Beijing takes another heavy hand in anti-monopoly, e-commerce giants may no longer be in good shape

Shares of a host of e-commerce giants, including Alibaba, Tencent, Jingdong and Meituan, generally fell heavily after China’s State Administration of Market Supervision released its “anti-monopoly guidelines on the platform economy sector (draft for comments)” on Tuesday morning (Nov. 10).

On the Hong Kong stock market, Alibaba’s shares fell 5.1 percent, Tencent’s fell 4.4 percent, Meituan’s fell 10.5 percent and Jingdong’s shares fell 8.8 percent. The e-commerce sector evaporated $100 billion in market value.

The new anti-monopoly guidelines mainly target Alibaba, Tencent and other Chinese online platform behemoths. The new anti-monopoly guidelines mainly target Chinese online platform giants such as Alibaba and Tencent, which are in a monopoly position in the economic field of online platforms and “abuse their dominant market position to exclude and restrict market competition without justifiable reasons by applying differential treatment to traders with the same trading conditions”, according to the “Exposure Draft”.

Since the overall deterioration of U.S.-China relations and the global virus pandemic, the entire international environment has changed dramatically for China, with exports, which were the main driver of China’s economic growth, becoming unsustainable. This situation has forced Beijing to make a major adjustment to its economic development strategy in recent months, launching a dual-cycle development strategy that focuses on the internal cycle.

Observers point out that this strategic reshuffle has led to a dramatic change in Beijing’s attitude toward the web giants. The spring may be over for these Internet pride kids, with fall or winter to follow.

Now the focus has shifted to the need to expand the domestic market and speed up the development of small and medium-sized enterprises, so anti-monopoly and encouraging competition have become priority policy options, said Xie Wen, former president of Yahoo China.

Reuters quoted Xie as saying, “At that time, people thought that China’s Internet companies were competing with U.S. companies, that they were China’s pride. But now, we’re moving to an internal cycle.”

This is roughly the same strategic consideration that led Chinese regulators to abruptly halt Ant Technology’s plans to go public last week. Judging from the joint interview of three key figures at Ant Group by four regulators and the central bank’s recent public statements, Beijing’s message to the market is that the central government does not want to see private companies running too many online financial businesses, nor does it want private companies to grow stronger and form an unshakable monopoly.

On Nov. 6, China’s three departments, the State Administration of Market Regulation, the Central Internet Information Office and the State Administration of Taxation, called a meeting with representatives of 27 major online platform companies, including Alibaba, Byte Jump, Jingdong and Ziduo, asking them to comply with the law, strengthen self-restraint and promote the healthy development of the online economy.

The draft, released Tuesday, also specifically called for a ban on “two-for-one” market monopolies on e-commerce platforms, allowing one brand of goods to be sold on multiple commercial platforms.

Alibaba has often come under such criticism online in China. Last year, the General Administration of Market Management convened a meeting with more than 20 online platforms, asking them to stop forcing merchants to sign exclusive cooperation agreements.