China has announced its proposal for new regulations aimed at limiting the influence of its largest tech companies.
The government's proposed regulations indicate the unease in China regarding the expanding influence of tech companies as digital platforms become more popular in the country. The new rules would impact local firms, including Alibaba, Ant Group and Tencent.
Curbing tech giants' power globally
The Chinese government's proposed rules come as both the US and the European Union (EU) are taking initiatives to limit the power of tech firms on their respective markets.
The European Commission has filed formal antitrust charges against e-commerce giant Amazon over its alleged abuse of online shopping dominance in Germany and France.
The Commission’s top antitrust official Margrethe Vestager said Amazon utilized non-public seller data in its own retail algorithms to determine which new products to launch and their particular price points.
She said: "We do not take issue with the success of Amazon or its size, our concern is the very specific business conduct that appears to distort competition."
In July 2019, the European Commission announced that it opened a formal investigation into Amazon regarding its dual role as marketplace and retailer.
Meanwhile in the US, the US Department of Justice and 11 other states filed charges in federal court against Google for allegedly violating competition law to maintain its monopoly over internet searches and online advertising.
The landmark lawsuit is considered the biggest case filed by US regulators versus a major tech firm in the past years. The case was filed after over a year of investigation and amidst local and international scrutiny of the company’s practices.
However, Google referred to the lawsuit as "deeply flawed", arguing that its sector remains intensely competitive and that places customers first in its business practices. The company said: "People use Google because they choose to – not because they’re forced to or because they can’t find alternatives."
In the case filing, it was highlighted that Google spends billions of dollars annually to ensure that its search engine is installed as the default on browsers and devices such as mobile phones.
Proposed Chinese regulations
In a 22-page draft, China's State Administration for Market Regulation (SAMR) tried to define anti-competitive behavior for the tech sector.
The proposed rules focus on prohibiting the firms from sharing sensitive consumer data, forming partnerships to place pressure on smaller competitors and selling at a loss to force rivals to close down.
Under the rules, platforms that compel businesses into exclusive arrangements will also be regulated. Merchants and competitors have long accused Alibaba of doing this. The SAMR will also try to crack down on companies that provide different customer experience based on data and spending habits.
These rules will be crucial for Chinese tech giants that dominate the country's online retail market, such as Alibaba and JD.com, which together comprise around three-quarters of China's e-commerce.
Alibaba claimed that as of September of this year, its mobile monthly active users are at 881 million, which is over 50% of China's population.
Last week, Alibaba's affiliate company Ant Group, pulled back its IPO after Chinese regulators raised issues regarding the increasing power of online lenders and how they might affect the broader financial system.
