A top Chinese franchise and retail association has urged food delivery and instant retail platforms to curb destructive price subsidies, warning that the tactics distort market order, harm small merchants and threaten the industry's long-term sustainability.
In a public letter posted yesterday, the China Chain Store & Franchise Association, or CCSFA, criticized a recent surge in capital-driven subsidy battles, calling them a “price subsidy war” that is escalating across major platforms.
Though the group did not name companies, the warning comes amid intensifying discount campaigns by Meituan and Alibaba’s Taobao Flash Purchase, following JD.com’s aggressive entry into the market. The letter also comes as China’s top officials vow to crack down on “involution-style” competition — a cycle of cutthroat rivalry that leads to diminishing returns.
On July 1, the Central Financial and Economic Affairs Commission emphasized the need to address “low-price, disorderly competition” and to guide companies toward improving product quality.
The CCSFA’s warning appeared to echo that message, stating that “low-price competition backed by capital not only disrupts fair market order, but has triggered a chain reaction — undermining normal business operations of physical merchants, shrinking product quality, degrading service standards and putting profits under extreme pressure.”
Framing its letter as a formal appeal to the entire sector, the CCSFA urged its members and related enterprises to reject short-sighted tactics such as “price battles,” “subsidies for traffic” and “loss-making for visibility.”
The trade body accused some platforms of using their superior position to coerce merchants into participating in subsidies, either directly or through indirect pressure. The letter called for an immediate end to this behavior, urging them to stop using tactics like “traffic downgrades” or “search demotion” to penalize merchants who opt out of discount campaigns.
The CCSFA’s concerns were mirrored by another widely circulated letter yesterday from a catering association in southwest China’s Zunyi city, which explicitly named Meituan and Alibaba's business branches.
In its open letter, the Honghuagang District Catering Industry Association condemned what it described as “irrational subsidy practices” by the two companies. The group said such promotions had pushed merchants into a harmful cycle, distorting market pricing and worsening financial strain.
It further warned that the tactics had “dealt a severe blow to dine-in–dependent brick-and-mortar restaurants, leaving many in deep distress.”
The Zunyi association called for regulatory intervention and stricter enforcement of the Anti-Unfair Competition Law.
The CCSFA also renewed criticism of platform practices such as “choose one out of two” exclusivity clauses — a tactic penalized by China’s top antitrust regulator in 2021.
In addition, “platforms must not use standardized contract terms or opaque algorithm rules to force merchants to bear unreasonable portions of subsidy costs,” the CCSFA said.
It demanded that platforms publicly disclose subsidy policies and algorithm mechanisms, and restore merchant autonomy over pricing and order acceptance.
Rather than relying on discount wars, the CCSFA encouraged platforms to adopt advanced technologies — including big data, digitalization and AI — to improve supply chain management and customer operations efficiency.
It also called for stronger integration between online and offline commerce, and for loyalty-building strategies focused on product quality, service experience and differentiated offerings, rather than aggressive short-term subsidy burn.
In May, China’s top market regulator, together with four other Communist Party and government agencies, summoned major food-delivery platforms JD.com, Meituan and Alibaba-backed Ele.me to address mounting competition concerns in the sector. Despite the warnings, the subsidy war has since risen to levels not seen in recent years.
Source: MLex
