Technology giants around the world are facing increasingly higher regulatory barriers to expansion. Long uneasy with monopolies, governments and consumers in North America, Europe and now in China have pushed back against Big Tech’s increasing concentration of market power. China’s attempts to rein in the nation’s home-grown technology champions culminated last weekend in the record 18.2 billion yuan (US$2.8 billion) antitrust fine against this newspaper’s owner Alibaba Group Holding . Alibaba’s fintech affiliate Ant Group was brought in line to be regulated as a bank , followed in quick succession by dozens of tech companies – with the combined market value bigger than the UK’s economy – pledging their adherence to China’s antitrust regulations. This week, the US House of Representative Judiciary Committee formally approved the October 2020 report that accused US tech giants of buying or crushing smaller firms, which could become the blueprint for antitrust legislation to rein in the behaviour of Alphabet’s Google, Amazon, Facebook and Apple. “Closer scrutiny of the tech sector is not uniquely Chinese, and the seriousness of antitrust enforcement is not particularly new,” said Marcus Pollard, antitrust and foreign investment counsel at the law firm Linklaters, adding that the main concern for regulators had been whether Big Tech could use their market clout to exclude competitors at the detriment of consumers. “Alibaba is obviously a high-profile statement of intent by the regulator of their mission to keep markets open with diverse choices for consumers.” In both China and the West, the rise of Big Tech went mostly unchecked for years, as many extolled the role played by technology in economic growth and improving people’s lives. US regulatory scrutiny of tech firms went into abeyance since the 1998 antitrust case against Microsoft was ultimately overturned and settled out of court, failing to break up the software vendor which powered nine of 10 personal computers around the world. Scrutiny did not resume in earnest until about two years ago, as policymakers and consumers became aware of how technology giants – especially the internet behemoths operating everything from search to shopping and social interactions – had come to govern people’s lives and public discourse. Worse, as the incumbents grew larger, they were starting to squeeze out smaller competitors and start-ups. Google, Amazon, Facebook and Apple, collectively known as GAFA, have clashed with regulators in multiple jurisdictions, including the US, UK, EU, Turkey and India. Over 450 pages, the US Judiciary Committee report was scathing in finding three common problems of depriving market access, abuse of market power and the further entrenchment of their dominance. China’s antitrust scrutiny under the Anti-Monopoly Law had evolved from an initial focus 12 years ago on the pharmaceutical industry and municipal water utilities to the market dominance by technology companies, according to research by South China Morning Post . The first salvo for tech companies came in November 2020, when Chinese regulators abruptly pulled the plug on the US$37 billion initial public offering (IPO) by Ant Group 48 hours before shares were expected to begin trading in Shanghai and Hong Kong. Regulators accused Ant Group of disregarding financial regulations and over-collecting personal data. China’s antitrust regulator fined affiliates of Alibaba, Tencent and SF Holding for monopolistic behaviour in December. Months of investigations ensued, resulting in Ant Group restructuring its sprawling fintech business to be in line with regulations. Regulators are particularly wary of possible infractions in the use of data and how it gave platform operators with troves of user data unfair advantage. One specific concern in China has been the imposition of exclusivity deals that prevent vendors from selling on competing platforms, forcing merchants to “ pick one from two .” This was the subject of the State Administration for Market Regulation’s (SAMR) investigation into Alibaba. “Globally, regulators will be looking at areas where there is unfair competition,” Alibaba’s vice-chairman Joseph Tsai said during an April 12 call with analysts after the company’s penalty. “We have gone through this process and gotten to know [the regulators’] thinking very well. It’s a very healthy process. We have a plan to correct our [course] and we have a good internal compliance system to comply with the law.” More than two dozen technology companies including Alibaba, Tencent, Baidu , Meituan and TikTok ’s owner ByteDance were warned by SAMR and State Tax Administration to solve problems that include monopolistic practices and unfair competition. Tencent was hit by two antitrust claims in February. The first was a potentially landmark lawsuit brought by ByteDance , which alleged that the world’s largest games publisher was abusing monopolistic power by preventing links to videos on Douyin, the Chinese version of TikTok, from working within WeChat. Another complaint came from smart vehicle tech supplier Pateo and a General Motors China venture with SAIC Motor Corp, which claimed Tencent was abusing its market power with WeChat by limiting product sales. This month, SAMR fined Alibaba-backed start-up Nice Tuan and the community group-buying units under e-commerce platform Pinduoduo, ride-hailing firm Didi Chuxing and online delivery company Meituan. Before the crackdown, China’s