China completes overhaul of antitrust law to corral Big Tech
China techChina completes overhaul of antitrust law to corral Big Tech
Legislation takes effect Aug. 1, keeping pressure on sector despite earlier signs of easing
BEIJING -- Chinese tech companies will face stiffer penalties for crossing Beijing's red lines on competition after lawmakers on Friday approved changes to the country's antitrust law that were years in the making.
The amendments, adopted by the National People's Congress Standing Committee, will go into effect on Aug. 1, Xinhua News Agency reports. The changes are the first to the law since it went into force in 2008.
The enacted version has yet to be published in full. But based on a draft proposal announced in October, the changes are designed to put China's tech giants on a shorter leash despite signs in April that China's leadership was open to easing its crackdown on the likes of top e-commerce player Alibaba Group Holding.
The draft amendments add the words "encouraging innovation" to the first article of the antimonopoly law's general provisions. A new Article 10 that states "business operators shall not exclude or limit competition by abusing data, algorithms, technology, capital advantages as well as platform rules." The wording seems to take aim at big tech companies that put the squeeze on smaller players and emerging rivals.
Under the amended legislation "the vast majority of anticompetitive practices by platform providers can be regulated by law," Jiao Haitao, professor at China University of Political Science and Law in Beijing, told Chinese media.
In one likely scenario, tech giants are expected to face legal repercussions if they force vendors to operate on only one platform, a practice known in China as "choose one from two."
Alibaba has already faced regulatory pressure over its relationships with vendors. In April last year, Chinese antitrust authorities slapped Alibaba with a 18.2 billion yuan ($2.7 billion) fine for abusing its dominant position.
The antitrust law revisions will raise such penalties. For egregious violations with widespread impact, fines could be double to quintuple the normal amount. Authorities will also have the option to seek criminal charges.
The amendments will significantly increase fines for companies that fail to report mergers and acquisitions to regulators. The original maximum fine of 500,000 yuan has been scrapped as too low to deter big tech groups.
In cases where the nondisclosure hurts the competitive environment, the highest fine will be equivalent to 10% of the previous year's revenue. Even if the failure to report is found not to harm competition, the penalty cap is still raised tenfold to 5 million yuan.
Alibaba, along with Tencent Holdings, Baidu and Didi, was fined last year for not reporting earlier acquisitions.
Under the amended antitrust law, authorities will apply greater scrutiny upon mergers and acquisitions that involve public welfare, finance, science and technology and the media. Alibaba and other tech giants have been moving into finance and media, which has been a cause for concern among officials.
As it cracks down on tech heavyweights, Beijing seeks to support small and midsized enterprises as part of President Xi Jinping's "common prosperity" initiative. Business whose market share falls below a certain threshold will be exempt from the antitrust regulations and allowed to set resale prices if such practice does not harm competition.
"The stronger authority granted to the antimonopoly law will limit the anticompetitive profits sought by [tech] executives and create a framework for achieving common prosperity," Sun Jin, professor of law at Wuhan University, said to Chinese media.
Fines for violating the antimonopoly law ballooned to 23.5 billion yuan in 2021 from 400 million yuan in 2020, according to Chinese media.
China began laying the groundwork to amend the antimonopoly law around 2018, and authorities show no signs of softening their stance on the tech sector.
"To overcome the difficult economic circumstances, some restriction on internet giants might be eased, but only to a limited extent," said a senior provincial government official. "The Chinese leadership's overall policy of controlling internet giants will continue in that direction."
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