Cover Story: Tightening the Rule Book to Make China’s Internet Platforms Fairer

20 Jan 2025

By Guan CongSun YanranBao Yunhong and Denise Jia

China’s internet platform economy is coming under closer scrutiny as a new wave of regulatory action gets underway.

Unlike previous rounds, which focused on curbing platform expansion and monopolistic behavior, this phase is putting the emphasis on setting rules, increasing algorithm transparency and balancing the power dynamics among suppliers, users and platforms.

On Nov. 22, 2024, Premier Li Qiang chaired a State Council executive meeting, underscoring the importance of orderly competition and enhanced regulatory norms. The meeting urged platforms to adopt fair business practices, improve quality and safeguard the rights of both customers and those who work in the sector.

Proposed measures included publicizing online complaints and refining labor practices to improve the role of platforms in job creation.

A veteran from the service platform said the meeting set priorities for the sector which included preventing price wars between e-commerce platforms, clarifying refund policies, increasing the transparency of algorithms and addressing unfair practices such as price discrimination and the exploitation of employees.

Chen Tianhao, associate professor at Tsinghua University’s School of Public Policy and Management, told Caixin that the meeting’s focus on fair competition and protecting the rights of customers’ and workers’ rights aimed to stabilize employment — vital in boosting domestic demand and driving supply-side improvements.

China’s two largest e-commerce platforms, Taobao and JD.com, are facing growth challenges, with only Pinduoduo achieving growth against the trend.

With nearly 1.1 billion internet users, an 80% internet penetration rate and booming digital consumption, China’s platform economy remains integral to its overall economy. By mid-2024, sectors such as short videos, e-commerce, food delivery and online travel collectively engaged hundreds of millions of users, driving a 9.8% year-on-year growth in online retail to 7.1 trillion yuan ($970 billion).

Since 2020, platform oversight has evolved — from strict antitrust investigations to a phase in which moderated growth is encouraged. The Central Economic Work Conference in late 2022 marked a shift, urging platforms to contribute more to economic development, job creation and global competitiveness.

China’s declining economic growth, however, has exposed new challenges, prompting intensified regulatory efforts. Key measures included curbing e-commerce price wars, addressing exploitative refund policies and tackling algorithmic biases. The Cyberspace Administration of China launched the “Clean Algorithm” initiative, which targeted harmful algorithmic practices and mandated platforms to carry out self-checks by the end of 2024.

The sector has already responded. Major e-commerce platforms are revising refund policies, while delivery giants like Meituan and ele.me are introducing measures to protect workers, such as systems to prevent overtiredness and the removal of penalties for late deliveries. Short video platforms such as Douyin and Kuaishou are enhancing algorithm transparency and promoting responsible content.

Experts are recommending a governance model that balances regulatory oversight with platform-driven ecosystem management. Excessive government intervention could stifle innovation, while platforms must adopt self-regulatory practices to improve service quality and foster sustainable growth, said Chen Hongmin, professor at Antai College of Economics and Management of Shanghai Jiao Tong University.

Crackdown on addiction

China’s internet content platforms face growing scrutiny as regulators target algorithm-induced user addiction and “information silos.” These practices, widely adopted to encourage the engagement of users, have been criticized for limiting content diversity and fueling societal risks.

Content platforms rely on data-driven distribution to analyze user behavior to predict preferences and deliver a steady stream of relevant content. While this boosts user retention and monetization through ads and e-commerce, it traps users in repetitive content cycles, which can lead to addiction and isolates them within narrow information silos.

Short video platforms are the main offenders. As of September, short videos accounted for 22.7% of Chinese mobile internet users’ total online time, according to Quest Mobile. Apps like Douyin — TikTok’s Chinese counterpart — and Kuaishou dominate the market, holding nearly 70% of user time in this category. Their reach has heightened concerns about content diversity and the well-being of users.

To address these issues, regulators banned algorithmic models that encourage addiction and demanded greater transparency in how content is presented. Platforms can no longer require users to select interest tags or manipulate rankings to evade oversight.

Platforms such as Douyin and Kuaishou are implementing changes. Douyin is experimenting with diversity-focused algorithms, while Kuaishou collaborates with Tsinghua University to address recommendation biases. Both aim to balance user preferences with content variety to improve engagement without compromising ethics.

To comply with the new regulations, platforms now allow users to manage interest tags and disable personalized recommendations. However, accessibility to these tools varies — Kuaishou offers straightforward settings, while Douyin’s features are harder to locate and require specific searches to adjust recommendation intensity.

Platforms already possess the technical capability to address these issues. For example, Douyin’s youth mapping mode uses algorithms to identify and restrict content unsuitable for minors. Its “video age model” can adjust user profiles based on uploaded content, ensuring safeguards for younger users, said an employee at Douyin’s parent company ByteDance Ltd.

