Dragon tightens grip over digital monopolies

Dragon tightens grip over digital monopolies

China has issued a new set of rules to dissuade large online retailers from monopolizing digital platforms

China has issued a new set of rules to regulate digital platforms and dissuade large online retailers from monopolizing the online consumer market. The news rules were issued by the State Administration for Market Regulations (SAMR) on 7 February 2021.

The new anti-monopoly rules were seen as imminent ever since the Chinese authorities suspended Ant Group's $37 billion IPO in November 2020. It was scheduled to be listed at the Hong Kong and Shanghai stock exchanges.

The new set of rules are likely to impact big online traders like Taobao and JD.com. Besides major Chinese online payment providers like Alipay and WeChat Pay will also be hit hard by these.

Alipay and Ant Group are owned by billionaire Jack Ma who also runs Alibaba digital consumer retail platform. Jack Ma has been under the heavy weather since criticising the authorities and the Chinese banking system. Of late he has been lying low.

Among the changes incorporated in the new rules include a ban on merchants requiring to choose one payment gateway on their platforms. The SAMR announcement states that the rise in algorithms on major platforms makes it challenging to determine if price-fixing or other monopolistic behavior is taking place.

Article 9 of the new rules takes care of this issue. Providing that knowledge of monopolistic activity is enough to violate the antitrust law. Thus the onus now is on the digital platforms to monitor that their platforms are not being used for any anti-competitive activities.

The digital platforms are also expected to introduce evidence to enable buyers to determine that any indirect evidence regarding monopolies are not true.

China had until now been loath at the rampant monopolistic practices adopted by online platforms where a seller had a sign exclusive agreement that prevented it from selling the same product on a rival platform. With the new rules coming into effect, China's ever-expanding digital market is expected to give shape to competition that may benefit the buyers.