Whether Internet giants Alibaba and Tencent were fined for monopolistic behavior on Monday, or Ant Group’s ipo was temporarily halted in early November, analysts say the signals from Chinese regulators are increasingly clear. That Beijing is tightening antitrust regulation of the online economy means the era of brutal expansion by Chinese Internet companies is coming to an end.
Four analysts interviewed by VOA said authorities are aware of the unfair competition created by monopolized markets by Internet giants and the threat to the real economy.
As a result, they say, regulators are gradually strengthening method and enforcement of the anti-monopoly law, to control the network economy, including the use of dominance or between industry capital advantage to a competitor’s block, for example, forced electricity reform “alternative” platform, or take advantage of the data of consumer price discrimination, “big data kill cooked”, for example, on which platform the same goods or services, to new and old customer price is higher “technique of abusing the” of VIP customers.
In the future, analysts expect such crude monopolistic practices in the Internet to be sharply curtailing, and Internet companies to put the country’s economic and industrial health ahead of individual companies’ profits.
But they also said That China’s sources of law, regulatory mechanisms and enforcement experience in combating monopolies were immature, and that it would be a long and challenging process to establish comprehensive antitrust governance in the future.
Internet companies punished for monopolistic behavior
This week, For the first time since The introduction of the Anti-monopoly law in 2008, China issued antitrust penalties against two Internet giants. Alibaba and Tencent have been fined 500, 000 yuan ($75, 000) for “failing to declare” completed mergers, although the fine is a fraction of the two companies’ revenues.
Lu Suiqi, an associate professor of finance at Peking University’s School of Economics, said that in the past 12 years since the anti-monopoly law came into force, Internet companies have become virtually invisible because of the government’s efforts to foster the Internet economy. But as companies get bigger, regulation will become tighter in the future.
, he said: “these enterprise larger later, it took some means of abnormal vicious competition, the competitors out of the market, monopoly on higher market share, such a practice is, in fact the market vigor is inhibited or killed, the use of monopolistic management, in fact is a damage to the market.”
A Tencent video platform on a street in Beijing (Nov 11, 2020)
Seventy percent of China’s top 30 apps are owned by Alibaba and Tencent, and both systems are estimated to have ecosystems worth 10 trillion yuan ($1.5 trillion) each, compared with other online giants such as food delivery, mobile payments and bike-sharing.
Li Chengdong, founder of the Beijing-based dolphin think tank, said the explosive growth of Internet companies has alarmed governments and created a global antitrust trend as they get bigger. But unlike acquisitive monopolies such as Facebook and Google in the US, it is far too common for Chinese companies to use their monopoly position to suppress vicious competition from their rivals, especially if they need to strengthen regulation to return to healthy competition.
“In China,” he says, “it’s a common choice. It’s very common to actually use that monopoly position to crush competitors, to crush small and medium-sized startups. China has a different approach to monopoly than the US.”
Corporate competition is in disarray
Jd.com sued alibaba’s Tmall in 2015 for forcing merchants to “choose between two” platforms, while taobao merchants told the media last year that alibaba continued to force them to sign “exclusive cooperation” agreements, which meant that e-commerce companies still had to take sides.
Jd.com founder Liu Qiangdong celebrates his company’s nasdaq stock market debut. (May 22, 2014)
In addition to the chaos of the alternative, analysts say the platform economy’s “big data” and disorderly expansion are also reasons to force China’s hand in regulation.
‘It is a common practice for Internet companies to lower prices in the early stage to attract new customers, and then to raise prices when there are few competitors,’ Mr. Lu said. ‘This is a normal practice that harms consumers’ rights and interests, and can only be corrected by government regulation.’
In addition, no Chinese cross-border e-commerce experts pointed out that China’s digital economy and online electricity economy rapid development over the past 20 years, although on the amount of users, clinch a deal amount and single continuous innovation is high, but also to the offline entity essence of economy and environment, harm, China must establish a system as soon as possible, find a more balanced and sustainable growth.
“If the e-commerce economy in the digital economy grows too fast, it will not be well prepared for the real economy, or for technological progress, including the preparation of policies, regulations and institutional arrangements for monopolies,” he said.
‘The digital economy is a key element for China to maintain overall economic momentum in the future,’ Mr. Tang said. ‘Market opportunities should be open to all participants and not be monopolized by a few large companies.’ E-commerce companies, with annual sales of 70 billion, need to find greener ways to do business. The plastic bags they use this year alone can wrap around the earth 1,200 times, which is too harmful to the environment.
Faced with the chaos that has resulted from the pursuit of profits in China’s online economy in recent years, he said it was time for the government to clean up.
Beijing plans comprehensive supervision
New American think-tank, a researcher at the Chinese digital economy special Liao Luo (Paul Triolo) said that in recent years, the scale of the big Internet companies have been great to a tipping point, plus the ant gold suit for the authorities to see its financial business of bank of large state-owned enterprises dominate the potential destructive power and possibly brought about by unfair competition, therefore, the valuation of up to $37 billion in a moratorium on the pile of the listed after, Beijing clearly starting to tighten regulation of network economy.