Douyin’s headquarters in Beijing on June 26, 2024

Online violence

Content platforms such as Douyin and Kuaishou are also under pressure to tackle misinformation, cyberbullying and harmful content. These issues threaten public trust, making them a focal point of China’s tighter internet governance.

A recent controversy spotlighted the issue of misinformation when Zhong Shanshan, founder of Nongfu Spring, publicly demanded ByteDance remove defamatory content about him on Douyin and the news platform Toutiao. The rumors, tied to his family and product branding, led to legal actions and highlighted the difficulties platforms face in controlling false narratives.

Platforms struggle to balance regulatory compliance with operational limitations. Under China’s Civil Code, platforms follow a “safe harbor” principle, requiring rights holders to report infringements before content can be removed. While fighting misinformation aligns with platforms’ commercial interests, it requires substantial time and resources, especially for verifying disputed content, Li Liang, Douyin’s vice president, told Caixin.

For controversial content, Douyin applies a tiered moderation approach: extreme emotions, antagonistic attacks and cyberbullying face stricter controls, while general emotional expression is partially allowed. “Algorithms can’t make these distinctions; human judgment is essential,” said Li. “Decisions often rely on experience and intuition, as it is difficult to determine whether certain remarks stem from cyberbullying or genuine social sentiment.”

Cyberbullying is another complex issue. Legal recognition of such behavior is challenging due to its subjective nature. Douyin collaborates with China’s Legal Aid Center to provide victims with legal support. Despite efforts, most reported cases fail to meet the legal threshold for cyberbullying, Li told Caixin.

Viral controversies pose an additional hurdle for content moderation. For instance, in December 2024, former gymnastics champion Wu Liufang’s erotic dance video sparked public outcry, leading to a temporary suspension of her account. While platforms claim not to promote contentious content, natural user interest often drives its visibility, complicating governance efforts.

Regulators are also targeting “toxic videos,” often involving minors in inappropriate or provocative scenarios. In late 2024, authorities intensified efforts to ban such content, penalizing violators and implementing stricter guidelines for youth protection. Enforcement remains uneven, however, with platforms criticized for insufficient action.

In November, Kuaishou was penalized for failing to take down prohibited content and neglecting youth protection measures. Similarly, ByteDance’s short drama app faced temporary suspension after distributing content that broke the rules.

In 2024, Douyin banned 32,000 live-streaming accounts, while Kuaishou aided police in arresting more than 250 suspects linked to illicit activities. Both platforms have reported significant reductions in harmful content exposure through AI-driven initiatives.

Trip.com Group’s headquarters in Shanghai

Labor protections

As China’s gig economy grows, regulators are pressing platforms such as Meituan and Didi to tackle issues such as worker fatigue, declining earnings and unsafe practices. With 84 million gig workers across industries such as food delivery and ride-hailing, balancing effeciency with labor protections is an urgent challenge.

The death of a Meituan delivery rider in September, who collapsed reportedly due to overwork, reignited concerns. Gig workers often exploit platform loopholes to avoid mandatory breaks, swapping between platforms so they can earn more money.

Platforms have started to introduce mechanisms to avoid overtiredness. Meituan now prompts riders to take a break after 8 hours and enforces a mandatory rest after 12 hours. Similarly, Didi requires drivers to rest for 20 minutes after 4 hours of work and insists on a 6-hour break after 10 hours of driving. Drivers say that long wait times between orders undermine these measures, as they struggle to maintain their income levels.

A Meituan rider in Zhuhai said that his monthly income, which used to reach 12,000 yuan, now barely surpass 10,000 yuan, while a Didi driver in Wuhan said his daily earnings had dropped from 500 yuan to 300 yuan over the past two years.

Overwork and falling wages have led to a poorer service. Complaints about unclean or “smelly cars” surged on social media in late 2024, prompting Didi to issue an apology and say it was blacklisting poorly maintained cars and improving driver training. Meanwhile, food delivery riders are resorting to speeding and running red lights to avoid late deliveries.

Platforms have started to introduce incentive-based systems rather than punitive measures to solve these problems. Meituan has begun phasing out late-delivery penalties, replacing them with a points-based system tied to rewards. To reduce delays, Meituan has introduced penalties for merchants who give misleading food preparation times. This has reduced rider wait times by 18%. Additional measures to ensure fair responsibility-sharing between riders and merchants are also being explored.

Both Meituan and Didi are both improving safety education and enforcement. Meituan collaborates with local police to penalize speeding and running red lights, while Didi uses a “reputation score” system to control driver behavior.

Regulators now require platforms to provide clear grievance channels for their employees. Meituan and Didi have set up systems to handle issues such as delivery delays caused by uncontrollable factors, while Didi allows drivers to appeal against customer complaints.

