China Bans Platforms from Forcing Merchants into Subsidies or Promotions
Nine Chinese government departments, including the Ministry of Commerce, have jointly issued an opinion on accelerating the innovative development of the retail industry. The new guidelines aim to regulate platform operators' behavior towards merchants, specifically prohibiting them from forcing businesses to bear subsidy costs or participate in promotional activities. This move seeks to prevent platforms from indirectly compelling merchants to cover promotional expenses or engage in practices like '0 yuan purchases.'
The opinion also emphasizes supporting brand owners in establishing reasonable pricing systems to reduce price disparities between online and offline channels. It calls for the implementation of existing regulations like the 'Rules on Pricing Behavior of Internet Platforms' and the 'Measures for the Supervision and Administration of Network Trading Platform Rules.' The focus will be on rectifying false advertising, fake promotions, deceptive discounts, and unfair pricing. Furthermore, platforms will be required to clearly display prices and the rules, duration, and scope of promotional activities.
This directive signals a significant regulatory shift aimed at rebalancing power between dominant e-commerce platforms and independent merchants in China. By prohibiting mandatory merchant participation in subsidies and promotions, authorities are attempting to curb exploitative practices that can strain small businesses and distort market competition. The emphasis on transparent pricing and promotional rules suggests a broader effort to foster a more predictable and equitable retail environment. Looking ahead, this policy could encourage platforms to innovate in service provision and value creation rather than relying on mandated merchant contributions, potentially leading to more sustainable business models across the retail ecosystem.
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