November 27, 2020

Market and Financial News Aggregator

China draws up first antitrust rules to curb power of tech companies

3 min read

China’s market regulator has taken its first major step towards curbing the monopolistic power of its tech giants, drawing up draft antitrust rules that have sent shares in companies such as Alibaba, Tencent and food delivery giant Meituan tumbling in Hong Kong.

The move, which will see China attempt to define for the first time what constitutes anti-competitive behaviour in the tech sector, is the latest wing-clipping of high-flying digital platforms in the country after Beijing suspended the blockbuster IPO of Ant Financial last week.

Meituan’s shares fell more than 11 per cent following the news, while Alibaba’s and Tencent’s fell more than 5 and 4 per cent respectively.

Until now, Chinese regulators have taken a relatively hands-off approach to antitrust, even as authorities in the US and Europe launched inquiries and investigations into Amazon, Facebook, Google and others.

This is in spite of the fact that Chinese tech companies have been building increasingly captive ecosystems, with users being prevented from using WeChat Pay to purchase products in Alibaba’s Taobao online store, for instance, or easily sharing links to Taobao goods within WeChat.

The new guidelines mark the first time the State Administration for Market Regulation has directly tackled anti-competitive behaviour in the internet sector.

The practices that regulators are taking aim at include using exclusivity clauses to hinder competition, treating customers differently based on their spending behaviour and data, and forcing customers to buy a bundle of products to access the ones they want.

The move comes as Chinese tech firms gain control over ever-larger swaths of the economy, with Alibaba selling almost one-fifth of all Chinese consumer goods, compared with Amazon’s roughly 5 per cent of total retail sales in the US.

It also fits with an increasing global trend of regulators taking action against big tech companies, said Hoi Tak Leung, a Hong Kong-based lawyer at Ashurst. “It appears that the China government has decided to be more active in taking steps to curb large internet platforms’ power and dominance in society,” he said.

Last week, Chinese regulators halted Ant Group’s $37bn public offering after publishing new draft rules for online lending. Beijing also released the first draft of its comprehensive law on personal data protection last month, while its export control law, which regulates the export of sensitive materials and technologies from the mainland, will come into effect in December.

China’s ecommerce industry has long been known for its aggressive tactics. Some online sellers have said for instance that Alibaba unfairly forces them to sell exclusively on its platform, in a tactic known in China as erxuanyi, or “pick one of two”. The new regulations specifically cite “pick one of two” as an example of a monopolistic practice.

“It shows the authorities’ attitude: ‘We are working on controlling you guys and we have the methods to do it’,” said Yu Jianhua at Shanghai-based DeBund Law Offices.

The draft makes clear that tech giants such as Tencent, Alibaba, Meituan and JD.com would fall under the new regulations. JD.com was also down more than 8 per cent in Hong Kong on Tuesday.

In Chinese markets, the tech-focused ChiNext in Shenzhen was down 1.5 per cent and Star 50 in Shanghai fell 2.9 per cent, compared with a dip of 0.6 per cent for the benchmark CSI 300 index of the largest and most liquid onshore stocks.

The regulator is seeking public feedback until November 30.

With additional reporting by Hudson Lockett in Hong Kong




2020-11-10 08:28:48


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