Experts stress that protecting gig workers requires structural reforms. Labor laws, designed for fixed employment, struggle to address the flexible, plug-and-play nature of gig work. A more portable system of worker rights, including basic insurance and safety guarantees, is essential for the future of the gig economy, said Xu Ke, director of Digital Economy and Legal Innovation Center at the University of International Business and Economics.

Price discrimination

Price discrimination based on user profiles, commonly known as “big data killing loyal customers,” has become a controversial but widespread practice in China’s platform economy.

Powered by data analytics, this approach enables platforms to offer different prices to different users — often at the expense of loyal customers. While regulators have called for greater transparency, effective solutions remain elusive.

In 2020, a Ctrip customer successfully sued the online travel booking platform for charging a loyal “high-value” user more than a regular user for the same hotel booking. The court ruled this was fraud, requiring compensation and ordered changes to Ctrip’s privacy policy.

A November survey by consumer associations in Beijing, Tianjin, and Hebei province found that over 40% of respondents had experienced big data price discrimination. Common practices include prices going up after repeated browsing, withholding personalized discounts from long-time users and price discrepancies among users for identical products.

China’s Cyberspace Administration has banned algorithm-driven price discrimination based on factors such as users’ age, occupation or income. Platforms must now clearly disclose coupon eligibility, explain failed coupon claims and avoid misleading messages such as “you missed it.” Enforcing this remains challenging.

Frustrated users have developed countermeasures, such as posting negative reviews. Some users even adopt generic usernames like “momo” to obscure their identities and confuse profiling algorithms. However, platforms can still identify users through permanent data points, such as a phone number or device ID, said Yao Zhiwei, deputy director of the Institute for Law and Economic Development at Guangdong University of Finance and Economics.

Yao argued that not all price differentiation is inherently unfair. Offering discounts to new or inactive users is a legitimate business practice. The key lies in ensuring transparency and preventing monopolistic behavior, said Lv Yanbin, a researcher at the Institute of Law of Chinese Academy of Social Sciences.

A major hurdle in combating price discrimination is the “black box” nature of algorithms. Platforms often resist disclosing their mechanisms, citing trade secrets while regulators lack the technical expertise to analyze sophisticated algorithms. Experts suggest involving independent third parties to audit platforms and provide consumers with a stronger voice.

Price wars

As China’s e-commerce sector faces slowing growth and fierce competition, platforms such as Alibaba’s Taobao, JD.com and Pinduoduo are grappling with the challenge of balancing consumer demands, merchant interests and regulatory scrutiny.

A reliance on aggressive pricing strategies and contentious refund policies has created an unsustainable ecosystem, prompting calls for reform.

E-commerce growth in China has slowed dramatically. Physical goods online retail sales grew by just 6.8% year-over-year from January to November 2024, compared with over 20% pre-2019.

China’s consumer market is saturated with oversupply, pushing platforms into fierce price wars. The 618 mid-year shopping festival in 2024 revolved almost entirely around discounts, a trend that has spread from Pinduoduo to Taobao and JD.com. Platforms leverage their dominance to squeeze suppliers, further eroding the profit margins of merchants.

Contentious refund policies such as “refund without return” have increased tensions between platforms, merchants and customers. Regulators have stepped in, demanding that platforms revise refund rules and establish better grievance mechanisms to protect merchants from malicious claims.

A closed-door meeting in August organized by the State Council focused on issues such as low-price competition and refund abuse. Regulators told platforms to balance consumer and merchant rights. Specific measures include limiting refund scenarios, strengthening merchant autonomy and compensating them for platform-induced losses.

E-commerce giants have begun responding to regulatory demands. Taobao now uses third-party testing to verify refund claims and has introduced algorithms to flag abusive refund behavior, intercepting over 400,000 fraudulent claims a day. Pinduoduo introduced stricter refund assessments and enhanced merchant protections, including unlimited appeals for disputed orders. Meanwhile, Kuaishou and Douyin have adjusted their refund policies to prioritize fairness.

Some platforms are moving away from aggressive discounting. During the 2024 Double 11 shopping festival, Taobao emphasized “value for price” rather than low prices. JD.com and Pinduoduo, however, continue to rely on supply chain efficiencies and low operational costs to sustain their discount-driven models.

Merchants have voiced concerns over rising costs on platforms such as Pinduoduo. In response, Pinduoduo launched initiatives to reduce operating costs and expand market opportunities for merchants. Despite these efforts, many merchants say low prices no longer guarantee the explosive sales they once did.

Experts argue that the core issue is not low prices but whether platforms achieve them through fair competition or by exploiting their dominant positions. Regulators are pushing for greater algorithm transparency and market oversight to prevent platforms from monopolizing consumer and merchant data for unfair pricing.

Contact reporter Denise Jia (huijuanjia@caixin.com)

caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.

Image: Ameer– stock.adobe.com