Who Should Bear the Cost of Delivery Platform Promotions?

China's State Administration for Market Regulation (SAMR) has announced its stance on the competitive structure of the food delivery platform industry. The key message is that platforms must not pass on the costs of their promotional campaigns to participating merchants or delivery drivers.

This announcement is seen as the authorities' first official response to criticisms that intensifying competition among Chinese delivery platforms has been eroding the profitability of franchisees and delivery workers. The SAMR has made clear the principle that when platform operators conduct aggressive promotions to expand market share, the platforms themselves must bear those costs.

Why This Issue Has Emerged

China's delivery market is dominated by major platforms such as Meituan and Ele.me. These companies regularly run large-scale discount coupons and promotions to attract new customers and counter competitors.

The problem lies in the cost-sharing structure. Some platforms have been passing a significant portion of promotional costs onto participating restaurants through increased commission rates or delivery workers through reduced delivery fees. Small business owners and delivery workers have had to bear the full brunt of the platforms' marketing strategies.

Particularly after COVID-19, as delivery demand surged, platforms' negotiating power grew even stronger, and small restaurants became increasingly dependent on platforms, making it difficult for them to speak out against unfair practices.

Shifting Regulatory Perspective

The Chinese government began intensifying regulation of the platform economy in earnest from 2021. Anti-monopoly investigations into big tech companies like Alibaba and Tencent followed, and delivery platforms were no exception.

The SAMR's current position is likely to lead to legally-backed regulations rather than mere recommendations. The authorities take the stance that platforms abusing their market dominance to impose unfair burdens on trading partners can be considered violations of anti-monopoly laws.

Industry observers believe this measure will directly impact delivery platforms' profitability. If platforms must fully bear promotional costs themselves, a decline in profit margins in the short term is inevitable.

Future Outlook [AI Analysis]

This regulation is likely to trigger structural changes in China's delivery market. Platforms are expected to shift their competitive focus from indiscriminate price wars to improving service quality and operational efficiency.

For small business owners and delivery workers, cost burdens may decrease in the short term, but actual benefits could vary depending on how platforms respond. There remains room for platforms to respond by restructuring their commission systems or introducing new fee categories.

The key going forward will be the effectiveness of regulatory enforcement. How closely authorities monitor platforms for cost-shifting practices and what level of sanctions they impose for violations will determine the overall transformation of the industry.