The Analysis Of The Competitive Behavior In The “Subsidy’s Price War” -From A Legal Perspective

From January to April, 2004, the “subsidy’s price war” between mobile taxi apps “Didi” and “Kuaidi” had attracted a lot of attention.In order to improve the market share of apps, both of these two operators had totally invested 1.855 billion yuan for subsidizing passengers and taxi drivers in four months. This competitive behavior can be described as “subsidy’s price war”, and the result is each subject of market got benefited. Passengers obtained cash back, taxi drivers’ income had been increased, and the market share of mobile taxi apps had expanded rapidly. This competitive behavior became the new model of e-commerce application development. It is conceivable that under the condition of capital adequacy, there will be more emerging enterprises follow this procedure to expand their market share. However, this competitive behavior is very similar with political behavior of vote- buying model, which behavior bribes the users’ authority of “vote with their feet” through a series of cashback activities, instead of upgrading quality of products to attract customers. How to define this competitive behavior from a legal perspective? Right now, there is no specific research with regards to this issue to give a clear definition, just some comments can be found. In order to avoid negative effect of this “seemingly benefit” competition, it is necessary to analysis this behavior and defined it from legal perspective. With expectation to provide new theories over the competitive behaviors and maintain the order of the market economy in the E-commerce Era, this article deeply analysis the market impact of the competitive behavior in "subsidy’s price war", and based on the theory of competition law to define this behavior.In addition to the introduction and conclusion, this article is divided into three parts. First part is to definethe boundary between fair competition and unfair competition. The second part is the market analysis of the competitive behavior.The last part is focus on the analysis of this subsidy’s price war froma legal perspective.Theconclusion is that, from whatever the perspective of legal theory or legal practice, the competitive behavior in the “subsidy’s price war” results intothe unfair competition. However, considering the characteristics of e-commerce industry, this competitive behavior shall be regulated by the general rules in case by case analysis.As the rapid development of electronic commerce industry, the business model constantly changes, and the competitive behavior also varies in new ways. As there is no obvious violation of laws, whether or not the competitive behavior can be described as unfair competition requires deeply researched over the market impact and legal theory.