China Drafts Rules to Curb Subsidy Abuse by Food Delivery Platforms

Chinese authorities introduced draft regulations on Wednesday to crack down on the misuse of subsidies by food-delivery platforms, as Beijing seeks to rein in the sector’s intense competition.

The proposed rules, open for public comment until July 17, identify several practices that would be banned, including using subsidies to disrupt the market and selling goods at a loss, according to a statement from the State Administration for Market Regulation (SAMR).

“China’s food-delivery platforms exhibit problems such as using capital advantages to seize market share, coercing businesses on their platforms into taking part in subsidies, and triggering irrational competition in the industry,” the regulator said, adding that such cutthroat competition was hurting businesses, delivery drivers and consumers.

The draft regulations will ban platforms from using “long-term, large-scale” subsidies to hamper market competition or disrupt market order, according to the SAMR.

Platforms will also be prohibited from forcing merchants to participate in subsidy activities or making them bear the associated costs. They would also be barred from using their relatively deep pockets to engage in monopolistic or unfair competition, and from pricing goods below cost.

Under the new framework, platforms must make public disclosures, both before launching a subsidy campaign and after completing it. The rules also identify relevant legal obligations and liabilities related to subsidy activities.