China has issued new draft regulations aimed at preventing unfair competition by Chinese Internet companies, such as unfairly blocking rival platforms. The new set of regulations will expand the Chinese government’s efforts to restrain the powerful technology industry.
The new set of regulations released by the State Administration for Market Regulation (hereinafter referred to as the State Administration for Market Regulation) on Tuesday includes a detailed list of prohibited behaviors. Regulators claim that these actions may harm the rights of Internet users and restrict market competition. The actions include hijacking user traffic, blocking competitors’ products, and differential pricing.
This is the latest in a series of regulatory actions in the past year. Chinese government officials are putting pressure on Chinese technology giants and other companies to rectify their businesses, embrace competition, and emphasize social welfare.
On Tuesday, the stock prices of Chinese technology companies fell one after another, continuing the decline that has occurred over the past few months due to tightening regulations. Alibaba Group Holding Limited (Alibaba Group Holding Limited, 9988.HK) shares plunged 4.8%, and Tencent Holdings Ltd. (Tencent Holdings Ltd., 0700.HK) fell more than 4%. Short video app Kuaishou Technology (Kuaishou Technology, 1024.HK), video and game group Bilibili (Bilibili Inc., 9626.HK) and search giant Baidu (Baidu Inc., 9888.HK) share prices all fell to record lows. The Hong Kong Hang Seng Technology Index, which consists of Tencent and Alibaba, has fallen about 40% in the past six months.
The market regulator stated that the new regulations for Internet companies aim to clarify some concepts of the current anti-unfair competition law. China also finalized new antitrust rules for online platforms this year.
Angela Zhang, author of the book Chinese Antitrust Exceptionalism and associate professor of law at the University of Hong Kong, said that these regulations will enable China’s antitrust regulators to adopt more quickly Act to supervise the digital economy. She said that compared with the current framework, these regulations will streamline procedures for such issues by reducing the burden of proof.
The list specifically mentioned several practices that have recently been criticized and acted upon by the Chinese technology industry, including forcing exclusive use of its services and blocking links from competitors.
This year, Alibaba was fined a record-breaking US$2.8 billion in antitrust fines for implementing the “choice of two” approach. An investigation by the top market regulator of the Chinese government found that the e-commerce company abused its dominant market position and forced suppliers to sell products exclusively on its platform. Food delivery giant Meituan (3690.HK) is currently under investigation for the same behavior.
The usual practice of blocking traffic from competitors and external websites has also been under scrutiny and is considered to hinder market competition, which has prompted some large technology companies to consider changes. Previously, platforms such as Tencent’s social media application WeChat generally did not allow links with Alibaba’s competing platforms, such as payment software Alipay or shopping platform Taobao, and vice versa. Now, these two competitors will consider lowering these thresholds.
This regulation is now open to the public for comments for a period of one month. The draft new regulation shows that operators are not allowed to use data, algorithms and other technical means to influence user choices or other ways to implement traffic hijacking, interference, malicious incompatibility, etc. , Hinder or disrupt the normal operation of network products or services legally provided by other operators. These include setting up links to their own products or services, deceiving or misleading users to click, adjusting the natural ranking position of search results, installing and running applications against the wishes of users, etc.
Operators will also be prohibited from charging different consumers for the same product based on their transaction history, shopping habits, credit or other personal data collected by the operator.
Chinese companies are already following the rectification requirements put forward by the regulatory agencies, promising to solve existing problems and comply with new regulations. In addition to e-commerce, officials have also taken regulatory actions against other industries, including restricting education and training and financial technology companies.
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