Opinion: To Save Its Economy, China Must Put an End to Self-Defeating Competition in Tech

1. On March 23, the Beijing Municipal Administration for Market Regulation, along with other government agencies, summoned 12 major Chinese internet platforms—including Ctrip, JD.com, Taobao Flash Shopping, Meituan, and Douyin—providing administrative guidance and addressing competitive misconduct. This move is part of China’s larger campaign to manage behavior among leading tech platforms and foster more sustainable business practices in the digital sector. [para. 1]

2. The regulators disclosed the initial findings of their crackdown on what they term “involutionary” or self-defeating competition among these platforms. Companies were required to rectify the identified behaviors, and specific, enforceable guidelines were set to address recurring issues in the sector. [para. 2]

3. The cases highlighted by authorities served as clear and diverse examples of destructive competition, illustrating not only the particular abuses committed by the companies but also the broader negative lessons for the entire economy. The documentation was meant to make the public and other businesses aware of the extensive harm caused by unchecked platform competition. [para. 3]

4. Since October, authorities have used the hotel and restaurant industries as a testing ground for this regulatory campaign. They launched the Negative List for Involutionary Competition Behavior by Platforms, which features eight broad categories and 49 specific prohibited practices, such as rule manipulation, price controls, and violations of consumer rights. The newly revealed instances stem directly from this targeted enforcement effort. [para. 4]

5. Combatting hyper-competition among digital platforms has become a central focus of China’s economic strategy, even being written into the government’s official work report. The risks associated with this “race to the bottom” are severe for both platform operators and the broader economy, prompting the urgent need to reform large digital companies to restore fair competition and balanced opportunities for all stakeholders. [para. 5]

6. Chinese digital platforms are intricately woven into every sector of the economy, serving as a vital driver of digital transformation while still being deeply connected with traditional industries and numerous small businesses. As these platforms have grown, the economic fate of millions of small merchants—along with many gig workers—has become firmly linked to their policies and practices. Any deterioration in the business environment caused by harmful competition therefore has far-reaching consequences. [para. 6]

7. The intense competition among platforms disproportionately harms small businesses, who bear the costs of platform rivalries. Despite often appearing to be contests between corporate giants, it is the small merchants on these platforms who suffer most. [para. 7]

8. One regulator-cited case involved a platform’s use of algorithmic “auto-pricing” systems that removed hotels’ authority to set their own prices—enforcing compliance through monitoring, pressure campaigns, and algorithmic controls. Hotels that resisted found their business operations interfered with directly. [para. 8]

9. Another abuse involved platforms securing authorization agreements that allowed them to alter merchant listings, enroll products in promotions, or slash prices without the merchant’s consent. In one egregious incident, a plate of dumplings, normally priced at 18 yuan ($2.60), resulted in a payout to the merchant of just 1.25 yuan due to forced deep discounts. [para. 9]

10. Such practices erode merchants’ autonomy, exposing the dangers of predatory platform tactics: while platforms may gain market share temporarily, the long-term viability of small businesses is sacrificed. [para. 10]

11. The public is also negatively affected. Consumers might briefly benefit from artificially low prices during platform wars, but these behaviors threaten long-term quality, safety, and choice. [para. 11]

12. Some platforms sold misleading “ticket-snatching acceleration packages” or “priority” booking services for train tickets, simply repackaging free state services as premium paid features through deceptive advertising. [para. 12]

13. False “quality icons” awarded to certain hotels and the price wars within food delivery not only mislead consumers but also introduce risks to food quality and restaurant reputations. [para. 13]

14. Government regulation aims not to eliminate competition, but to halt destructive excesses and promote healthy, sustainable business practices among platforms for the benefit of companies, merchants, workers, and consumers alike. [para. 14]

15. The campaign against vicious platform competition is viewed as an opportunity to redirect the digital economy toward sustainability and high-quality growth. Regulators urge continued focus on the underlying issues to ensure that China’s technological innovation advances hand-in-hand with fair and responsible market practices. [para. 15]