Photo: Ant Group headquarters in Hangzhou, Zhejiang province, China
“After the suspension of the listing, Beijing seems to have entered a phase of comprehensive reassessment, starting to plan the best mode of supervision for fintech and large Internet e-commerce, payment and financial services companies,” he said.
When Communist Party President Xi Jinping visited the Nantong Museum in Jiangsu province in mid-November, he singled out the 19th century industrialist Zhang Jian as a role model for China’s private entrepreneurs, which seems to be a message to private Internet companies that they must put industry and national development ahead of individual companies’ self-serving business models, Tliao said.
Is also under the premise, the observer reported, the ant gold suit, chairman of Wells in xian building on Tuesday (December 15th) in Beijing to attend the fourth session of China’s Internet financial BBS, special speak publicly noted that the ants in after more than a month of internal examination, “is central difference planning advice and a series of careful study on the development of financial security and financial stability policy spirit, regulatory requirements, to conduct a comprehensive self-examination, seriously and actively cooperate with supervision, further implement the regulatory requirements.”
National development is more profitable than private enterprise
This is the first time an ant executive has spoken publicly since the ipo was postponed, and the remarks appear to echo Mr. Xi’s expectations for private entrepreneurs.
Both Trillo and Lui say the tech giants are too big to resist China’s tightening antitrust regulations, though they also haggle over what they can’t enforce or other enforcement details.
In supervision on the establishment of the environment, said the Liao Luo, due to the global is in grope a set of effective supervision system can both network innovation, as a result, China is no exception, he believes that China should emulate the UK, Singapore and Japan, the early launch of “supervision of sand box (regulatory sandbox)”, letting industry under the controlled environment risk, to try to innovative products, and work closely with regulators, trial and error, trial and error), with the head of the supervision and the legal system together.
Lu Suiqi said that China’s market mechanism is not mature, the economic and non-economic factors under the dispute formed monopolies, now to correct, particularly complex. Even the formulation of the rules is a game of various forces, fully reflecting the complexity of China’s antitrust disposal. So the process will be slow and challenging.
In particular, he raised several concerns: First, will the anti-monopoly law really be implemented, or will it become a tool for unwarranted suppression of enterprises, or even for the sharing of spoils? Second, what is the anti-monopoly approach? Lu Suiqi said that the fine is to treat the symptoms rather than the root causes. However, with the complex cross-shareholding structure of Chinese Internet companies, it may only be reduced to a false split, which is not conducive to the fight against monopoly. Third, in the process of antitrust disposal, how public and private interests are divided, or even how to respond to the game of various forces, which may affect the effectiveness of the implementation.
The work of establishing the anti-monopoly supervision system is endless, and China has taken the first step of perfecting the source of law.
Anti-monopoly Law Overhaul
China’s State Administration for Market Regulation released its draft antitrust Guidelines on the Platform Economy on Nov 11, the first overhaul of the anti-monopoly law since it came into force 12 years ago.
In particular, the guidelines, which apply to all types of foreign and Chinese companies, raise the maximum penalty from 500,000 yuan ($7.5 million) to 50 million yuan ($7.5 million), equivalent to a hundredfold jump, in addition to continuing the rule that the maximum penalty can be up to 10 percent of last year’s revenue.
Analysts generally believe that this reflects the Chinese government’s zero-tolerance attitude towards corporate monopolistic behavior, and further implementation should also have a certain deterrent effect on enterprises.
But Mr. Tang, the e-commerce expert, said he expects Beijing authorities to set up a state-level bureau or ministry of digital Economy in the next two to three years to coordinate supervision of Internet companies.
‘Without such an integrated authority that empowers, regulates, coordinates policies and enforces enforcement, it is difficult for the authorities to make accurate judgments about companies’ real financial data, future Internet trends and the contradictory nature of the industrial structure,’ he said. ‘It will also affect the enforcement of the anti-monopoly Law.’
For example, if there is no way to know the real financial performance of an enterprise, it may be impossible to issue fines with “pain points and strength” for monopolistic behaviors. In this way, the purpose of anti-monopoly cannot be achieved, because as long as the benefits still outweigh the fines, most enterprises will still take risks to pursue profits.
Tang also called on the authorities to adopt a comprehensive approach to incorporate legal advice from the industry. The development of the Internet has overturned many past supervision theories, he said. If the authorities continue to revise the law, only a few scholars will make laws or mechanisms based on past theories and experience, it will be impractical and difficult to adapt to future development trends.
Big Chinese Internet technology stocks, such as Meituan, jd.com, Tencent, alibaba and xiaomi, have been depressed recently by tougher antitrust regulations.
If antitrust scrutiny falls further in the future, says Li Chengdong of Dolphin Think Tank, the pace of mergers and acquisitions by Internet technology giants should slow, which will definitely affect their long-term growth. However, due to the fear of aggressive monopolistic practices by large enterprises, the competitiveness of small and medium-sized business rivals and the rights and interests of consumers will be better protected, and the overall development of the industry will be more sound.
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