At the beginning of the year, Alibaba’s in-house bulletin board was hotly debated when Chinese antitrust officials formally investigated the tech giant.
But the company’s management did not have the answers to many questions. China’s technology industry has never had strict application of the country’s competition law.
The staff said that the regulators interviewed them and downloaded the conversation notes from Alibaba’s internal communication platform. Officials were able to obtain the information they wanted, expanding as a result of surprise raids that could have stopped operations. As soon as the investigation was launched, the management told the staff that they had studied the antitrust cases in the EU and the US to prepare.
The sudden outburst of the State Market Administration (SAMR) has shaken the tech industry.
Alibaba shares fall about 18% since the investigation in December չեն did not significantly accumulate even after regulators closed their initial case $ 2.8 billion in fines. The food delivery company Meituan fell by about 5% as it became the second target of an official investigation in late April.
More than 30 other technology companies have also asked for “self-recovery” to provide information to SAMR, including the floating company Didi Chuxing uncertainty earlier than scheduled blockbuster US IPO:,
“It is the speed of the turn that surprised everyone. In China, regulators can move very fast. In fact, China lags behind US and EU regulations. The direction is right, “said Daisy Kay, head of Venture Capital’s Beijing office in Beijing.
Public anger drives action
Advocates and tech experts say the wave of antitrust activity was partly in response to public outrage over the enormous power of some tech companies, such as online grocery platforms and catering companies, which needed utilities during the coronavirus epidemic but did not share. revenue with their overloaded delivery drivers.
Apparently, Beijing’s goal is also to unleash the most vocal tech billionaires, such as Mae Man, the outspoken founder of Alibaba, whose Ant Group ipo was withdrawn last year, to revive companies to serve the public and the government’s ambitions.
“Whether it is an antitrust law or a law of unfair competition, these are for the government [laws] all are social management tools. “It’s all about setting standards for behavior. What works best will be used,” said Daytons lawyer Wei Shilin.
Enforcing the competition law was not just about improving the market, agreed Guo Shan, a Beijing consultant at the Plenum, as the authorities closely monitored the treatment of fintech: employees. “An antitrust agency can be a useful tool for keeping technology giants disciplined,” he said.
In March, Li Shozhen, a member of the Chinese government’s advisory committee, told state media that China was undergoing an “inclusive, cautious regulation” that allowed its tech giants to grow freely to “regulate science and innovation,” to protect consumers from established giants, and tech startups. About:
Beijing also wants its technology companies to do basic research, to help them with the long-term technology divide, rather than just focusing on getting as many consumers as possible into their programs.
Regulators lack resources
But in many ways, antitrust regulators are incomparable to those of Chinese tech companies. As of March, SAMR had a staff of only about 50, according to Huang Yong, a member of the State Council’s Antitrust Advisory Committee.
It does not have a dedicated team of economists to analyze cases, but instead hires individual advisers or academics, says Fai Zhou, head of internships at Linklaters China. At the same time, technology companies are hiring lawyers and government liaison officers to protect themselves.
Current antitrust campaign could help SAMR expand, predicts Angela Hang Ang, Professor of Law at the University of Hong Kong China’s antitrust exclusivity,
“Chinese government agencies at all levels are competing fiercely for policy control,” he said. “Antitrust regulators certainly see the ongoing campaign against Big Tech as a perfect opportunity to focus on allowing their small bureau to demand more budget and staff.”
The sharpest point SAMR has is the antitrust law, which allows fines of up to 10 percent of a company’s internal revenue, the same penalty proposed by the EU Digital Markets Act.
“But under this law, investigations can be slow, the main purpose of which is restraint,” Wei said. SAMR solves several anti-competitive practices of technology companies, including forcing traders to exclude a single platform, which was the main reason for Alibaba’s fine, raising prices by tempting customers with discounts and offering different prices to different customers.
“Many of these behaviors are still difficult to determine, and SAMR lacks the resources to catch up with all the companies involved,” the lawyers said.
Tech companies are starting to shine in society
Instead, regulators focus on companies whose behavior leads to public outcry. “Companies can follow up on complaints from consumers, customers and the media,” he said. “When the company’s behavior rises to the level of public discontent, the risk of regulatory inquiries or even interference will be high.”
Companies that attract the attention of regulators can wait a long time for private negotiations, communications, to publish something if the case becomes public at all.
In response to the pressure, China’s tech founders have filed a lawsuit seeking public opinion, extending their promises to improve society. In April, Tencent announced it would spend Rmb50 billion ($ 7.7 billion) on social and environmental initiatives. Tencent co-founder Pony Mann also pledged $ 2 billion in stake.
Other techies are coming to the fore, including Colin Huang of Pinduoduo, who said he wanted to do research, and Zhang Yiming of ByteDance, who spoke of “returning to society.”
The biggest blow will be the strict rules of data
It remains unclear how badly Chinese tech companies will suffer from the rules. After announcing its antitrust fine, Alibaba said its revenue would increase by 30% year-on-year to 930 billion rubles. The CEO of Meituan assured investors that the company will probably depend on its merchants, did not change any growth target.
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Oliver Rooney, professor of finance at the China-Europe International Business School in Shanghai, warned that tighter data collection controls would be a major risk for companies, as much as Apple has hurt the global advertising industry by tightening its regression.
Investors continue to be confident in supporting current industry leaders. “These companies are leading because they have built tough competitive trenches. “Their platforms still have considerable focus, they will continue to be leaders,” said venture capitalist Kay.
Additional report by Nian Liu