Promoted "2 Trillion Won Subsidy" for Shopping Festival, but Why Did China Issue a Warning?

Crackdown Intensifies Ahead of "6·18 Shopping Festival"

Chinese authorities have issued warnings to the five major e-commerce platforms, including Taobao and JD.com, demanding corrective action against unfair practices such as false promotions. This measure comes ahead of the "6·18 Shopping Festival," one of China's largest online shopping events.

The 6·18 Shopping Festival began in 2004 to commemorate the founding of JD.com on June 18th and offers a variety of discounts. Along with Singles' Day on November 11th, which was launched by Taobao in 2009, it is considered one of China’s two major discount festivals.

Since then, the festival has evolved into a nationwide consumer event with active participation from most e-commerce platforms—including Pinduoduo, Douyin, and Xiaohongshu—as well as offline retail businesses.

The previously held 'Taobao Maker Festival'. Photo by The Asia Business Daily Database

According to Yonhap News on June 11th, citing China Central Television (CCTV), the Beijing Municipal Administration for Market Regulation summoned representatives from e-commerce platforms such as Taobao, JD.com, Pinduoduo, Douyin, and Xiaohongshu. The authorities notified them of problematic practices they had detected, including false promotions, incomplete promotion rules, and lack of public disclosure regarding product operator information, and urged them to make corrections.

The report noted that Alibaba’s Taobao and Tmall, as well as JD.com, did not transparently disclose the detailed breakdown of subsidies actually paid by the companies and participating brands.

Taobao heavily promoted a "10 billion yuan (about 2.26 trillion won) subsidy" campaign during the 6·18 event. However, it was revealed that Taobao did not offer a one-time payment of 10 billion yuan, but rather used the term to refer to a long-term marketing campaign.

Pinduoduo also conducted a "10 billion yuan subsidy" event, but did not specify in its terms and conditions the actual amount of subsidies invested or the cost-sharing ratio between the platform and sellers, nor did it provide supporting documentation. Douyin was found to have failed to disclose specific promotion rules to consumers. In the case of Xiaohongshu’s "earn points for a chance to win a prize" event, only the total number of prizes was stated, while key information such as the probability of winning or the conditions under which prizes could not be claimed was not clearly specified.

Liu Xiaochun, Director of the Center for Internet Law and Governance at the University of Chinese Academy of Social Sciences, stated, "Platforms competitively launching '10 billion yuan subsidies' can trigger cut-throat competition, which is detrimental to the healthy development of the industry. Irrational subsidy promotions distort the market price mechanism and may shift the burden to some merchants operating on the platform."

In this regard, the Beijing Municipal Administration for Market Regulation urged, "Platforms should shift their focus from subsidy and price competition to innovation and service competition to promote win-win growth among platforms, operators, and workers."

This content was produced with the assistance of AI translation services.