliances and automobiles, offering a 15% rebate capped at 500 yuan per eligible item. The program has been credited with supporting retail growth of 3.5% in 2024 and 3.7% in 2025, and has been extended through 2026, even as consumer confidence remains fragile amid soft household income growth.
