On June 11, the e-commerce giants Taobao (Tmall), JD.com, Pinduoduo, Douyin, and Xiaohongshu were summoned by the Beijing Municipal Market Supervision Administration for a centralized meeting. The issues highlighted for these platforms mainly include false advertising in promotional activities, irregularities in setting and disclosing promotion rules, and non-disclosure of information regarding the operators of the goods.
Following the exposure of this news, it quickly drew attention, with many mainland Chinese internet users expressing that these issues are not new, but have been persisting in the major e-commerce platforms during big promotion events for many years.
According to the official report, Taobao (Tmall) platform has been extensively promoting the “618 Billion Subsidy” campaign since May this year on various media and applications. However, the regulatory authorities stated that the so-called “billion subsidy” is not specifically an additional investment of billions of yuan to subsidize consumers during the “618” period, but rather a long-standing marketing activity.
The platform failed multiple times to provide the actual amount of subsidies invested during the “618” campaign, as well as the funding ratio between the platform and the merchants.
Pinduoduo’s “Billion Subsidy” campaign also did not clearly state the actual subsidy amount and the funding ratio between the platform and merchants in its rules, nor could it provide relevant supporting documentation.
JD.com’s “Billion Subsidy” and “Billion Agricultural Subsidies” campaigns were criticized for not disclosing the promotion period, not specifying the actual investment amount and the sharing ratio between the platform and merchants, and for not providing the corresponding documentation; its “Billion Supermarket” campaign also did not disclose relevant rules.
Douyin’s “618 Good Products Festival” and “Billion Consumer Voucher” campaigns were also criticized for not clearly disclosing complete promotion rules to consumers. In the recruitment rules of the campaign, the platform reserved the right to directly modify the rules and notify the merchants without having an open comment solicitation process.
Xiaohongshu’s platform’s “Points Draw Gifts” sales event was also singled out for incomplete information disclosure. The platform only indicated the total number of prizes without disclosing the winning probability, forfeiture rules, and other key information.
The above news sparked widespread discussions and quickly trended on social media.
Many netizens believe that the “billions in subsidies” are more of a marketing concept rather than platforms actually investing billions of yuan during specific promotional periods.
Some netizens pointed out that it is unclear whether the so-called billion subsidies are funded by the platform or if merchants are offering discounts. Consumers have no way of knowing; it appears that while the platforms are seemingly offering large discounts, there is a lack of transparent proof regarding the actual investment amount.
In recent years, the price war in China’s e-commerce industry has intensified. From “9.9 with free shipping” to “billion subsidies,” and various promotions like discounts, red envelopes, and coupon stacking, promotion rules have become increasingly complex. Some consumers even joke that they have to study a large number of the rules for discounts every time there is a big promotion, making it feel like solving math problems.
Many consumers also question the existence of the “raising prices before discount” phenomenon in some products, where the discounts do not actually lead to significant price reductions, but rather increase the cost of making shopping decisions.
Pinduoduo first introduced the “Billion Subsidy” in 2019 by attracting users quickly through substantial subsidies for popular products like Apple phones. Subsequently, platforms such as JD.com, Taobao, and Douyin followed suit, making “Billion Subsidies” gradually become an important promotion label in China’s e-commerce industry.
However, for many years, there has been no transparent mechanism for disclosing how much subsidy funding platforms have actually invested and how much costs merchants have borne.
Liu Xiaochun, Director of the Internet Rule of Law Research Center at the China Academy of Social Sciences University, told the “New Beijing News” that the various platforms competing to launch “Billion Subsidies” may pose a risk of “internal competition.”
He said that the irrational large subsidies of some platforms not only distort the market price mechanism but may also lead to situations where merchants bear the subsidy costs. If merchants do not participate in price-reduction activities, they lose traffic; participating may result in losses, severely compressing profit margins.
Financial blogger “Love Finance Bear” analyzed that this mutual consumption of their own resources, known as “internal competition,” may ultimately lead to a situation where all parties lose.
“Love Finance Bear” said that from a merchant’s perspective, prolonged price wars continuously squeeze profit margins, putting small and medium-sized businesses in a dilemma of “no traffic without lowering prices or losses when reducing prices”; from a consumer’s perspective, false advertising, complex rules, and offers that are hard to distinguish between genuine and fake, weaken the shopping experience; for platforms, relying on price wars and marketing gimmicks to gain traffic may boost short-term performance, but in the long run, it may overdraw the platform’s credibility and brand value.
The blogger pointed out that what should have been a promotional activity benefiting consumers has gradually evolved into a consumption war where platforms, merchants, and consumers all bear the cost under fierce competition.