China's Regulators Order Online Hotel Booking Platforms to End Exclusive Deals and 'Lowest Price' Practices

Beijing – On September 15, the State Administration for Market Regulation (SAMR), together with the Ministry of Culture and Tourism, convened an online meeting with hotel booking platforms including JD.com and Ctrip.

Key Points from the Meeting

The meeting emphasized that:

• Fair competition is the legal cornerstone of a market economy
• Compliant operations are essential for corporate development
• China's online hotel booking platform industry has grown rapidly, benefiting tourism consumption and daily life
• Competitive risks in the sector must not be overlooked
• Platform enterprises must strictly observe legal boundaries, uphold fair competition, and strengthen compliance management

Regulatory Requirements

All platform enterprises were instructed to strictly comply with:

• The Anti-Monopoly Law of the People's Republic of China
• The Anti-Unfair Competition Law of the People's Republic of China
• The Electronic Commerce Law of the People's Republic of China

Industry Analysis

Song Xiangqing, Vice President of the China Society of Business Economics and founder of Huade Ranking, told the China Business Journal that the root causes of chaotic "involution" competition in the online hotel booking industry include:

• Network effects of platform traffic and market share battles
• Highly fragmented hotel supply side
• Weak bargaining power of small and medium-sized hotels

According to Song, platforms use traffic allocation and resource incentives to:

• Lock in high-quality hotels through exclusive partnerships
• Enforce "lowest prices across the entire internet" via technical means
• Force merchants to accept unreasonable trading terms through traffic rewards and penalties

This creates a vicious cycle of "grabbing room inventory — suppressing prices — squeezing merchant profits," leaving hotels with "full occupancy without profitability."

Song further noted that the joint administrative guidance meeting signals normalized regulation of the platform economy. It aims to:

• Draw red lines for competition across the industry
• Rectify "involution" behaviors such as exclusive partnerships and mandatory lowest-price policies
• Safeguard hotel merchants' autonomous operation and pricing rights
• Shift the industry from price-based rivalry to service quality competition
• Balance interests of platforms, hotels, and consumers
• Support high-quality growth in cultural and tourism consumption

Platform Responses

On September 15:

• Meituan issued an announcement committing to implement compliance requirements
• Ctrip released a statement expressing determination to comply, cooperate with industry supervision, and promote healthy development of the online travel market

Expected Market Impact

Song Xiangqing outlined the following post-rectification outlook:

| Stakeholder | Expected Changes | |-------------|------------------| | Platforms | Shift from exclusivity and low-price strategies to service optimization, operational efficiency, and differentiated products | | Hotel suppliers | Regain multi-platform operation and independent pricing rights; break free from traffic penalty constraints; earn returns based on service quality | | Tourists | Return to full price comparison environment; more accommodation choices; shift from pure price competition to value-for-money offerings | | Short-term risks | Possible contraction of low-price subsidies; structural price changes for certain rooms |

Broader Policy Context

Over the past two years, central authorities have repeatedly signaled efforts to combat "involution." Rectifying "involution-style" competition has evolved from industry-specific campaigns to alignment with the construction of a unified national market.

Cai Wei, Dean of the KPMG China Economic Research Institute, stated that combating "involution" requires more than administrative measures. Key steps include:

• Accelerating legal and regulatory improvements, such as amending the Price Law
• Setting product quality standards across industries
• Expanding mandatory national standards coverage
• Reshaping procurement evaluation and policy guidance to establish a "good quality at good prices" market logic
• Increasing support for corporate R&D and innovation
• Strengthening intellectual property protection

Cai emphasized that the ultimate solution to eradicating "involution" lies in technological and application innovation.

Source: China Business Journal