Chinese regulators want to bring order to the the country’s vast e-commerce market, with a focus on resolving issues related to monopolistic practices, unfair competition and counterfeiting. Illustration: Shutterstock
ExplainerChina’s e-commerce crackdown: timeline of Beijing’s actions to bring tech giants in line with national policy
Big Tech firms, led by Alibaba, Tencent and Meituan, are under the spotlight in China’s campaign to bring order to the world’s biggest e-commerce market
This crackdown signalled policymakers’ heightened concerns over the growing power, influence and risks of these digital platform operators
China has long been recognised as the world’s biggest e-commerce market, driven by technology giants that helped revolutionise consumer spending behaviour in the second-largest economy behind the United States.
On November 6 last year, the Cyberspace Administration of China (CAC), the State Administration for Market Regulation (SAMR) and the State Tax Administration (STA) discussed with 27 major internet companies – including Tencent, Baidu, Meituan, ByteDance and Alibaba – ways of bringing order to the digital economy and solving problems like monopolistic practices, unfair competition and counterfeiting.
Four days later, SAMR released its draft antitrust guidelines to rein in internet-based monopolies. It signalled policymakers’ heightened concerns over the growing power, influence and risks of digital platforms and their market practices in the economy. Monopolistic practices by internet platforms, such as demanding vendors to transact only on one platform exclusively, or providing differentiated prices to customers based on their shopping history and profiles, are to be outlawed, according to the guidelines.
09:40
Tightened regulations among key trends shaping China’s internet in 2021
Tightened regulations among key trends shaping China’s internet in 2021
That marked the first time the country’s market regulator attempted to define what constitutes anticompetitive practices among internet companies under the law. The announcement immediately resulted in about US$102 billion of market value erased from Tencent, Meituan and Alibaba, owner of the South China Morning Post.
The following is a timeline of Beijing’s recent actions in the e-commerce industry, the third in a series about government-led crackdowns that includes off-campus education, video gaming and cybersecurity.
DECEMBER 2020
SAMR flexed its muscles early this month, slapping fines of 500,000 yuan each on Alibaba, Tencent-backed China Literature and Shenzhen Hive Box for not properly reporting past acquisitions for clearance. E-commerce giant Alibaba’s case involved past equity investments in major Chinese mall operator Intime. Although these firms failed to seek regulatory clearance, the deals were not deemed to be “excluding or restricting market competition”, so a fine, rather than a break-up, was ordered, according to the regulator.
On December 23, SAMR said it conducted an “administrative guidance meeting” with six e-commerce companies, warning them to strictly toe Beijing’s line and pay attention to problems of “low price dumping and squeezing jobs”.
01:26
China kicks off antitrust probes into Alibaba over alleged monopolistic practices
China kicks off antitrust probes into Alibaba over alleged monopolistic practices
Early this month, SAMR head Zhang Gong said the agency’s 2021 agenda was to tighten antitrust regulations, but did not single out any company by name in an interview with state-run media outlet Xinhua. SAMR will implement decisions from China’s leadership on “enhancing anti-monopoly [rules] and preventing the disorderly expansion of capital”, Zhang said.
The market regulator on January 14 announced its investigation of Vipshop for alleged anticompetitive behaviour. Founded in 2008, online discount retailer Vipshop counts Tencent and JD.com as investors. It is based in Guangzhou, capital of southern Guangdong province.
Online discount retailer Vipshop was investigated for anticompetitive behaviour by the State Administration for Market Regulation. Photo: SCMP
The ruling Communist Party and the State Council on January 31 issued a long-term action plan, which would formulate and improve laws and regulations on “how to define whether a platform enterprise is a monopoly”, as well as on the “collection, use and management of user data” and “protection of consumer rights”.
FEBRUARY
The final version of the country’s new antitrust guidelines targeting internet platforms took effect on February 7, creating an important tool for Beijing to stamp out monopolistic practices such as forcing merchants to choose only one online channel.
The following day, SAMR imposed a 3 million yuan fine on Vipshop for unfair competition. The market regulator said its investigation into Vipshop found that the firm ran an inspection system that obtained information about brands on its platform and others to gain a competitive advantage.
