Food delivery platforms set for healthier growth

China's latest efforts to regulate the management of food delivery service platforms are expected to maintain fair market order, curb "involution-style" competition and promote the healthy, orderly and sustainable development of the platform economy, experts said.

Their comments came after the State Administration for Market Regulation on Wednesday began soliciting public feedback on a set of draft guidelines focused on the charging and promotional activities of platforms, and better protecting the rights and interests of delivery staff.

The move is aimed at helping food delivery platforms standardize service management and improve service quality, while reducing the burden on merchants and guiding platform enterprises to compete in a fair and orderly manner.

The draft guidelines clearly stipulate the fee items and amounts that food delivery platforms can charge merchants, prevent nontransparent charging practices, and encourage platforms to establish a mechanism for reducing technical service fees and to gradually lower basic commission fees.

The protection of delivery staff rights has long grabbed public attention. The draft concentrates on delivery staff wages, working hours and social security benefits, specifying that the wage distribution mechanism should be continuously improved to align with such employee workloads and labor intensity.

It said platforms should reasonably limit the duration of delivery staff's order-taking to prevent overwork and excessive fatigue that could pose health and safety risks. For those who have been taking orders continuously for more than four hours, the platform should issue fatigue alerts.

The launch of the draft guidelines followed cutthroat competition in the country's food delivery sector in recent months, with major players offering huge discounts and subsidies to grab a bigger slice of the pie, which triggered a relentless price war.

Li Qiangzhi, deputy director of the policy and economics research institute at the China Academy of Information and Communications Technology, said, "In recent years, platform charging rules and subsidy requirements have become increasingly complex, leading to a situation where merchants cannot understand, figure out or accurately calculate the fees, making it difficult for them to accurately assess costs and expected revenues."

Li said that the draft guidelines require platforms to formulate special support measures such as fee reductions or exemptions for micro, small and medium-sized enterprises, and include a number of targeted provisions that explicitly require platforms not to directly or implicitly require merchants to share the costs of promotional activities.

The draft guidelines will urge and guide platforms to move away from irrational competition characterized by excessive subsidies and disorderly expansion, but rather toward high-quality competition, with a key focus on improving services and bolstering innovation, said Zhai Wei, executive director of the Competition Law Research Center of East China University of Political Science and Law.

Chinese leading food delivery platforms — Alibaba Group-backed Ele.me, Meituan, and JD — vowed in August to rein in aggressive discounting practices, resist disorderly and vicious competition, and foster a win-win ecosystem.

Their move came after the SAMR summoned the three leading food delivery platforms on July 18, urging them to regulate their promotional activities and engage in rational competition.

Pan Helin, a member of the Ministry of Industry and Information Technology's Expert Committee for Information and Communication Economy, said charging practices of platforms are expected to become more transparent in the future with the launch of the guidelines, and the distribution of benefits among consumers, merchants, riders and platforms will be more transparent.

Pan emphasized that the transparency and standardization in fees can guide the food delivery sector to shift from "involution-style" competition to healthy competition, thus promoting the healthy and sustained development of the platform economy.

Cao Lei, director of the Internet Economy Institute, a domestic consultancy, said the continuous steep discounts and price war pose challenges to platform companies' profitability, intensify competition and further squeeze the survivability and viability of small and medium-sized merchants.

It is of vital significance to safeguard a fair and orderly market environment and avoid "involution-style" competition in the food delivery sector, which is experiencing a prolonged price war, Cao said.

He added that food delivery platforms should increase investments in technologies such as artificial intelligence-powered algorithms and intelligent scheduling to enhance fulfillment efficiency, while optimizing supply chain management, safeguarding the legitimate rights and interests of consumers, and improving the welfare of delivery staff.

Lyu Jinkai contributed to this story.