China’s central bank defines monopoly for the first time in antitrust curb of world’s largest online payment services market
- Any nonbank service provider with half the online transactions market, or two entities with a combined two-thirds share, could be subject to antitrust probes
- Three providers with three-quarters of the market would also set off the antitrust alarm
“The new draft rule is part of the tightening [financial] regulations. Payment is a fundamental part of financial services because it is where [fintech] companies start to enter the market,” said John Dong, a securities lawyer at Joint-Win Partners in Shanghai. “It is impossible for payment services to escape from [this regulatory environment]. There are no giants or businesses that cannot be carved up, and no company can be a monopoly forever.”
The draft by the central bank, which oversees all banking and financial services, is part of the Chinese government’s efforts to rein in the unchecked growth of nonbank service providers in the payments market.
The central bank can flag any monopolistic or anticompetitive behaviour that breaches the principles of “security, efficiency, credibility or fairness” to antitrust regulators for rectification. These actions may include the suspensions of service, veto of merger plans that produce monopolies, or “carving up nonbank payment institutions upon business types”, according to the draft regulation.
The new regulations are drafted with other regulators to “further regulate the operation of payment institutions and maintain the healthy development of payment services market” through encouraging “openness and competition”, the People’s Bank of China said.
Antitrust regulators can be called upon to warn potential “monopolisers” of their breaches if the central bank finds one nonbank institution with more than a third of the payment service market, two institutions with over half of the market, or three institutions with 60 per cent of the share, according to the rules.
The draft regulation also empowers the central bank to conduct on-site inspections to payment service institutions.
With additional reporting by Zhou Xin