On July 25, the State Administration for Market Regulation slapped Ctrip Group with an administrative penalty for leveraging its dominant market position to engage in monopolistic conduct.

The total penalties, including fines and confiscations, amounted to RMB 5.179 billion. This sum comprised RMB 1.658 billion in confiscated illegal gains and a fine of RMB 3.521 billion, calculated at 7.5% of Ctrip's 2025 domestic sales revenue, which stood at RMB 46.958 billion. Additionally, the platform was mandated to refund RMB 122 million in compulsorily deducted order reserves to hotel operators.

The regulatory penalty against Ctrip for its violations hinges on two primary issues: first, using traffic incentives to coerce 'premium-branded' hotels into exclusive partnerships; second, compelling 'gold-branded' and unbranded hotels to offer the lowest prices across all platforms, with non-compliance resulting in traffic restrictions, delisting, and reserve deductions.

In terms of financial magnitude, Ctrip's penalty falls between those imposed on Alibaba and Meituan. Nevertheless, the 7.5% fine ratio signals that Ctrip's violations have reached a critical juncture. Whether through exclusive cooperation, mandatory lowest pricing, or price adjustment mechanisms, Ctrip is exploiting its dominant position to directly intervene, influence, and even dictate merchants' operational rules, thereby meddling in hotel management.

Ronald Coase, in his seminal work 'The Nature of the Firm,' posited that firms emerge to substitute internal commands for market transactions, thereby reducing transaction costs.

One primary objective of reducing transaction costs is to enhance efficiency. Over the years, to improve efficiency and achieve superior economic outcomes, authorities have often delegated certain powers to enterprises across various sectors, enabling them to take center stage and assist in enhancing overall efficiency.

In the nascent stages of online travel platforms, certain market organizing functions were indeed delegated to these platforms, including matchmaking, ranking, credit evaluation, performance guarantees, and initial dispute resolution. The essence was to leverage the platforms to foster a virtuous cycle within the industry ecosystem and achieve more acceptable efficiency gains.

However, as platforms expanded and the Matthew effect took hold, leading platforms began to disrupt this ecological balance by exploiting their dominant positions. Platforms initially entrusted with facilitating smoother market matchmaking started to overreach, seizing powers that did not rightfully belong to them, such as punishment rights and final interpretation rights.

The crux of Ctrip's penalty lies in its privatization of certain public functions delegated by the authorities, using them to serve the company's sustained and deep-seated profit-making objectives.

In a 2026 Fortune China 500 sub-list ranking the 40 companies with the highest net profit margins, Ctrip ranked second, boasting a net profit margin exceeding 50%. While this figure includes investment gains, it still necessitates a rigorous examination of Ctrip's profitability.

There is nothing inherently wrong with a company being established for profit. However, the means to achieve profit must be constrained. If the powers delegated to the platform by various stakeholders are self-absorbed without restraint, the allocation of traffic and interests will shift from being an efficiency tool to becoming a private asset. The immense traffic and potential profits amassed from millions of merchants will become a weapon for the platform to assert its dominance.

In fact, looking back over time, Ctrip was not always like this.

Over the past two decades, Ctrip has addressed numerous industry pain points in a highly fragmented sector with low online penetration, such as mismatched goods, unstable performance, and poor after-sales service. It has transformed hundreds of thousands of hotels in the industry into standardized products that consumers can book with a single click. In recent years, it has further enhanced the user travel ecosystem through SOP process construction, addressing shortcomings in industry infrastructure. This has also made it difficult for competitors to effectively divert traffic from Ctrip.

During this process, Tongcheng and Tuniu were taken under its wing, while Qunar and eLong were incorporated into the Ctrip system. Although industry concentration gradually increased, everything was once tacitly approved: the strengthening platform had saved costs for all parties in terms of communication, price comparison, and accountability, leading to overall improvement and controllability.

