Growing Challenges of Internet Platforms Spur Calls for Reform (AI Translation)

【周刊提前读】深度：互联网平台积弊日深 各方呼唤变革与平衡

China is initiating a new regulatory phase on its internet platform economy, focusing on rules and algorithms, shifting from previous strategies that prioritized platform expansion and competition[para. 1]. The State Council Executive Meeting chaired by Premier Li Qiang emphasized market standardization, improved regular supervision, and ensuring platform enterprises protect the rights of consumers and workers while promoting quality operations for mutual benefits[para. 2]. The role of China's platform economy was acknowledged, emphasizing its significance in employment[para. 3].

A senior service platform figure highlighted regulatory directions, stating that e-commerce platforms are moving away from low-price tactics, adjusting refund policies, and addressing labor issues related to work hours transparency in algorithmic regulations[para. 4]. Chen Tianhao from Tsinghua University underscored the regulation of competition protecting consumers and workers as tasks related to stabilizing employment, essential for domestic demand and supply improvements[para. 5].

China possesses a vast digital population of nearly 1.1 billion internet users, driving the platform economy's burgeoning size in various sectors. This digital surge has reflected on online retail performance, where the first half of 2024 saw online sales reach 7.1 trillion yuan, a 9.8% increase. E-commerce alone accounts for over one-quarter of total consumer retail sales[para. 6].

Since 2020, China's platform economy has been subjected to stringent regulations, aiming to align platform operations with regular oversight standards[para. 7]. A relatively relaxed development phase followed, with government recognition of platform contributions[para. 8]. However, macroeconomic pressures exposed competition abnormalities prompting regulators to scrutinize pricing practices, employment protections, and algorithmic transparency[para. 9].

Regulatory authorities have initiated "refund only" practices rectification, managed algorithms, and are working against information cocoons and unfair employee treatment, compelling platform compliance by implementing self-inspection mandates and rectification verification[para. 10]. These regulations directly address long-standing industry challenges, where unsustainable competitive aspects like low-pricing squeeze supply chains and merchant practices[para. 11][para. 12].

Legislative measures are advancing, as seen in the Anti-Unfair Competition Law's amendments prohibiting unfair competition via technology or algorithms, tackling price discrimination and exploiting workers’ rights[para. 13]. Platform firms are compelled to amend policies affecting merchant rights and rider working conditions with some like Meituan and Kuaishou improving algorithm structures for workers, while Douyin focuses on algorithm transparency combating "information cocoons"[para. 14][para. 15].

However, addressing "information cocoons" is complicated. Platforms endeavor to improve minority content visibility, yet foundational business models may inherently favor homogeneous content distribution[para. 16]. Engaging in strategic changes poses challenges due to contrasting commercial positions and consumer expectations wherein platform competition remains fierce amidst declining market demands[para. 17][para. 18].

Overall, strenuous efforts are underway to reconcile platform governance issues, including employment rights of gig workers[para. 19][para. 20], optimizing e-commerce policy alongside growing legislative changes and consumer expectations[para. 21]. The regulatory landscape for China's platforms is evolving, with increased scrutiny aiming for a balanced digital ecosystem that protects consumers and promotes fair competition, striving to mitigate the "involution" cycle presently affecting platforms like Pinduoduo in its competitive drive[para. 22][para. 23].