The antitrust investigation into Trip.com
... and the whispers around PDD
Welcome to Theoria’s first post of 2026. I hope everyone’s feeling refreshed, recharged, and ready for what the new year has in store.
I was in Engelberg last week for Rob’s meeting. I really enjoyed my trip to Switzerland—the snow, the mountains, and the chance to meet investors from around the world. It’s amazing how a shared passion for investing can bring together people across professions, cultures, and life paths.
As my struggle to find time for deep dives continues, I thought it’d be nice to write a shorter piece on the antitrust investigation into Trip.com Group. I’ll provide some background and lay out three possible outcome scenarios.
Some investors also worried that PDD could face a similar investigation, partly as retaliation for the fistfight last December. While I think an antitrust probe into PDD is unlikely, I found the mystery around the fistfight intriguing enough to dig deeper into what’s been circulating online. Needless to say, much of this is unverified—so take it with a grain of salt.
One quick note up front: you won’t find any investment recommendation in this post. I don’t own shares of Trip.com or PDD, and I don’t claim to be an expert on either business.
So what’s the takeaway then, beyond the fascinating stories themselves? I hope you walk away with a better sense of the complex waters that both Chinese companies and the government are navigating—let alone investors.
Antitrust investigation into Trip.com
On January 14, 2026, the Chinese government officially launched an antitrust investigation into Trip.com. It’s reported that the State Administration for Market Regulation (SAMR) have already stationed personnel at the company’s headquarter in Shanghai. Staff have been asked to surrender their computers and mobile phones and cooperate with the investigation.
The news quickly became a trending topic across the country, and Trip.com’s ADRs nosedived 17% the same day.
Background
Trip.com is China’s largest online travel agency (OTA), with roughly 56% market share measured by GMV. It operates two major apps with somewhat different customer profiles: Ctrip, Qunar. Including its ~20% stake in Tongcheng, Trip.com effectively controls close to 70% of China’s OTA market. The next largest players are Meituan and Fliggy, with market shares of about 13% and 8%, respectively.
Trip.com makes most of its money from commissions—roughly half from hotel bookings and half from transportation tickets. Yet this investigation targets only the hotel side. That’s because China’s hotel supply is still fragmented (chain penetration is just above 40%), leaving hotel owners with limited bargaining power. Ticket suppliers, on the other hand, such as airlines and railroads, are concentrated and often state-owned.
This weaker bargaining power shows up in the much higher take-rates on hotel bookings (about 10–15%) compared with transportation tickets (around 1%-2%). Trip.com’s contracts with hotel suppliers generally fall into three tiers:
Standard. 10% commission. No additional traffic support from the platform.
Preferred. 12% commission. Better exposure (shown earlier than comparable listings), in exchange for a guaranteed 5% lower price than on any other platform.
Exclusive. 15% commission. Even more exposure, in exchange for sole listing on Trip.com.
Both the exclusive requirement in Tier 3 and the price-parity clause in Tier 2 are obvious antitrust red flags. Trip.com enforces price parity through an algorithm called “Pricing Assistant”, which constantly scans rival platforms for the same room. Once it finds a lower price, Trip.com’s backend automatically cuts the price on its own listing—without the hotel’s consent.
The warning signs started flashing last year. In August 2025, the Guizhou Provincial Administration for Market Regulation called Trip.com in for a regulatory meeting over alleged exclusive dealing and the use of technical measures to interfere with pricing. A few months later, in November 2025, the Yunnan Provincial Tourism Homestay Industry Association issued a rights-protection statement, making similar accusations.
Hotel owners blame Trip.com for their financial struggles. Meanwhile, many users complain about algorithmic price discrimination. Basically, the more time you spend in the app, the more expensive the tickets become. No wonder everyone seems to be cheering—except Trip.com’s investors.
Some misleading media coverage didn’t help either. Trip.com was frequently described as the most profitable internet company, based on its Q3 2025 net income of RMB 19.9B—even though RMB 14B of that came from the sale of its India business.
