China’s major food delivery platforms, including Meituan, Ele.me, and JD.com, have come under regulatory scrutiny over aggressive subsidy practices. Following multiple government summons, the platforms have pledged to curb unfair promotions, protect delivery riders, support merchants, and foster a healthy, competitive ecosystem, as regulators emphasize orderly market development and consumer protection.
On September 9, Wang Qiuping, spokesperson of the State Administration for Market Regulation (SAMR) said at a press conference that after summoning the major food delivery platforms for talks, the platforms responded quickly, issued joint statements, and committed to strictly abiding by laws and regulations, eliminating unfair competition, resisting malicious subsidies, and promoting the orderly and standardized development of the industry.
Moving forward, SAMR will closely monitor competition in the food delivery sector, requiring platforms to improve service quality, strictly uphold food safety standards, and ensure consumer experience, and it will urge platforms to reasonably control subsidies to avoid disrupting normal price structures, encourage greater support for merchants, enhance protection for delivery riders, and build a healthy ecosystem that benefits consumers, merchants, riders, and platforms alike, said Wang.
The talks mentioned by SAMR refer to the meeting held on July 18, when the administration summoned Ele.me, Meituan, and JD.com, which were instructed to strictly comply with the E-Commerce Law of the People’s Republic of China, the Anti-Unfair Competition Law of the People’s Republic of China, the Food Safety Law of the People’s Republic of China, and other relevant regulations. They were required to fully implement their responsibilities, standardize promotional activities, engage in rational competition, and jointly create a beneficial ecosystem for consumers, merchants, delivery riders, and platform companies, promoting the standardized, healthy, and sustainable development of the catering services industry.
After the talks, on August 1, Meituan, Ele.me, and JD.com jointly issued statements committing to regulate subsidy practices and promote mutual benefits. Meituan said it would strictly regulate promotional activities, eliminate unfair competition, foster a fair and orderly industry environment, and promote mutual benefits for all parties. Similarly, Taobao, Ele.me, and JD.com issued statements pledging to encourage healthy competition and jointly build a healthy ecosystem for the food delivery sector.
During this round of the food delivery battle, regulators summoned platform companies multiple times. In May this year, SAMR, together with the Ministry of Social Work, the Cyberspace Administration off China, the Ministry of Human Resources and Social Security, and the Ministry of Commerce, held talks with JD.com, Meituan, Ele.me, and other platforms to address prominent issues in current industry competition. The platforms were instructed to strictly fulfill their responsibilities, proactively assume social responsibilities, strengthen internal management, operate legally and in a standardized manner, compete fairly and orderly, jointly foster a healthy market environment, protect the legal rights and interests of consumers, platform merchants, and delivery riders, and promote a standardized, healthy, and orderly development of the platform economy.
In February this year, JD.com (NASDAQ: JD / 09618.HK) officially entered the food delivery business, igniting this round of the subsidy war. Alibaba also announced its entry in late April, upgrading its Taobao and Tmall instant retail service “Hours Delivery” to “Taobao Flash Purchase,” offering heavy subsidies for food delivery. On July 2, it further announced a 50 billion yuan subsidy plan.
Under the ongoing subsidy war, the profits of major food delivery platforms have been directly affected. In Q2, due to increased investment in new businesses, including food delivery, JD.com’s net profit attributable to ordinary shareholders tumbled 50.79% year-on-year to 6.2 billion yuan. Meituan’s core local business segment saw operating profit slump 75.6% year-on-year, with operating margin sliding 19.4 percentage points to 5.7%, and overall net profit falling sharply 96.8% year-on-year. Alibaba China E-commerce Group’s adjusted EBITA declined 21% year-on-year, and Alibaba Group’s non-GAAP net profit fell 18% year-on-year.