China’s Tightening Anti-monopoly Regulations Targeting Leading Internet Platforms – 3 September 2021

On 10 November 2020, the State Administration For Market Regulation (SAMR) published the draft of the Anti-Monopoly Compliance Guidelines for the Platform Economy for public consultation. On 7 February 2021, the State Council’s Anti-monopoly Committee released the Anti-monopoly Guidelines for the Platform Economy. Also, in 2021, on 17 August, the SAMR issued a draft document on tackling unfair competition in the internet market, soliciting public opinions. On 18 August, The Supreme People’s Court published an exposure draft of its interpretation on several issues concerning the application of China’s Anti-unfair Competition Law. Could you first review the anti-monopoly regulations issued in H1 2021? Which regulations do you think are more important? Could you elaborate on the improvement process of the regulatory system? Among the latest regulations, which ones worth the most attention?

In 2021, there were many cases in which internet giants received penalties. In fact, in the past several years, the platform economy has long and increasingly involved unfair competition and monopoly, but the platform didn’t receive any substantial penalties until the end of 2020. The regulation of the internet platform economy has been intensified since then. What is the logic behind the regulation? Why does the government intensify the regulation at this stage? What are the purposes and long-term plans?

Could you elaborate on China’s legislation process and timeframe? How does the government gradually enhance the legislation in the anti-monopoly, anti-unfair competition, consumer protection, labour protection, data security and privacy compliance dimensions? The ministries and departments often release some documents. What are the roles of those documents in the legislation process?

According to the current guidelines, laws and regulations, under what circumstances should companies declare the M&A? What practices violate the laws? For example, Alibaba and Tencent made various acquisitions, including buying some equities or the major stake. Tencent invested in some small game studios, while Alibaba bought some small software companies. Do they need to declare such investment and acquisitions?

Alibaba was fined RMB 18.2bn for its “either-or” restriction policy. Besides that, does it have other business or behaviour that risks being deemed to have violated the anti-monopoly law or to have caused unfair competition?

How will the recent policies regarding data security, user privacy, personal information protection, internet algorithm-based recommendation and so forth affect Alibaba’s e-commerce business, such as its recommended ads and personalised recommendation algorithms? Actually, not only Alibaba but also many other platforms apply algorithms to advertising. Will they be banned from using algorithms for advertising?

Due to protection of users’ privacy data, companies are not allowed to use users’ search and preference data at will. Will it render the use of recommendation algorithms much less efficient?

Tencent was barred from merging Huya and Douyu. Tencent Music Entertainment Group was also ordered to end its exclusive music copyrights. Does Tencent have other unfair competition or monopoly behaviour? In terms of data, which potential risks, say, security risks, deserve particular attention?

As for blocking external links from Douyin, Tencent said it was because its user privacy had been leaked by Douyin before. Maybe I’m not concluding it accurately, correct me if I’m wrong. What’s your take on this?

Let us move on to Meituan. The SAMR launched an investigation into Meituan in April based on the Anti Monopoly Law, mainly involving the above-mentioned “either-or” restriction. The investigation is still ongoing. What do you think of the anti-monopoly investigation Meituan is facing? What monopolistic practices might it be suspected of? What are the possible penalties?

Meituan’s flexible staffing model is legal, but in the previous Uber incident in the UK, Uber drivers eventually became full-time employees. Will this also be the case in China?

Will the new definition of delivery staff pass on the rising costs of companies such as Meituan to consumers? Will the rate increase cause unfair competition?

Pinduoduo, Meituan and Alibaba are all engaged in community group buying. They have invested a lot, but nine restricting rules were rolled out in 2020 to protect the benefits of SMEs. Given the policy environment in 2021, how do you think this business should be advanced? Is it discouraged?

OTA is a conventional industry with a history of many years. The airline ticketing business is not very profitable, so players focus more on hotels. Trip.com’s problem is that its hotel inventory is shared with Qunar and Tongcheng-Elong. Does this involve unfair competition abusing dominant market positions? Is there a monopoly risk?

In addition to the new Anti-monopoly Law, what other new policies do you think will be introduced in the future? Will they be even stricter?

Tencent and Alibaba spent RMB 50bn and RMB 100bn respectively in supporting the common prosperity pursuit. What is your interpretation of common prosperity? How will it affect the internet platforms and the upstream and downstream players?