Impact of the investigation
Some investors worried this is 2021 all over again, which I think is far-stretched. In fact, Booking.com has been facing antitrust investigation across Europe over similar issues: Price Parity Clauses, Preferential Partner Programs, etc. Even the ‘pricing assistant’ is not something invented by Trip.com - If Booking detects better prices elsewhere, it unilaterally applies a discount, called Booking Sponsored Benefit, to align prices on its platform.
In my view, the Chinese government is simply doing its job, much like regulators in Europe.
How about the impact on Trip.com’s business? Will the investigation end up weaken Trip.com’s market position and profitability? The hones answer here is too soon to know. Let’s consider three scenarios:
Bull case
Trip.com only has to write a big check. Based on past cases involving Alibaba and Meituan, antitrust fines are typically around 3–4% of the prior year’s revenue. That would imply roughly RMB 1.8B, or about 10% of Trip.com’s 2024 net income. The exact number doesn’t matter much—it’s a one-time expense.
Under this scenario, the ~20% share price drop could be a bargain opportunity. That said, I think this outcome is unlikely. What’s the point of a fine if it doesn’t come with corrective action?
Base case
Trip.com ends up paying a fine and is forced to drop both its exclusive arrangements and price-parity clauses. That would certainly affect both revenue and margins. Without these terms, Trip.com has to match the lower commissions offered by competitors, and some price-sensitive customers could shift to cheaper alternatives.
On the other hand, I’m sure Trip.com’s moat is more than just bullying hotel owners. After all, these practices are common across all OTAs. Trip.com has a sticky, high-income user base that values service quality over price. And its transportation-ticketing business should see minimal impact. Finally, we shouldn’t ignore its rapidly growing overseas business.
That said, if there’s one thing we’ve learned from investing in China over the past few years, it’s that the moat around platform businesses is often weaker than we assume—and competition is far more intense than expected. It’s not just Meituan, Fliggy, and Douyin eyeing Trip.com’s market share; even JD is moving into the space.
Bear case
The worst-case scenario is that Trip.com is forced to divest Qunar, and its stake in Tongcheng. If that happens, Trip.com could be left with only around 20% market share. And if these platforms end up competing head-to-head, the industry could turn ugly very quickly. This would be unprecedented—but nothing is impossible.
My point is simple: the prudent move, in my view, is to wait for the government’s official penalty decision. Based on past cases, that could mean a 6–9 month window (about 4 months for Alibaba, and 18 months for Meituan).
And even if the final decision ends up aligning with our base-case scenario, I would still not lean on theories to make my investment decision. I would closely monitor a set of KPIs to judge the impact on Trip.com’s business.
The fog around PDD
The Trip.com investigation has also made some investors nervous that PDD could be next—there are whispers that regulators showed up again at PDD’s headquarters earlier this week. I think that’s unlikely for one simple reason: unlike Alibaba, Meituan, and Trip.com, PDD doesn’t control anything close to 50% market share. In other words, it doesn’t even meet the basic threshold to be treated as a dominant player under the antitrust law.
The investigation is likely related to issues such as counterfeit products, food safety, fake shipments and fake orders. That could lead to a fine, but I don’t see it having a material impact on PDD’s business.
Now, why do I say “again”? In case you missed it, back in early December 2025, it was widely reported that PDD executives and officials from the State Administration for Market Regulation (SAMR) got into a fistfight on Dec 3rd. Almost immediately, reports and social media posts mentioning the incident were scrubbed from China’s internet.
Some investors worried that PDD might face retaliation from the government. But there has to be more going on beneath the surface. If PDD had truly crossed the government in a serious way, why wasn’t it publicly condemned—instead of being quietly shielded as the story disappeared? And it’s hard to believe senior management would be reckless enough to let things escalate into a physical confrontation with government officials. Too many pieces don’t add up.
In mid-December, a petition letter from a former PDD employee, one of 30 some who were reportedly fired, was leaked online. Combined with several posts from alleged insiders, it gave me a somewhat clearer picture of what may have happened, even though we’ll probably never know the full story. If you’re interested, read on—but take it with a grain of salt.
Why was the story scrubbed so quickly
Yes—there’s something called government relations. In practice, it functions a lot like lobbying in the Western world: almost every major internet company in China hires former government officials to help navigate regulation, manage communication, and reduce political risk. Of course, companies prefer it to remain in the shadow.