unique market conditions helped its tech giants thrive in their earlier years. Local authorities have kept out many foreign rivals, such as Google and Facebook, through online censorship enforced by the Great Firewall. However, experts say this has come with pitfalls. “The recent [fine on] Alibaba further shows [why] domestic companies should go out [and expand overseas], as domestic supervision will tighten,” said Zhao Xiaofeng, an assistant professor at Lingnan University’s Department of Finance and Insurance. “Anti-monopoly is a game of fairness and efficiency. In the past, Chinese private enterprises were still very small, and the government mainly treated them with a supportive mentality, so efficiency is more important [at that time.] Now, these enterprises have gradually grown up and even have a good international reputation. Its development has indeed brought social problems, so fairness has gradually gained the upper hand.” To counter that, Zhao said these companies need to diversify outside China. “Don’t rely on a single country and a single government,” he said. Beijing’s new-found interest in regulating Big Tech has also raised questions about the changing political environment for major internet companies. China’s centralised political and legal system means that businesses often cannot directly push back on top-down mandates, forcing companies to adapt to decisions made behind closed doors. As a result, Chinese companies have less legal leverage to push back on government mandates than large tech firms in the US and EU, analysts said. “In a federal system, such as the US, a company can be investigated by one level of government – say federal – but still be fine with local and municipal authorities,” said Victor Shih, associate professor at the School of Global Policy and Strategy at the University of California. “In China, since all courts and regulators are controlled by the Chinese Communist Party, if there is political trouble with the central-level party, a company will run afoul of all lower-level governments and courts,” Shih added. Major Chinese conglomerates such as Anbang and Hainan Airlines have seen their fortunes take a sudden turn for the worse after being placed under regulatory scrutiny, according to Shih. “Because politics is in command, legal defence is ultimately ineffective in protecting investor interests,” he said. In countries like the US, tech companies have sought to defend themselves in both the courtroom and in the media against regulatory pressure. Chinese authorities, meanwhile, have significant power to contain speculation and control the public conversation around regulatory moves. As the antitrust investigations have drawn attention from around the world, Chinese state media has been downplaying the political significance and drawing parallels with antitrust cases in the West. The government’s propaganda arm ordered news outlets to strictly follow the official line regarding Alibaba, according to sources cited by Bloomberg News and the Financial Times. Tech bosses have been keen to show their support of China’s new regulatory environment. JD.com, Meituan and ByteDance were among the first Chinese Big Tech companies to pledge compliance with the law , a day after regulators lectured 34 companies to “learn a lesson” from Alibaba. The regulatory push is unlikely to ease up soon. In January, SAMR made it clear that tightening antitrust regulations would lead the agenda in 2021. Analysts said that for now, it is hard to predict the outcome and the duration of the investigations. Tech giants such as Alibaba could face several possible outcomes. Most antitrust cases in China merely result in fines. According to a review of published cases by the Post , regulators decided to end several antitrust investigations after the company agreed to correct alleged monopolistic behaviour. “As we see in recent days, companies may be required to change some of their long-standing business practices to comply with legal standards and to make commitments to fully comply with antitrust rules,” Pollard said. Companies may be required to change some of their long-standing business practices to comply with legal standards, Pollard said. The most severe punishment may be breaking up a company, a threat that has been levied against the likes of Facebook and Google. Regulators have so far refrained from imposing structural remedies such as breaking up a firm in antitrust cases, the Post found. Alibaba had lost about 8 per cent of its value in Hong Kong since December 23, the day before Chinese authorities unveiled it antitrust investigation, before the announcement of the fine. However, the market has taken the fine, and Alibaba’s subsequent reassurances, as a net positive with the stock price jumping by 8 per cent to HK$235.60 on the Hong Kong exchange by Friday. The market capitalisation of Tencent Holdings , speculated by many as the next target for anti-monopoly action, was also marching towards US$1 trillion before the Big Tech crackdown stalled its ascent. “Large internet companies have done a lot of good things to help the economy,” as shown “in China, where digitalisation has helped the average person afford goods and services, [which] is good, and we have played a role,” Alibaba’s vice-chairman Tsai said. “From a regulatory standpoint, every large company will face scrutiny. We have experienced it, and we are glad to put this behind us.” Additional reporting by Tracy Qu.