China's SAMR targets food delivery subsidies as 3 platforms back rules

China's food delivery giants are embracing a regulatory crackdown on the subsidy wars that have defined their battle for market share.

China's market regulator proposed rules Wednesday to curb irrational food-delivery subsidies, drawing swift support from Meituan, JD.com and Alibaba's Taobao as the sector's price war faces a regulatory clampdown.

"The draft guidelines target long-term, large-scale subsidies that disrupt market order and coerce merchants into bearing campaign costs," the State Administration for Market Regulation said in a statement.

The 10-point framework, open for public feedback through July 17, bans platforms from selling goods below cost, using capital advantages for monopolistic competition, or forcing merchants to participate in subsidy campaigns. Platforms must disclose subsidy data before and after each campaign.

The crackdown threatens the growth playbook of China's $100 billion-plus food delivery market, where Meituan, JD and Alibaba have burned through cash on subsidies to capture market share. Meituan shares fell 1.9% in Hong Kong trading Wednesday, with short interest at 11.8% of float.

Meituan said it would "carefully study the guidelines, actively cooperate and implement the regulatory requirements to ensure effective execution," according to a company statement. The platform called the rules a step toward curbing "involution-style competition" — a term Beijing has used to describe wasteful zero-sum rivalry — and clarifying compliance boundaries for subsidy practices.

Taobao Instant Commerce said a healthy industry ecosystem depends on clear rules and pledged to work with industry participants to safeguard fair competition. JD Food Delivery said it "strongly agrees" with measures to counter involution, protect fair market order and defend the rights of consumers, merchants and riders.

What the Rules Change

The SAMR's draft guidelines specifically prohibit platforms from using their financial heft to sustain prolonged subsidy campaigns that undercut rivals. Selling goods below cost — a common tactic in China's food delivery wars — is now explicitly banned. Platforms must also disclose the scope, duration and funding of any subsidy campaign before launch and report results after completion.

For Meituan, which commands roughly 70% of China's food delivery market, the rules could slow user acquisition but may also reduce the cost of retaining merchants who have complained about being forced to subsidize orders. JD Food Delivery, the smallest of the three, has positioned itself as a quality-focused alternative and said it would continue to "reject vicious low-price competition."

The last time Beijing targeted tech platform subsidies was in early 2021, when antitrust regulators fined Alibaba a record 18.2 billion yuan ($2.5 billion) for anti-competitive practices. That crackdown erased more than $800 billion in market value from China's tech sector over six months before regulators reversed course in 2022.

The regulatory shift introduces uncertainty for near-term revenue growth across the sector. Meituan's short-selling ratio stood at 11.8% of float on Wednesday, suggesting investors are hedging against downside risk. CLSA noted in a separate report that China's May retail sales missed market expectations, signaling that consumer confidence recovery remains fragile — a headwind that subsidy restrictions could amplify.

The SAMR will accept public comments until July 17 before finalizing the rules. The timeline for implementation and enforcement details have not yet been disclosed.

This article is for informational purposes only and does not constitute investment advice.