China’s new rules on anticompetitive practices by internet companies

China has issued new draft rules on the anticompetitive practices by Internet Companies. New rules would prevent internet companies from engaging in anticompetitive practices.

Key Points

  • New guideline seeks to prevent internet companies from involving into anticompetitive practice like unfairly blocking rival platforms.
  • It extends China’s efforts to rein in technology sector.
  • Guidelines include a detailed list of prohibited behaviors that could harm internet users and limit market competition.
  • Prohibited behaviors include controlling user traffic, blocking competitors’ products as well as discriminatory pricing.
  • Habit of blocking traffic for competitors and external sites has also come under scrutiny as it hinders the market competition.

Impact of the new guidelines

Shares of Chinese tech companies declined on August 17, 2021 and extended a monthslong slump. It was driven by regulatory oversight. Share of Alibaba Group Holding Ltd. decreased by 4.8% while that of Tencent Holdings Ltd. by 4%. According to the market regulator, new rules targeting internet companies seeks to clarify an existing law on unfair competition.

Alibaba’s antitrust fine

In the year 2021, Alibaba was hit with a record antitrust fine of $2.8 billion for a practice called as “er xuan yi,” or “choose one out of two.” It was found during an investigation by Beijing’s top market regulator that, e-commerce company had abused its dominant market position as it forced vendors to exclusively sell on its platform. Another Food-delivery giant Meituan is also under investigation for same practice.

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