Caixin
Oct 09, 2021 04:36 AM
OPINION

Opinion: Fines on Meituan and Alibaba Show Effectiveness of Anti-Monopoly Law

China’s market regulator fined Meituan 3.44 billion yuan ($533 million) for anti-competitive behavior, or 3% of the company’s domestic sales in 2020.

Looking at it alone, the 3% penalty is appropriate and in line with most experts’ estimates. Together with Alibaba Group Holding Ltd.’s record fine in April, Meituan’s punishment stands as a landmark that establishes the real effectiveness of China’s Anti-Monopoly Law in the internet sector and plays a deterrence role that has been missing for a long time.

Compared to Alibaba’s fine, 4% of its revenue, Meituan’s penalty is relatively severe. In terms of corporate attitude, industry scale and social influence, Alibaba’s practices of “picking sides”—a platform that forces merchants to work exclusively with it and shun competitors—are far more serious than Meituan’s. Therefore, as Meituan was fined 3% of its revenue, Alibaba should have been fined 6%; since Alibaba was only fined 4%, a 2% fine on Meituan is more appropriate.

In recent years, the real monopoly impact on the whole industry and society are from Tencent and Alibaba. The regulatory measures levied on Alibaba have achieved immediate results, while the measures surrounding Tencent are minimal. What follow-up measures will be taken is worth looking forward to. Otherwise, this round of anti-monopoly crackdown will cause unreasonable results, which will be difficult to offset.

A penalty based on companies’ sales needs to be used from time from time as it plays a crucial role in maintaining the competitive order of the industry. However, the anti-monopoly law, from the practices in Europe and the United States, must catch the big and let the small go. The U.S. regulatory focus is all about FAANG (Facebook, Amazon.com, Apple, Netflix, and Alphabet’s Google), while China’s focus should be Alibaba and Tencent.

Precise guidance is very important, and the war should not be expanded. Regulations should curb abuse while promoting growth. We still need to explore the balance.

The fines on Alibaba and Meituan will not break the bones of the giants, nor will they change the business model and competition pattern, but only make them pay attention to industry competition and market order. How big a long-term impact these fines can have on China’s internet industry in the end is hard to estimate. After all, there is a general lack of the internet’s sharing, cooperative spirit among Chinese leading internet companies. I hope that the Chinese internet giants will now have a deeper understanding and a loftier pursuit.

In the 100-year history of U.S. antitrust practices, it is the spin-off that really made the difference by changing the entire industrial landscape. Whether regulators dare to use this “spin-off” option appropriately is the ultimate measure of the effectiveness of antitrust regulations. In the latest round of antitrust actions in U.S., spin-offs are inevitable. If China can dare to split up some industry giants, it can really lead in the antitrust system. It’s a bold expectation, but worth imagining.

The only way to really make an immediate impact on the monopoly practices of Chinese internet platforms is to establish the Digital Marketplace Law as soon as possible. The amendments on existing laws, including the Anti-Monopoly Law, are to deal with problems on an ad hoc basis, which is necessary and effective, but not enough for long-term resolution. The Digital Marketplace Law is the way to institutional innovation in the digital age.

Fang Xingdong is founder of China Labs, a think-tank on the Internet industry.

The views and opinions expressed in this opinion section are those of the authors and do not necessarily reflect the editorial positions of Caixin Media.

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