With platform operators like Nice Tuan, community group buying enables residents in a typical neighbourhood to purchase groceries and household items in bulk via a group representative. Photo: Handout
Alibaba was fined a record 18.2 billion yuan by SAMR on April 10 for abusing “its dominant market position in China’s online retail platform service market since 2015”, as it forced merchants “to open stores or take part in promotions on its platforms”.
The Hangzhou-based company was ordered to correct its misconduct, and pay a fine equivalent to 4 per cent of its total 2019 revenue. The fine was nearly three times the 6.1 billion yuan penalty paid by mobile chip supplier Qualcomm in 2015.
Three days later, 34 of the country’s largest technology companies – including Alibaba, Tencent and Meituan – were hauled in for a meeting in Beijing with regulators SAMR, CAC and STA. The companies were lectured to “pay full heed to the warning of Alibaba’s case”, and conduct “self-inspections”. They were also required to publicly disclose their commitment to conduct business in compliance with laws.
On April 26, SAMR commenced its antitrust investigation into food delivery giant Meituan, operator of China’s largest e-commerce platform for local services. The regulator said it was looking into whether Meituan forced merchants to pick its platform as an exclusive distribution channel, after receiving a tip-off from the public.
SAMR was said to have started an investigation into suspected anticompetitive practices by KE Holdings, the country’s biggest housing broker whose top backer is Tencent, according to two people with knowledge of the matter. The investigation is the latest into China’s internet platform companies that match sellers and buyers, several of which have been accused by regulators of exploiting consumers.
Alibaba-backed community group buying platform Nice Tuan was fined 1.5 million yuan by SAMR for failing to take action on product dumping practices and pricing fraud.
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JUNE
With the goal to further open up the country’s internet retail sector, the General Administration of Customs announced the roll-out of a new clearance system for cross-border business-to-business e-commerce across the country from July 1. The system was previously limited to dozens of designated areas, but the move to expand was made after Premier Li Keqiang decided at a regular cabinet meeting this month that China must promote cross-border e-commerce.
JULY
SAMR continued to dish out fines this month. On July 7, the market regulator slapped a total of 22 fines of half a million yuan each on some of the country’s Big Tech firms – including Alibaba, Tencent and Didi – for a series of irregularities related to merger deals over the past decade.
In the first six months of the year, the market regulator, along with its local branches in cities and provinces, investigated more than 3,000 cases of fake reviews and inflated sales numbers, and imposed fines totalling 206 million yuan, according to a statement published on the agency’s website on July 22.
Under the proposed update of China’s e-commerce law, the response window – the time a merchant’s business can be restricted while infringement claims are settled – will be extended to 20 working days from 15 days. Photo: Shutterstock
The draft of China’s 14th five-year plan for e-commerce was published on October 26 by the Ministry of Commerce, CAC and the National Development and Reform Commission. It forecast a slowdown in the country’s e-commerce growth rate, but expected the sector to remain a key lever to pursue “high-quality” growth in the next five years, especially in terms of narrowing the development gap between urban and rural areas.
China’s annual Singles’ Day retail extravaganza on November 11, which Alibaba Group Holding initiated in 2009, is the world’s biggest online shopping festival. Photo: Shutterstock
NOVEMBER
Days before China marked the annual Singles’ Day shopping festival, the Guangdong Administration for Market Regulation accused 16 e-commerce platform operators of various irregularities including selling fake products, false advertising and poor after-sales service. The agency on November 5 issued a set of guidelines for the offending platforms, including requiring them to establish a compliance management system, handle consumer complaints in a timely manner, protect consumers’ personal information, and refrain from false or illegal advertising.
The world’s biggest online shopping festival recorded a slower pace of annual growth for Alibaba, as the company swapped its usual razzamatazz on Singles’ Day with a more down-to-earth event that stressed sustainability.
The market regulator on November 20 slapped fines on several Big Tech firms, including Alibaba, Tencent and JD.com, for failing to declare 43 corporate deals. The companies were fined 500,000 yuan for each violation, with the oldest infraction dating back to 2012. Alibaba, for example, was fined for a violation involving its acquisition of a 44 per cent stake in food delivery platform Ele.me in 2018.