China Targets Alibaba, Other Homegrown Tech Giants With Antimonopoly Rules


(WSJ) China has released new draft antimonopoly rules for its online platforms, signaling an increased appetite by Beijing authorities to rein in its dominant technology companies.


China’s State Administration for Market Regulation said Tuesday it would seek feedback on rules covering a host of potential anti-monopolistic practices on the country’s digital platforms, including offering different prices to different consumers for the same product.


The release of the new draft rules, the timing of which came as a surprise to some in the market, follows on regulators’ abrupt intervention last week to halt the initial public offering of Ant Group Co.


The planned $34 billion IPO of Ant, the financial affiliate of Alibaba Group Holding Ltd. , China’s biggest technology company by market value, was set to be the largest in history. Regulators’ move to suspend the listing just two days before its market debut in Shanghai and Hong Kong has reverberated through China’s technology and finance industries.


On Wednesday, Alibaba is set to hold its annual Singles Day shopping event, which is often billed as the world’s largest online retail event. Last year it generated $38.3 billion in sales, serving as a reminder of the company’s clout in the world’s second-largest economy.


“Regulators are sending a message to online platforms to behave themselves,” said He Jing, a lawyer at Beijing-based GEN Law Firm, who said the draft rules were likely meant to help advance a recent push from China’s top leaders to encourage domestic consumption over the next five years.


Achieving that goal might have prompted regulators to clean up the online market and ensure that the competitive landscape was fairer and consumers better protected, Mr. He said.


All around the world, authorities are reacting to the rapid growth and rising clout of internet platforms, with advances in artificial intelligence and big data processing sparking new regulatory dilemmas. Technology companies in China, already omnipresent in the lives of Chinese consumers through e-commerce and short-video apps, have only grown more influential this year as the coronavirus pandemic further accelerates the adoption of digital platforms.


In Tuesday’s draft document, China’s market regulator said it planned to target certain practices, such as the unfair pricing of products by inflating prices or pricing them below cost. Other rules could target the use of data and algorithms to offer different prices to different consumers, or the use of market clout to restrict sales on competing platforms.


The regulator proposed setting up a review system to ensure platforms don’t abuse their market position. Under the suggested rules, violators may be asked to divest assets, technologies or intellectual property. Network infrastructure and licensed key technologies may also be subjected to checks by authorities.


The rapid expansion of the digital economy in China has led to problems of unruly competition, fraudulent sales and personal information leaks, China’s internet regulator, the Cyberspace Administration of China, said Tuesday in a separate post. Chinese tech firms should not allow consumers to be “prisoners to algorithms,” it cautioned.


The market and internet regulators, along with China’s State Taxation Administration, met recently with 27 Chinese internet companies to discuss ways to ensure the healthy growth of the digital economy, the CAC said in its online post. China’s most dominant online tech titans, including Alibaba, WeChat operator Tencent Holdings Ltd. , e-commerce firm JD.com Inc. and online delivery giant Meituan attended the meeting, the regulator said.


Tuesday’s announcement follows guidelines published by China’s main market regulator on Friday targeting its live-streaming sector. Those instructions tighten oversight over the types of products, pricing and advertising in live streams, which a variety of Chinese companies—from fashion retailers to asset managers—use to sell their products, including on Alibaba’s Taobao platform.


Cases of unfair pricing and fraud on consumer internet platforms have been a high-profile source of frustration among Chinese consumers in recent years. Trip.com, an online travel-booking company formerly known as Ctrip.com, came under criticism last year after a user accused the company of overcharging him the equivalent of $320 for an airplane ticket. Many Chinese consumers have accused Ctrip of using its storehouse of data to quote higher prices to some customers. The company has denied the accusation, blaming the incident on a technical error.


Chinese consumers have also voiced concern that online shopping, food-delivery and ride-hailing platforms are using the user data they collect to enable price discrimination.


Alibaba’s Hong Kong-listed shares fell 5.1% on Tuesday, with other technology stocks falling by roughly the same degree, on a day when the benchmark Hang Seng Index advanced 1.1%.


Source: Wall Street Journal by Liza Lin

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