However, ensuring that increasingly powerful platforms truly exercise self-restraint and that delegated powers are constrained internally may be an eternal challenge.

In terms of GMV, in the domestic online hotel reservation platform services market, Ctrip's market shares from 2020 to 2025 were 53.5%, 54.0%, 53.3%, 59.1%, 58.3%, and 58.7%, respectively. In terms of operating revenue, its shares for the same period were 53.4%, 51.5%, 51.1%, 58.9%, 58.5%, and 56.8%.

Given such clear industry dominance, hotels find it difficult to afford not being on Ctrip. The cost is essentially equivalent to withdrawing from mainstream online channels. Especially in areas where high-star hotels have higher Average Daily Rates (ADRs) and Ctrip's business development coverage is more aligned, the platform's grip on key supply is even stronger.

More critically, the operational tools originally designed to enhance efficiency have gradually changed in nature over time, effectively transforming into means of suppression to achieve greater dominance.

In the past, if a dominant enterprise wanted to infiltrate and control its upstream and downstream sectors, it often required capital investment. However, in today's platform economy, direct capital participation is no longer necessary; mere traffic allocation can covertly control merchants' presence and significantly impact their actual operations.

In fact, both this penalty and previous reports on Ctrip have repeatedly pointed out that platform tools such as premium branding, gold branding, mandatory lowest pricing, price adjustment tools, listing services, and order reserves are evolutions of such control.

The essence lies in the platform's deep overreach of its powers—beyond efficiently fulfilling its role and facilitating matchmaking, the platform acts more like a de facto governing body with 'legislative' clauses, inspection methods, and enforcement penalties for merchants.

Although the platform deducts merchant reserves and restricts traffic, the outcome of restricting merchants has objectively taken shape. From this perspective, compared to previous antitrust cases where platforms imposed 'either-or' choices on merchants, at least merchants had some options then. This Ctrip case represents a further step, with more overtly transgressive behavior that is also more covert.

Therefore, what is even more alarming than Ctrip's penalty is that once dominant platforms begin to abuse and covertly privatize delegated powers, even transforming from players into referees, such more covert and sophisticated 'misconduct' becomes increasingly difficult to govern.

This may also explain Ctrip's record-high 7.5% fine ratio.

During the process of power delegation, once it involves the right to formulate competition rules, the de facto coercive power over market entities, and the final adjudication power after disputes arise, the difficulty and complexity of the game increase sharply. At this point, ensuring that companies receiving delegated powers are aware of their boundaries has never been an easy question to answer.

In fact, before Ctrip was formally penalized by the regulatory authorities, local regulatory departments in Guizhou, Zhengzhou, and other places had also summoned the platform for discussions. On the consumer side, this penalty does not address controversies such as big data-driven price discrimination and bundled sales. These issues mostly fall under consumer protection, pricing, and e-commerce regulations, and are not part of this case involving abuse of dominant market position.

Therefore, relying solely on an antitrust penalty to improve the experience of all parties in the OTA industry may not be realistic. This is destined to be a protracted struggle.

For Ctrip, a penalty exceeding RMB 5 billion is unlikely to fundamentally shake the company's dominant position, as it still possesses the strongest supply organization capabilities in the Chinese tourism industry. A single penalty cannot change the company's industry status, but it can delineate the boundaries within which the company must operate.

Currently, the online penetration rate in the tourism industry has reached a high level, and the bargaining power derived from exclusive supply and lowest-price lock-ins has been negated by regulators. From a business perspective, in the future, Ctrip will need to compete with other rivals in terms of service quality, supply chain depth, international performance, and other tangible strengths. Compared to its previous model, earning such 'hard-earned money' will not be as easy.

On the other hand, nothing is absolute. To some extent, as an industry leader, the ecological health of the industry itself is equivalent to the company's own well-being. This may be the true significance of this penalty: the pioneer entrusted to light the way for all should not decide who is worthy of seeing the light.