Anti-monopoly moves underline fair practices, healthy digital economy

An institutional environment for healthy market competition serves the interests of all parties, including the big companies. Starting from December, a string of Chinese internet heavyweights, including Alibaba Group Holding Ltd, Tencent Holdings Ltd, JD.com Inc, Meituan and Suning.com Co, have been fined for involvement in cases of violation of the anti-monopoly law. China’s efforts to step up regulation of “big tech” companies and antitrust enforcement will help stimulate innovation, ensure fair competition and promote the high-quality development of its sprawling digital economy, government officials, company executives and industry experts said.

Antitrust measures have become an important “gatekeeper “worldwide to maintain healthy market development

China’s efforts to step up regulation of “big tech” companies and antitrust enforcement will help stimulate innovation, ensure fair competition and promote the high-quality development of its sprawling digital economy, government officials, company executives and industry experts said.

Their comments came as technology giants across the world, including those in China, have been facing increasing challenges from accusations of monopolistic behavior. Hence, antitrust measures have become an important “gatekeeper “worldwide to maintain healthy market development.

China is working to strike a balance between regulating monopolistic, unfair market behavior and encouraging internet-based companies to pursue next-generation innovation, commentators said.

Starting from December, a string of Chinese internet heavyweights, including Alibaba Group Holding Ltd, Tencent Holdings Ltd, JD.com Inc, Meituan and Suning.com Co, have been fined for involvement in cases of violation of the anti-monopoly law.

Wu Zhenguo, director of the antimonopoly bureau of the State Administration for Market Regulation, the nation’s top market regulator, said the digital economy has developed rapidly in recent years. While it improves the quality of economic development and provides consumers with greater convenience, competition issues also emerged down the line, which is a common problem faced by global antitrust enforcement authorities.

On digital platforms, the “winner-takes-all effect” is prominent, and strong players normally grow even stronger

On digital platforms, the “winner-takes-all effect” is prominent, and strong players normally grow even stronger. This is an area prone to an oligopoly situation where one or several players dominate, Wu said in a written interview with Antitrust Source, an online periodical edited and published by the American Bar Association.

According to him, an enterprise that operates an online platform has the dual attributes of being an enterprise and a market operator, and can easily slip into monopoly conduct that restricts or eliminates competition, harms consumer interests, and hinders industry innovation and development. Such companies can do so by manipulating market forces, exploiting their position as platform managers, and abusing their advantages in data, capital and technology, Wu said.

Given such considerations, beefing up anti-monopoly law enforcement in key sectors, including platform enterprises, is a top priority for the regulator this year, he said.

The moves are part of China’s broader efforts to rein in monopolistic behavior and to maintain fair competition. The nation promised strengthened enforcement of antimonopoly and anti-unfair competition laws in an outline on promoting the building of a rule of law government from 2021 to 2025, which was published in August.

On Aug 17, the State Administration for Market Regulation issued a draft regulation for the internet sector, which aims to ban and prevent unfair competition and prohibit business operators from using technologies to hijack traffic or influence users’ choices.

According to a document published on the administration’s website, business operators should not use data, algorithms or other technical information or means to influence users’ choices, hijack traffic or disrupt the operations of website products and services provided by other business operators.

The rules, open to public feedback until Sept 15, require internet-based companies not to use technical means to illegally capture or use other business operators’ data.

In July, the top market regulator imposed a penalty of 500,000 yuan ($77,200) each on a string of internet-based companies, including Tencent, Meituan and JD, involved in 22 cases of violation of the antimonopoly law.

The nation’s online platform operators will develop under increasingly sound and clear antimonopoly regulatory rules

That came after Alibaba was fined 18.23 billion yuan in April, equivalent to 4 percent of the company’s domestic sales in 2019, for its monopolistic behavior, including forcing collaborating merchants to choose between Alibaba’s online marketplaces such as Taobao and Tmall and those of its competitors for selling their products.

Wu from the State Administration for Market Regulation said the Alibaba case was the world’s first monopoly case in online retail platform services, and was quite challenging.

During the investigation, the regulator focused on studying and grasping the development patterns of the digital platform economy. It conducted extensive investigations and evidence collection to ascertain the facts of the case; it also organized in-depth research and gathered opinions of the enterprises involved to protect their legitimate rights, Wu said.

The watchdog said its investigation concluded that Alibaba had hindered competition in online retail in China, affected innovation in the platform-based internet economy, hurt the lawful rights of merchants and damaged consumers’ interests.

Fang Chaoqiang, a lawyer at Beijing-based Yingke Law Firm, said the Alibaba case is a landmark event that shows the country’s true enhancement of action against monopolistic behavior. The nation’s online platform operators will develop under increasingly sound and clear antimonopoly regulatory rules.

Sun Nanxiang, a researcher at the Chinese Academy of Social Sciences’ Institute of International Law, said that antitrust measures are a worldwide trend and the ultimate purpose is to leverage legal tools to restore fair and effective competition in the market.

Early intervention is conducive to preventing negative market effects and damage to the reputations of the enterprises

For years, US tech giants such as Google, Apple and Amazon have been facing continuous scrutiny and fines from government authorities globally for monopolistic behavior. European Union regulators slammed Google with a record 4.34 billion euros ($5 billion) antitrust fine in 2018 for using its Android mobile operating system to squeeze out rivals.

“Anti-monopoly supervision over those tech giants didn’t cause them to lose core competence, but helped them to stimulate innovation and entrepreneurship and, at the same time, restore market confidence,” Sun said.

To boost antitrust enforcement, the State Council, China’s Cabinet, unveiled the anti-monopoly guidelines on the country’s platform economy in February, which further clarified the principles of anti-monopoly law enforcement in the platform economy sector and refined the analytical approach, thus providing clearer guidance to undertakings in the platform sector on how to conduct their operations legally and compliantly.

In addition to the post-punishment model involving imposition of fines, the State Administration for Market Regulation is adopting early intervention to create a level playing field for companies.

In July, the administration prohibited the merger of the Tencent-backed game streaming platforms Douyu and Huya on the ground that any such merger would eliminate competition.

This is the first time that the market regulator had prohibited a merger in the internet industry since the anti-monopoly law came into effect in 2008, experts said.

The post-punishment and early intervention models will become two main forms of the anti-monopoly measures in the future, even if early intervention is comparatively rare in antitrust law enforcement, they said.

Early intervention is conducive to preventing negative market effects and damage to the reputations of the enterprises. That requires the watchdog to make its supervision more efficient and preemptive. The enrichment of the watchdog’s antitrust toolkit means it can suit the remedy to the case while exercising its power, experts said.

Frank Fine, head of international antitrust at Beijing-based DeHeng Law Offices, said in an interview that this forced “growing up” would help Chinese firms boost their competitiveness globally.

“If they’re able to keep their profits going, grow their markets and improve their services in such a way as to offset the antitrust pressure that they’re facing, they’ll have won,” Fine said. “The likelihood of them succeeding globally becomes much greater.”

Xiang Ligang, director-general of the Information Consumption Alliance, a telecom industry association, said the antitrust moves will encourage market competition and boost innovation, particularly from startups and newcomers.

“An institutional environment for healthy market competition serves the interests of all parties, including the big companies,” Xiang said.

About E. J. McKay

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