In PDD’s case, someone circulated a list online claiming to identify a dozen C-level executives with government backgrounds. The roles cited include a former division chief at the Public Opinion Bureau of the Central Propaganda Department, a former director of the Political Department at the Shanghai Intermediate People’s Court, a former deputy division chief at the Shanghai Administration for Market Regulation, among others.
With that context, the censorship around this incident feels less baffling. It’s not as simple as “PDD vs. the government.” The Chinese state isn’t a single monolith—there are different agencies, interests, and internal dynamics at play. PDD likely leveraged its government connections to keep the story under wraps.
Why the fistfight?
This also suggests that on Dec 3rd, the two sides involved likely knew each other well—perhaps they had even worked together before, back when they were both in government.
There is more background story: One of PDD’s GR staff, WX, previously served as a deputy inspector in the Advertising Department of the State Administration for Market Regulation. According to post from insiders, WX left PDD around mid-2025 and quickly joined Rednote, apparently without much regard for the non-compete he signed.
PDD then launched a series of investigations into WX, including surveillance, pulling bank records, and tracking his delivery/package information. Unsurprisingly, this infuriated WX. PDD’s management believed the December 3rd investigation was retaliation from WX.
Still, even if PDD hold low regard to the regulators on site that day—given the government backgrounds of some of its senior staff—and even if management believed the December 3 visit was retaliation, it still can’t really explain why they would think escalation was a good idea. You don’t need to be an executive to know that was obstruction of official duties.
The explanation from post by insiders (with specific details including the names of people supposedly involved) is that management wanted to shut the investigation down as quickly as possible to protect PDD’s interests. So they deliberately provoked the regulators in the hope of triggering a physical conflict. Once the police got involved, the investigation would have to pause.
I don’t know. It feels like I’m reading a magical realism novel. But if this is true, I wonder what was PDD trying to hide that made them take such extreme measures.
Timeline
I’ll close with a timeline based on information gathered online:
Dec 3rd 2025. SAMR officials arrived at PDD’s Shanghai headquarters for a 3–4 day on-site inspection. It’s not clear what the investigation was focused on, as different reports cited different issues—ranging from food safety to fake orders.
Dec 4th. A physical conflict broke out between PDD executives and SAMR officials. The SAMR team lead fractured his thumb. Police from Shanghai’s Changning District arrived and initially suggested resolving the matter privately, because people on both sides knew each other.
The SAMR side found the proposal unappealing, so the police issued a five-day administrative detention to the person identified as the lead participant in the fight. Higher-level regulators were still unhappy and escalated the matter to the State Council.
Dec 5th. The Ministry of Public Security issued a directive to the Shanghai Municipal Public Security Bureau, demanding that the incident be handled seriously. The Shanghai police then assigned two patrol cars to provide 24/7 protection for the SAMR team until they completed their inspection on December 6. Meanwhile, the case was filed by the Shanghai police as obstruction of official duties.
Dec 10th. PDD reportedly fired around 30 employees across its government relations and compliance teams, including co-founder Fan. One of the dismissed employees, Tu, who received no severance and lost his year-end bonus claimed that he was in Beijing at the time of the altercation and was made a scapegoat. His petition letter to SAMR was later leaked online.
Dec 19th. PDD held its AGM and announced a series of senior management changes. Newly promoted co-CEO Zhao Jiazhen said the company plans to “build another PDD in the next three years.”
The author of this write-up do not owns shares in the companies mentioned and may purchase or sell shares without notice. This write-up represents only the author’s personal opinions and is not a recommendation to buy or sell a security. No information presented in the write-up is designed to be timely and accurate and should be used only for informational purposes. Readers of the write-up should perform their own due diligence before making investment decisions.
In my opinion, investors seem to be dangerously conflating two distinct risks: Trip.com is paying a "success tax" (a standard, quantifiable antitrust fine), whereas PDD is suffering from a "survival instinct failure."
The reported physical clash with regulators reveals a corporate culture so aggressive it has crossed from competitive disruption into existential defiance; a governance red flag that no algorithm can hedge.
The Question: If the market can price in a fine, then how do we model the valuation risk of a leadership team that literally fights the state?