After allowing entrepreneurs like Jack Ma to grow their businesses into internet giants, Beijing is now reining them in.
China’s market regulator has released new anti-monopoly guidelines aimed at internet platforms, tightening existing restrictions faced by the country’s technology giants.
The new rules, published on Sunday, formalise an earlier anti-monopoly draft law released in November and clarify a series of monopolistic practices that regulators plan to crack down on.
The guidelines are expected to put new pressure on the country’s leading e-commerce sites such as Alibaba Group’s Taobao and Tmall marketplaces and JD.com. They will also cover payment services such as Ant Group’s Alipay and Tencent Holding’s WeChat Pay.
The rules, issued by the State Administration for Market Regulation (SAMR) on its website, bar companies from a range of behaviour, including forcing merchants to choose between the country’s top internet players, a longstanding practice in the market.
SAMR said the latest guidelines would “stop monopolistic behaviours in the platform economy and protect fair competition in the market.”
The notice also said it will stop companies from price-fixing, restricting technologies and using data and algorithms to manipulate the market.
In a Q&A explanation accompanying the notice, SAMR said reports of internet-related anti-monopoly behaviour had been increasing and that it was facing challenges regulating the industry.
“The behaviour is more concealed, the use of data, algorithms, platform rules and so on make it more difficult to discover and determine what are monopoly agreements,” it said.
China has in recent months started to tighten scrutiny of its tech giants, reversing a once laissez-faire approach.
China’s Politburo, the top decision-making body of the Communist Party, pledged in a meeting at the end of last year to strengthen anti-monopoly efforts in 2021. Less than two weeks after the meeting, China kicked off an investigation into Alibaba Group Holding Ltd. in December for allegedly monopolistic practices.
Those moves followed the dramatic suspension of the $37bn initial public offering plan of its payment affiliate, Ant Group.
At the time, regulators warned the company about practices including forcing merchants to sign exclusive cooperation pacts at the expense of other internet platforms.
Lawsuits over competition issues have been filed by companies even as regulators are moving to step up scrutiny.
ByteDance Ltd filed a lawsuit last week against Tencent Holdings Ltd over alleged monopolies in its WeChat and QQ platforms, escalating a feud between two giants of Chinese social media. A court in Beijing has agreed to hear the case, a ByteDance representative confirmed to the Bloomberg news agency on Sunday.
In one of the first uses of their newly expanded arsenal of rules, Chinese regulators hit online discount retailer Vipshop Holdings Ltd with a 3 million yuan ($464,000) fine, the biggest to date in the recent clampdown.
In a sign that regulators are increasingly willing to use more tools to rein in monopolistic behaviour in the tech sector, Vipshop was punished for violations of a law prohibiting unfair competition, which allows for fines of up to 5 million yuan.
By comparison, other firms that have been hit with penalties since late last year were fined under China’s 2008 anti-monopoly law, which allows for a much lower maximum fine of 500,000 yuan ($77,323).
SAMR said on Monday that from August through December last year, Vipshop had developed a system to obtain information on brands that gave Vipshop a competitive advantage. It added that Vipshop used its system to influence user choices, transaction opportunities and to block sales of particular brands.
New York-listed Vipshop, which has a market value of about $22bn, said on Monday that it accepted SAMR’s findings and would strengthen compliance.