China’s market regulator has signaled a definitive end to the high-stakes 'cash burn' era that has defined the nation's food delivery sector for nearly a decade. The State Administration for Market Regulation (SAMR) recently unveiled a draft titled 'Ten Regulations on Food Delivery Platform Subsidy Behavior,' a move aimed at dismantling the aggressive pricing strategies used by giants like Meituan and Alibaba-owned Ele.me to secure market dominance. The public comment period, running through mid-July, marks a significant escalation in Beijing’s efforts to transition the platform economy from 'disorderly expansion' to 'high-quality development.'
For years, the Chinese food delivery market has been characterized by 'involution'—a term describing intense, zero-sum competition where platforms utilize massive capital reserves to underwrite deep discounts. While consumers initially benefited from cheap meals, the regulator argues this model has created a toxic ecosystem. According to the SAMR, these practices have 'squeezed the real economy' and forced merchants into a corner where they are often coerced into funding the very subsidies that erode their own profit margins.
The proposed rules strike at the heart of the platform playbook by prohibiting 'long-term, large-scale subsidies' designed to exclude competition. Crucially, the draft forbids platforms from selling services below cost and prohibits the practice of forcing small-scale merchants to bear the financial burden of platform-wide promotional campaigns. This shift reflects a broader governmental concern that the digital economy’s gains have come at too high a cost to labor rights and the stability of traditional brick-and-mortar businesses.
Transparency is a central pillar of the new framework. Platforms will be required to disclose their subsidy structures to the public both before and after campaigns, subjecting their algorithmic incentives to social and regulatory scrutiny. This move toward 'algorithmic transparency' suggests that the era of opaque 'traffic control'—where platforms can effectively hide or promote vendors based on their willingness to participate in price wars—is coming to an end. By codifying these restrictions, Beijing aims to foster a market where competition is based on service quality and efficiency rather than the depth of a company's venture capital pockets.