The rules are likely to put pressure on companies like Alibaba, JD.com, Ant Group and Tencent, which dominate e-commerce in China.
China’s market regulator has released new anti-monopoly guidelines aimed at internet platforms, increasing the existing restrictions faced by the country’s technology giants.
The new rules, published on Sunday, formalize an earlier anti-monopoly bill launched in November and clarify a series of monopolistic practices that regulators plan to crack down on.
The guidelines are expected to put further pressure on the country’s top e-commerce sites, such as the Alibaba Group and JD.com Taobao and Tmall markets. 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 of Market Regulation (SAMR) on its website, prohibit companies from various behaviors, including forcing the shopkeeper to choose among the main internet players in the country, a long-standing practice in the market.
SAMR said the latest guidelines “would disrupt monopolistic behavior in the platform economy and protect fair market competition”.
The notice also said it would prevent companies from fixing prices, restricting technologies and using data and algorithms to manipulate the market.
In an explanation of questions and answers accompanying the warning, SAMR said that reports of Internet-related antimonopoly behavior have increased and that it has faced challenges in regulating the sector.
‘Hidden’ behavior
“The behavior is more hidden, the use of data, algorithms, platform rules and so on makes it more difficult to discover and determine what monopoly agreements are,” he said.
China has begun in recent months to restrict scrutiny from its tech giants, reversing a laissez-faire approach.
Chinese officials suspended the $ 37 billion initial public offering of payment services company Ant Group in November due to antitrust concerns [File: Qilai Shen/Bloomberg]
The Politburo of China, the Communist Party’s main decision-making body, promised at a meeting at the end of last year to strengthen anti-monopoly efforts in 2021. Less than two weeks after the meeting, China launched an investigation into the Alibaba Group Holding Ltd. in December for allegedly monopolistic practices.
These moves followed the dramatic suspension of the $ 37 billion initial public offering plan from its payment affiliate, Ant Group.
At the time, regulators warned the company of practices that included forcing traders to sign exclusive cooperation pacts at the expense of other internet platforms.
Lawsuits over competition issues have been filed by companies, even when regulators are moving to intensify scrutiny.
ByteDance Ltd filed a lawsuit last week against Tencent Holdings Ltd over alleged monopolies on its WeChat and QQ platforms, heightening a rivalry between two Chinese social media giants. A Beijing court agreed to hear the case, a ByteDance representative confirmed to Bloomberg news agency on Sunday.
First blow
In one of the first uses of its newly expanded arsenal of rules, Chinese regulators hit online discount retailer Vipshop Holdings Ltd with a fine of 3 million yuan ($ 464,000), the largest so far in the recent crackdown.
In a sign that regulators are increasingly willing to use more tools to control monopoly behavior in the technology sector, Vipshop has been punished for violations of a law that prohibits unfair competition, which allows fines of up to 5 million yuan .
In comparison, other companies that have been hit by penalties since the end of last year were fined under China’s 2008 antimonopoly law, which allows for a much lower maximum fine of 500,000 yuan ($ 77,323).
SAMR said on Monday that from August to December last year, Vipshop developed a system for obtaining information about the brands that gave Vipshop a competitive advantage. He added that Vipshop used its system to influence user choices, transaction opportunities and block sales of specific brands.
New York-listed Vipshop, which has a market cap of about $ 22 billion, said on Monday that it accepted SAMR’s findings and would strengthen compliance.