China’s markets regulator announced on July 10 that it has fined technology giants Tencent and Alibaba, as well as several other companies, for breaking anti-monopoly rules regarding disclosure of transactions.
A list of 28 transactions that broke the rules was published by the State Administration for Market Regulation (SAMR).
As reported, it had 5 Alibaba units engaged, including the purchase of ownership in its subsidiary, streaming service Youku Tudou, in 2021. Additionally, Tencent was involved in 12 transactions on SAMR’s list.
China’s tech industry has been one of the main targets of the campaign against monopolistic behavior that began in late 2020.
china anti monopoly law
The law has been amended after being approved by China’s top legislative body in June and will take effect from August 1.
It is believed that the amended anti-monopoly law will close some regulatory gaps regarding abuse of market dominance, and also provide a clear “bottom line” to private companies regarding illegal activities that threaten fair market competition. puts.
A major amendment to the law focused on how to address the new challenges posed by the development of the digital economy and properly regulate the platform economy.
The amended law will establish and improve a fair competition review mechanism, and develop and put into practice competition rules suited to China’s market economy.
It is worth mentioning that according to experts, major industry players can continue to expand in compliance with the law by adhering to the updated legislation of the platform economy as a whole with standardized norms and additional regulation.
The amendments also defined the application of relevant rules aimed at the platform economy, such as operators not using data, algorithms, technology, capital gains and platform rules to participate in monopoly functions, as posted on June 16. According to a draft version made.
It also includes a “safe harbour” principle, which indicates that agreements between businesses with a market share below a threshold established by relevant agencies will not be prohibited.
The amendments were passed in the 35th meeting of the Standing Committee of the 13th National People’s Congress (NPC). These are the first amendments since China’s anti-monopoly law came into force in August 2008.
According to local reports, the State Council, the cabinet of China will be in charge of taking enforcement action to create a unified, open, competitive and orderly market system.
tech industry crackdown
The tech industry in China has been one of the main targets of a campaign against monopolistic behavior that began in late 2020, when Ant Group, a fintech affiliate of e-commerce giant Alibaba, saw its upcoming high-profile initial public offering in Hong Kong. And Shanghai was suspended by regulators.
Following anti-monopoly investigations involving major Internet companies such as Tencent, Alibaba, Meituan, Didi Chuxing, JD.com and Baidu, the government imposed administrative penalties on 98 cases in 2021. According to the anti-monopoly report for 2021 published by the top market regulator, a total of 21.74 billion yuan ($3.25 billion) was fined.
However, the high level of volatility in the market since the start of the action was not surprising. Alibaba’s market valuation has declined by two-thirds since the end of 2020. Didi’s app, still banned, lost over 80% of its IPO value.
It was understood that there were ideological and political reasons behind the series of regulatory actions against Chinese domestic tech giants, and one of these included the idea of ”general prosperity” introduced by Xi Jinping.
Since Jinping’s speech in 2021, the campaign, which promotes moderate wealth for all and encourages the rich to give more back to society, has been a distinguishing feature of many initiatives.
The issue of wealth inequality has been exacerbated by China’s spectacular expansion in the technology sector and has prompted Chinese officials to demand a halt to the development of the sector.
At their peak, Alibaba and Tencent, both companies with a market capitalization of over $800 billion, made them one of the top five companies in the world’s tech sector.
As market power increases with growth, in China, many tech firms have a monopoly-like position in their own markets. It became a major concern that these corporations could liquidate small businesses and accumulate an excessive amount of influence. Beijing then began to see this as a bigger problem.
As a result in 2021, the government increased the vigil with which it enforced its antitrust rules, fined several Chinese tech giants.
The Chinese government did not want to see too much money and power concentrated in fewer hands, and these enforcement actions sent a clear message to the market and major Internet companies about their practices.
Similarly, there were concerns about national security as many companies also keep a lot of personal data of their customers with them. Beijing was concerned about what would happen if foreign agencies or organizations could access such data.
So it was no surprise that four days after its initial public offering on the New York Stock Exchange, ride-hailing giant Didi’s app was blocked by China’s cyberspace regulator over suspicions of collecting unauthorized user data.
Now, even though multiple reports claim China has signaled an easing of technical action, it is learned that Chinese markets regulator SAMR has imposed a fine of 500,000 yuan ($74,700) on firms such as Alibaba, Tencent and SoftBank. Fines have been imposed, each of which has broken an anti-monopoly law.
As reported, SAMR fined several businesses, including Alibaba, Tencent and Chinese video-sharing platform Bilibili, 500,000 yuan per case in January for failing to properly record more than a dozen acquisitions.
It should be noted that the penalties are the highest allowed by the country’s current anti-monopoly law.
All cases involve mergers and acquisitions, such as Alibaba’s purchase of Best Inc., Tencent’s acquisition of OKBuy (China) Holding Inc., and Ping An Healthcare & technology The company formed a joint venture with SoftBank.
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