China unveils new rules targeting anticompetitive practices by internet companies

REUTERS
REUTERS

Summary

  • Part of a recent wave of regulatory action, the draft guidelines detail prohibited behaviors such as blocking rival products and discriminatory pricing

 

China issued new draft guidelines that would prevent its internet companies from engaging in anticompetitive practices such as unfairly blocking rival platforms, extending Beijing’s efforts to rein in the powerful technology sector.

The guidelines, released by China’s State Administration for Market Regulation on Tuesday, include a detailed list of prohibited behaviors that regulators said could harm internet users and limit market competition, including controlling user traffic, blocking competitors’ products and discriminatory pricing.

It’s the latest in a wave of regulatory actions over the past year, as government officials pressure Chinese tech giants and other companies to overhaul their operations, embrace competition and emphasize social good.

Shares of Chinese tech companies declined Tuesday, extending a monthslong slump driven by heightened regulatory oversight. Alibaba Group Holding Ltd. fell 4.8% and Tencent Holdings Ltd. more than 4%, while short-video specialist Kuaishou Technology, video and gaming group Bilibili Inc., and search giant Baidu Inc. fell to record lows. The Hang Seng Tech index in Hong Kong, which includes Tencent and Alibaba stocks, has declined some 40% in the past six months.

The market regulator said the new guidelines targeting internet companies were intended to clarify an existing law on unfair competition. China also finalized new antimonopoly rules for online platforms this year.

Angela Zhang, author of “Chinese Antitrust Exceptionalism" and an associate professor of law at the University of Hong Kong, said the guidelines would allow China’s antitrust regulator to move more quickly to regulate the digital economy. It would streamline the procedure to target such issues by requiring a lower burden of proof compared with the current framework, she said.

The list specifically mentions several practices in China’s tech sector that have been the subject of recent regulatory criticism and action, including forced exclusivity and the blocking of competitors’ links.

Alibaba was hit with a record antitrust fine of $2.8 billion this year over a practice known as “er xuan yi," or “choose one out of two." An investigation by Beijing’s top market regulator found the e-commerce company had abused its dominant market position by forcing vendors to exclusively sell on its platform. Food-delivery giant Meituan is now under investigation for the same practice.

The habit of blocking traffic to competitors and external sites has also come under scrutiny as an impediment to market competition, prompting some major tech companies to contemplate changes. Previously, a Tencent platform such as its social-messaging app WeChat generally wouldn’t allow links to rival Alibaba’s platforms—for example Alipay for payments or Taobao for shopping—and vice versa. Now the two rivals are considering lowering those barriers.

The draft guidelines, which are open for public feedback for a month, stipulate that operators cannot use data, algorithms or other technical means to influence a user’s choices or access to another operator’s products or services. That could include tricking users to click on their own offerings over competitors’, adjusting search rankings, or installing and running software without the user’s knowledge or consent.

Operators would also be banned from charging varying prices for a single product to different consumers based on their transaction history, shopping habits, credit or other personal data that the operators have collected.

Chinese companies have rushed to comply with shifting requirements from regulators, pledging to fix outstanding issues and follow new rules. Outside of e-commerce, officials have targeted other industries in their regulatory campaign to rein in businesses such as education and financial technology.

This story has been published from a wire agency feed without modifications to the text

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