The Establishment Of Online Anti-Trust Regulations In China
Regulators in China have announced big changes towards their anti-trust approach and are preparing to crack down on some of the world’s most powerful technology companies. The unprecedented move aims to improve behaviour and erase anti-competitive practices in the online sphere.
The regulatory system in China has recently been scrutinised by big names in the industry. Jack Ma, the founder of Ant Group, has highlighted that “great innovation…shouldn’t be regulated with yesterday’s means”. Mark Zuckerberg has also criticised the system, branding it as “dangerous” and calling for “a clear regulatory framework that comes out of Western democratic countries”. It seems like China has engaged with the critique as it begins to follow in the footsteps of the EU and the US. The EU Commission has just announced another high-profile investigation into the operating mechanisms at Amazon.
Chinese regulators have also introduced modifications to lending practices in November, displaying further efforts to alter its reputation. The Ant Group IPO, that was expected to reach historic levels at $37bn, had to be suspended. The regulatory body wasn’t certain whether the unicorn company’s public offering would be able to meet the newly defined listing conditions.
What are the proposed rules?
The State Administration for Market Regulation, China’s regulatory body, revealed proposals that target predominantly monopolistic behaviour. A list of guidelines that companies should adhere to has already been published.
The bureau has outlined tighter restrictions around exclusive clauses, price discrimination and advantageous initiatives. Further, it aims to monitor the use of data and algorithms that offer varying prices to different customers.
What have been the immediate effects?
Following the announcement, Chinese tech giants’ stocks tumbled down, with a cumulative loss of $280bn.
Morgan Stanley has identified Alibaba, Tencent and Meituan as some of the potential victims that may have to prepare for “negative implications”. Indeed, two days after the announcement, Tencent’s shares were down by 7%. The company’s president, Martin Lau, has rejected the pessimistic claims and accepted that “regulations reflect the new reality”. Indeed, the stability of the company is displayed through a 29% growth in revenue year-on-year. Alibaba also saw a tumble of 5% on the day of the announcement but retains its leading position – the Group is responsible for approximately 20% of consumer goods sales in China.
Chinese regulators believe that the move “promotes the sustainable and healthy development of the online economy”. A public enquiry on the proposals will last until the end of November 2020. If the draft is successfully implemented, China may be on its way to acquire a more prominent position in the realm of anti-trust.
By: Zuzanna Potocka