China yesterday laid out detailed regulations for the first time to root out monopolistic practices in the Internet industry, as Beijing seeks to curtail the growing dominance of corporations like Alibaba Group Holding Ltd (阿里巴巴) and Tencent Holdings Ltd (騰訊).
The country’s antitrust watchdog, the Chinese State Administration of Market Regulation, is seeking feedback on a raft of regulations that establish a framework for curbing anti-competitive behavior such as colluding on sharing sensitive consumer data, alliances that squeeze out smaller rivals and subsidizing services at below cost to eliminate competitors.
They might also require companies that operate a so-called variable interest entity — a vehicle through which virtually every major Chinese Internet company attracts foreign investment and lists overseas — to apply for specific operating approval.
“This is a watershed moment,” said Ma Chen (馬辰), a Beijing-based partner at Han Kun Law Offices (漢坤律師事務所) who specializes in antitrust.
Chinese regulators “are stepping up control, because these platform companies have become too powerful and touch upon all corners of life.”
The rules also restrict targeting specific customers through their online behavior, a common practice adopted by players both at home and abroad.
Under the regulations unveiled by the agency, violators might be forced to divest assets, intellectual property or technologies, open up their infrastructure and adjust their algorithms.
The latest proposal follows heightened scrutiny of technology companies worldwide, as regulators investigate the extent to which Internet giants from Facebook Inc to Alphabet Inc’s Google can leverage their dominance.
Consumers in China — home to some of the world’s largest corporations from e-commerce giant Alibaba to WeChat-operator Tencent — have in the past few years protested against the gradual erosion of their privacy via technology from facial recognition to big data analysis.
Beijing is increasingly seeking to diminish the influence that a handful of its tech corporations wield over vast swathes of the economy.
It investigated Tencent’s music arm’s exclusive agreements with publishers last year, and most recently modified regulations to rein in risk at micro-lending entities such as Ant Group Co (螞蟻集團).
The latter step derailed Ant’s planned initial public offering on Thursday last week, before it was to complete what would have been the world’s largest such offering on record.
Alibaba and Tencent now dominate e-commerce and gaming, and are key backers of leaders in adjacent businesses such as food delivery giant Meituan and car-hailing leader Didi Chuxing (滴滴出行).
They have together invested billions of dollars in hundreds of up-and-coming mobile and Internet companies, gaining kingmaker status in the world’s largest smartphone and Internet arena by users.
Companies like TikTok-owner ByteDance Ltd (字節跳動) and Tencent-rival NetEase Corp (網易) that have risen to prominence without backing from either of the pair are viewed as rare exceptions. In other areas, Baidu Inc (百度) dominates online search.
The new rules were proposed in accordance with China’s Anti-Monopoly Law, which in January included broad language governing Internet companies for the first time.
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