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

On September 15, the State Administration for Market Regulation, together with the Ministry of Culture and Tourism, held a meeting with online hotel booking platforms including JD.com and Ctrip.

The meeting pointed out that fair competition is the cornerstone of a market economy governed by the rule of law, and compliance management is the lifeline of enterprise development. In recent years, China's online hotel booking platform service industry has developed rapidly, playing a positive role in facilitating people's daily lives and promoting tourism consumption. At the same time, competitive risks cannot be ignored. As key players in the industry, online hotel booking platform enterprises must strictly adhere to legal boundaries, uphold fair competition, strengthen compliance management, and promote the standardized and healthy development of the industry.

The meeting required all platform enterprises 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, and the Electronic Commerce Law of the People's Republic of China.

Expert Analysis on Industry Competition Issues

Song Xiangqing, Vice President of the China Society of Business Economics and founder of Huadebang, told a reporter from China Business News that the root cause of the chaotic involution competition in the online hotel booking industry lies in the network effects of platform traffic and the battle for market share, compounded by the highly fragmented hotel supply side and the weak bargaining power of small and medium-sized hotels. To capture users and room resources, platforms use traffic incentives and resource rewards as leverage, lock in high-quality hotels through exclusive cooperation, enforce "lowest price across the entire network" through technical means, and use traffic rewards and penalties to force merchants to accept unreasonable transaction conditions. This creates a vicious cycle of "grabbing room supply — suppressing prices — squeezing merchant profits," leaving hotels with no bargaining power and forcing them into low-price competition, resulting in the dilemma of "full occupancy but no profit."

"Against the backdrop of a sustained recovery in cultural and tourism consumption, the joint administrative guidance meeting by the two departments sends a clear signal of normalized regulation of the platform economy," Song Xiangqing analyzed. "On one hand, it uses past cases as a warning, setting competitive red lines for the entire industry, rectifying involution behaviors such as exclusive cooperation and forced 'lowest price across the entire network,' and safeguarding hotel merchants' rights to independent operation and pricing. On the other hand, it aims to reverse the distorted competition model of pure price competition, guiding the industry toward competition based on service quality, balancing the interests of platforms, hotels, and consumers, maintaining a fair and orderly development environment in the tourism market, and helping to release high-quality cultural and tourism consumption."

Platform Responses

On September 15, Meituan issued a statement pledging to resolutely implement compliance requirements for the online hotel booking industry. Ctrip also issued a statement expressing its firm commitment to comply with relevant requirements and actively cooperate with industry regulators to promote the healthy and orderly development of the online tourism market.

Expected Impact of Industry Regulation

In Song Xiangqing's view, after industry regulation and rectification:

• For platforms: They need to abandon the old path of relying on exclusivity and low prices to grab market share, and instead shift toward optimizing services, improving operational efficiency, and creating differentiated products for competition.
• For offline hotel suppliers: They will regain the right to operate across multiple platforms and set their own prices, free from the constraints of traffic penalties, and will be able to earn reasonable profits based on service quality, improving their profitability.
• For ordinary travelers: The market will return to an environment of full price comparison, with consumers having more room choices. The industry will shift from pure price competition to quality-based pricing. In the long term, this will benefit the improvement of accommodation service quality. However, in the short term, some platform subsidies may shrink, and the prices of certain room listings may undergo structural changes.

Broader Policy Context on "Anti-Involution"

Over the past two years, the central government has repeatedly signaled an "anti-involution" stance. The crackdown on "involution-style" competition has evolved from individual industry-specific rectifications into a coordinated effort supporting the establishment of a unified national market.

Cai Wei, President of the KPMG China Economic Research Institute, told reporters that "anti-involution" cannot rely solely on administrative measures but also depends on establishing a fairer competitive market order. First, the government should accelerate the improvement of regulatory and legal frameworks, such as revising the Price Law and other laws and regulations, setting product quality standards across industries, and expanding the coverage of mandatory national standards. Second, changing the price-only orientation in the end market is equally crucial. This requires the government to take the lead in reshaping procurement evaluation and policy guidance mechanisms, establishing a market logic of "quality over price." Finally, policies should continue to increase support for enterprise R&D and innovation, stimulating corporate R&D motivation. The ultimate solution to "involution" lies in technological and application innovation. Policies should continue to increase support for basic research and key generic technology R&D, and strengthen intellectual property protection.

(Source: China Business News)