China turns up heat on its Internet giants with new antitrust rules

BEIJING • China yesterday laid out detailed regulations for the first time to root out monopolistic practices in the Internet sector, as Beijing seeks to curtail the growing dominance of corporations like Alibaba Group Holding and Tencent Holdings.

The country's antitrust watchdog is seeking feedback on a raft of regulations that establish a framework for curtailing anti-competitive behaviour such as colluding on sharing sensitive consumer data, alliances that squeeze out smaller rivals and subsidising services at below cost to eliminate competitors.

They may also require firms that operate a so-called Variable Interest Entity - a vehicle through which virtually every major Chinese Internet company attracts foreign investment and lists overseas - to apply for specific operating approval. And they also restrict the targeting of specific customers through their online behaviour.

The latest proposal follows heightened scrutiny of technology firms worldwide, as regulators investigate the extent to which Internet giants from Facebook to Alphabet's Google can use valuable data to shore up their dominance.

Consumers in China, home to some of the world's largest corporations, have in recent years protested against the gradual erosion of their privacy via technology from facial recognition to big data analysis. Alibaba and Tencent were both down more than 3 per cent in Hong Kong, in line with a broader tech sell-off.

It is unclear how the regulations put forth by the State Administration of Market Regulation will be enforced. Beijing is increasingly seeking to diminish the influence that a handful of its tech corporations wield over vast swathes of the economy. It investigated Tencent's music arm's exclusive agreements with publishers last year, and most recently modified regulations to rein in risk at fast-growing microlending entities such as Ant Group. The latter move derailed Ant's planned US$37 billion (S$50 billion) initial public offering last week - what would have been the world's largest such offering.

The twin Chinese giants now dominate e-commerce and gaming, and are key backers of leaders in adjacent businesses such as food delivery giant Meituan and car-hailing leader Didi Chuxing. They have together invested billions of dollars in hundreds of up-and-coming mobile and Internet firms.

Companies like TikTok owner ByteDance and Tencent rival NetEase that have risen to prominence without backing from either of the pair are viewed as rare exceptions. In other areas, Baidu dominates online search.

The new rules were proposed in accordance with China's Anti-Monopoly Law, which included broad language governing Internet firms in January for the first time. The watchdog is seeking public feedback till Nov 30.

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A version of this article appeared in the print edition of The Straits Times on November 11, 2020, with the headline 'China turns up heat on its Internet giants with new antitrust rules'. Subscribe