Caixin
Apr 13, 2021 08:51 PM
BUSINESS & TECH

Beijing to Big Tech: Stop Breaking the Law Within One Month or Else

China’s State Administration for Market Regulation has warned domestic internet platforms that they will be “severely punished” if they continue to break the rules after a one-month grace period.
China’s State Administration for Market Regulation has warned domestic internet platforms that they will be “severely punished” if they continue to break the rules after a one-month grace period.

China’s internet firms must stop abusing their market dominance and cease all illegal activities within one month or face “severe punishment,” the government said Tuesday, putting the sector on notice following the record $2.8 billion fine handed to Alibaba Group Holding Ltd. for antitrust violations.

The country’s market regulator and its cyberspace and tax agencies said at a Tuesday meeting with China’s biggest tech firms that they must comprehensively self-assess, rectify any issues and pledge to comply with China’s laws and regulations, according to an online statement (link in Chinese) by the State Administration for Market Regulation (SAMR).

Platforms that continue to break the rules after the one-month grace period ends will be “severely punished in accordance with the law,” the statement said.

In attendance were representatives from 34 companies including e-commerce giants JD.com Inc., Pinduoduo Inc. and Vipshop Holdings Ltd., takeout platforms Meituan and Ele.me, short-video app operators ByteDance Ltd. and Kuaishou Technology, internet titan Tencent Holdings Ltd., and gaming giant NetEase Inc., according to the statement.

On Saturday, the SAMR issued Alibaba, which operates the Taobao and Tmall e-commerce platforms, a fine of 18.2 billion yuan ($2.8 billion) for a range of monopolistic behavior including stifling competition by forcing vendors to choose between its services and those of its rivals — a practice known in the industry as “picking sides.”

The term reappeared in Tuesday’s warning alongside a further list of outlawed activities such as abusing market dominance, burning cash in order to take a dominant position in the lucrative group buying market, violating user data privacy rules and turning a blind eye to phony products.

The regulator demanded that platform operators strictly adhere to five key measures: preventing the disorderly expansion of capital, ensuring fair market competition, fostering innovation, preventing the abuse of algorithms that can infringe people’s legal rights, and using technological ecosystems that are open and shared.

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It further said all platforms must conduct a comprehensive investigation of tax-related issues to ensure they are in compliance with China’s tax laws, regulations and policies.

Following the Alibaba case, industry insiders believe that Beijing is gearing up to wield the Anti-Monopoly Law, long criticized for lacking teeth, against more of the country’s sprawling and powerful internet firms.

In December, the Communist Party’s top decision-making body announced a sweeping campaign to strengthen antitrust efforts this year.

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Contact reporter Matthew Walsh (matthewwalsh@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

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