Opinion: New Legislation Targets Race-to-the-Bottom Competition Among China’s Internet Firms

China is progressing with new legislation intended to address the escalating “involution-style” competition within its vast e-commerce and technology industries. This move seeks to establish a clearer legal framework governing the country’s internet platform economy, in an effort to curb the ruthless, zero-sum practices that have come to characterize competition among China’s tech giants[para. 1]. A second draft of revisions to the Anti-Unfair Competition Law has recently been submitted to the Standing Committee of the National People’s Congress (NPC) for review, reflecting Beijing’s determination to legally anchor its campaign against such detrimental competitive behaviors[para. 2].

The updated draft builds on an earlier version released in late December for public feedback. According to a spokesperson for the NPC’s Legislative Affairs Commission, the new text directly responds to the central government’s directives to address the problem of hyper-competition. Notable new provisions require fair competition reviews, clarify the rules around platform business activities, increase the obligations of operators to police unfair activities, and specify what constitutes a violation of data rights and malicious transactions[para. 3].

This legislative initiative underscores both the significant economic importance of China’s platform economy and the growing urgency to regulate it more effectively. The amendments are intended to tackle immediate, real-world issues by creating a crucial legal framework designed to guarantee the long-term health, stability, and predictability of the industry[para. 4].

Recently, “involution”—an intense race to the bottom that offers little genuine innovation—has become a defining feature of the tech landscape. Such tactics mirror traditional unfair business methods but are exacerbated by the scale and speed of internet transactions. Unfair strategies include faked data, smear campaigns against rivals, and leveraging market dominance to coerce merchants. Given the massive user bases and transactional velocity, these behaviors have far-reaching public impacts. Thus, fostering a fair competitive environment is seen as vital to China’s broader ambitions for high-quality economic development[para. 5].

China’s efforts to moderate online competition date back to the 2017 amendment to the law, which targeted disruptive technical means such as unauthorized links or forced redirects. However, as tactics evolved to incorporate fraudulent reviews, price discrimination, and forced exclusivity deals (“choose one of two”), the law has been revised to expand the list of prohibited acts, now banning the use of data, algorithms, technology, and platform rules in unfair competition[para. 6].

A core element of the new law is the strengthening of platform operator responsibilities. The draft explicitly forbids platforms from coercing merchants into selling below cost and mandates internal mechanisms to resolve unfair competition complaints and ensure fair play among merchants. Platforms are also required to keep records of and report illegal activity to market supervisors[para. 7].

Officials emphasize that the regulations are not designed to inhibit innovation or excessively micromanage the tech sector—considered vital for economic growth—but to create a stable, consistent legal environment. The law incorporates public input to better reflect consumer interests[para. 8].

The legislation also seeks to protect smaller companies by forbidding large enterprises from leveraging their resources or influence to impose unfair terms on small and midsize businesses or delay payments in a manner detrimental to them[para. 9].

Despite progress, challenges remain. From 2020 to 2024, 127 criminal cases involving internal company corruption and totaling over 305 million yuan ($42.5 million) were documented in just one Beijing court, highlighting the need for stronger corporate governance as a foundation for fair competition[para. 10].

The public’s keen interest in the draft law underscores the centrality of the platform economy in China. Ultimately, policymakers hope that these amendments will sustainably strengthen the industry, bolster China’s market system, and signify a milestone toward a rule-of-law society[para. 11].