Regulatory Shifts in China's Food Delivery Sector: A Turning Point for Sustainable Growth?

The food delivery sector in China is at a crossroads. Regulatory crackdowns, led by the State Administration for Market Regulation (SAMR), have upended the dominance of longtime giants like Meituan and Alibaba’s Ele.me, while newcomers like JD.com exploit the resulting chaos. This isn’t just a battle for market share—it’s a race to align with Beijing’s vision of a “fair competition” ecosystem. For investors, the stakes are clear: firms that adapt to antitrust mandates and prioritize worker/consumer welfare (ESG compliance) could build durable moats, while laggards face margin erosion and reputational risk.

A Regulatory Reset, Led by SAMR
The SAMR’s relentless pursuit of antitrust enforcement has reshaped the sector. In 2021, Meituan was fined $478 million for abusing its dominant position—most notably, forcing restaurants to choose only its platform via “exclusive contracts.” Fast-forward to February 2025, and SAMR extended Meituan’s rectification period indefinitely, citing ongoing anti-competitive practices. This move, paired with the regulator’s broader focus on labor rights and pricing transparency, has created an uneven playing field.

The result? Dominant players face pressure to abandon tactics like predatory pricing and exclusive agreements. Meanwhile, newcomers like JD.com are capitalizing on the vacuum.

JD.com’s Bold Disruption: Zero Commissions and Full-Time Riders
JD.com’s February 2025 launch of its “Quality Canteen” platform was a masterstroke. By waiving commissions for merchants until May 1 and offering full-time delivery riders robust benefits (including housing funds and social security), JD struck at the core of Meituan’s business model. The strategy has forced rivals to respond:

• Meituan and Ele.me have upgraded rider benefits, but details remain vague.
• Merchant enthusiasm for JD is high, with some receiving RMB 200 per onboarded competitor.

The move isn’t without risks. JD’s operational disarray—technical hurdles for merchants and scalability challenges—could undermine its gains. Yet its financial firepower (backed by JD’s logistics arm, Dada Nexus) gives it staying power.

Data shows Meituan’s shares down ~30% in 2025, while JD’s delivery-related segment gains traction.

Antitrust as a Catalyst for Cost Discipline
The regulatory push isn’t just about breaking up monopolies—it’s about forcing firms to earn their dominance through efficiency, not exploitation.

1. Pricing Power Under Siege:
2. JD’s zero-commission model has eroded Meituan’s revenue streams. Restaurants, long burdened by 20%+ fees, now have alternatives.

3. SAMR’s scrutiny of “exclusive contracts” has stripped Meituan of its grip on merchants.

4. Labor Costs as a Competitive Weapon:

5. JD’s full-time rider model—targeting 100,000 hires—positions it as an ESG leader, attracting socially conscious investors.
6. Meituan’s reliance on gig workers now carries reputational risk.

Margins for both have compressed as labor costs rise and commissions decline.

ESG Compliance: The New Moat
Regulators aren’t just targeting monopolies—they’re prioritizing consumer and worker welfare. Firms that lead in ESG metrics stand to gain:

• Worker Benefits: JD’s rider policies set a new baseline. Meituan’s gradual rollout of social insurance for part-time workers lacks the urgency needed to compete.
• Consumer Trust: SAMR’s transparency mandates (e.g., pricing algorithms) favor firms with open, fair systems. Meituan’s opaque practices, under scrutiny since 2021, remain a liability.

Investment Implications: Pick the Compliant Winners
The sector’s shakeup creates two clear investment paths:

1. Bet on the ESG Leader:
2. JD.com: Despite short-term losses (JPMorgan estimates a potential ¥18 billion annual deficit by 2025), its labor reforms and regulatory alignment position it to capture long-term market share.

3. Risk: Execution hurdles and capital-intensive scaling.

4. Buy the Turnaround Play:

5. Meituan: Its operational efficiency (unit economics of RMB 1.45/order in 2024) and entrenched user base give it a fighting chance. But success hinges on SAMR’s goodwill.
6. Risk: Prolonged regulatory pressure and margin compression.

Avoid the Laggards:
- Alibaba’s Ele.me: Struggles to differentiate in a battle against JD’s pricing and Meituan’s scale. Its 30% market share may shrink further.

Conclusion: The Tide Is Turning
Beijing’s regulatory push isn’t a temporary headwind—it’s a structural shift. Firms that prioritize ESG compliance, operational efficiency, and fair competition will thrive. For investors, the time to act is now: selective bets on JD’s disruptive vision or Meituan’s operational resilience could yield outsized returns as the sector resets.

The race isn’t just about delivery—it’s about delivering on China’s new rules.