Amid escalating competition among the country’s food delivery giants, China’s top market regulator is taking action to steer the industry back toward fair and sustainable growth.

Five government institutions led by the State Administration for Market Regulation (SAMR) recently summoned JD.com, Meituan, and Alibaba-backed Ele.me — three of the country’s dominant delivery platforms — to address malpractices in the sector.

In a statement released Tuesday, the SAMR urged relevant platforms to “strictly comply” with China’s laws and regulations on e-commerce, anti-monopoly, and food safety. The platforms should fulfill their responsibilities and strengthen internal management to safeguard the legitimate rights and interests of consumers, merchants, and delivery riders, the regulator noted.

Competition in China’s food delivery industry has been intensifying since February, following JD.com’s move to recruit restaurants to its platform. To attract food delivery riders, the company announced in February that it would provide full-time riders with social insurance and housing funds starting March 1.

JD’s entry into a sector that has long been dominated by Meituan and Ele.me, who account for a combined 98% market share, triggered tit-for-tat promotions from its rivals. Meituan said it would start paying social security for full-time and regular part-time couriers from the second quarter. And on April 30, Ele.me launched its own major campaign titled “Billion-Yuan Subsidy,” aiming to attract both users and merchants with aggressive discounts.

The turf war further escalated with Meituan and Ele.me both announcing their own answer to JD.com’s core on-demand retail services. In April, Meituan officially launched its new Flash Sale retail platform, while Alibaba expanded its one-hour delivery service Taobao Flash nationwide earlier this month.

At times, the spats have spilled over to online accusations. In April, JD.com alleged that a rival — widely believed to be Meituan — was forcing delivery riders to reject JD’s orders, threatening them to blacklist them from their platform if they did not comply. JD claimed that the tactic, which the SAMR had previously dubbed “forced exclusivity,” had reduced some riders’ incomes by 16-25%.

Meituan denied this in a post on its official WeChat channel on April 19, saying “no platform anywhere in the world has either the motivation or the ability to restrict food delivery riders from choosing which orders to accept.”

Cutthroat competition — from price wars and forced exclusivity to subsidies aimed at undercutting rivals and fierce public disputes — has long been a hallmark of China’s tech sectors, from e-commerce and food delivery to ride-hailing.

In response, the government has stepped up efforts over the last decade to regulate and foster healthy market development, issuing stricter regulations and slapping billions in fines on tech giants like Alibaba and Meituan.

The strategy of using heavy subsidies to capture market share was likely a major topic of discussion at the meeting, Zhuang Shuai, founder of the Beijing-based consulting firm Bailian, told Sixth Tone.

The applicability of this tactic is highly dependent on the development stage of an industry, according to Zhuang. “It works when a market is in the growth phase because spending money to acquire market share and attract users can quickly cultivate consumer habits, guide businesses toward industrial upgrades, and encourage more merchants to operate online,” he said.

While China’s food delivery industry is already well established, price wars could actually harm the market. “At this stage, price subsidies no longer serve to upgrade the industry or shape consumer habits — instead, they encourage consumers to chase discounts and train merchants to lower their operational standards in pursuit of short-term growth.”

Zhang Yi, chief analyst at consulting firm iiMedia, noted that the central government’s Society Work Department was among the five regulators involved in the meeting, highlighting that this is not only an economic development issue but also a social one — potentially impacting more than 10 million delivery riders.

“In the long run, capital may be able to sustain cash-burning strategies,” Zhang told Sixth Tone. “But such practices are ultimately harmful to merchants, delivery riders, and even consumers, while efforts should be channeled towards improving food quality and user experiences.”

Editor: Tom Arnstein.

(Header image: VCG)