Shares of Alibaba Group Holding Ltd and JD.com Inc fell sharply in Hong Kong on June 11 after Chinese regulators reprimanded them for misleading sales promotions during the annual 618 midyear online shopping festival [1, 2, 3]. Alibaba shares declined about 5.9% to 6.5% intraday, marking their biggest drop in nearly three months [1, 2, 3]. JD.com shares dropped almost 6%, the steepest decline since November [1, 2, 3].
The Beijing branch of the State Administration for Market Regulation summoned Alibaba, JD.com, PDD Holdings, ByteDance, and Xiaohongshu over false advertising practices related to the festival [1, 2, 3]. Regulators criticized the e-commerce giants for promoting tens of billions of yuan in subsidies without clarifying the actual amounts or details of these subsidies [2, 3]. Alibaba's marketplaces Tmall and Taobao and JD.com failed to disclose information on subsidies granted by the companies and participating brands [2, 3].
The crackdown is part of Beijing's ongoing effort to curb destructive price wars among major e-commerce firms that erode profits [2, 3]. It also marks a tightening of regulatory scrutiny amid weak consumer demand and worries about profitability in China's economy [2, 3]. Consumer prices in China rose only 1.2% in May, below expectations, signaling sluggish demand [2, 3].
Robert Lea, a Bloomberg Intelligence analyst, said the action "signifies further tightening of regulatory scrutiny" [2].
The reprimand and share declines come as Beijing has increased enforcement to ensure transparency and fair competition during major shopping events following complaints about deceptive promotions and inflated price cuts [1, 2, 3].
