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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.
The value of these Big Tech companies – led by e-commerce stalwarts Alibaba Group Holding, JD.com, Meituan, Pinduduo and Tencent Holdings – continued to rise last year, despite the disruptions caused by the Covid-19 pandemic. Benefiting from a global stock market rally among tech firms as the pandemic receded, they each added more than US$100 billion in value over the year, according to a Hurun Research Institute report, which was based on data up to October 2020.
Still, not everything was as it seemed.
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
The hammer dropped on Alibaba on Christmas Eve, when SAMR commenced its antitrust investigation on the company. Chinese official media played down the political significance of this investigation, as it framed the move as a necessary step to ensure the healthy development of the country’s internet industry.
Several days later, the market watchdog slapped online retail platforms JD.com, Vipshop and Alibaba-run Tmall with a fine of 500,000 yuan each for pricing irregularities in November and early December.
JANUARY 2021
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.
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.
MARCH
On March 3, SAMR slapped Alibaba-backed Nice Tuan and the community group buying units under Pinduoduo, ride-hailing firm Didi Chuxing and Meituan with a fine of 1.5 million yuan each for breaching the country’s price law. A Tencent-backed start-up, Shixianghui, was fined 500,000 yuan.
The market watchdog introduced on March 15 updated rules for online sales, including those conducted via live-streaming campaigns. The new measures, the draft version of which was opened for public feedback in October last year, would take effect from May 1, replacing the previous rules implemented in 2014.
APRIL
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.
JD.com, Meituan and ByteDance led the first group of Chinese Big Tech companies to pledge compliance. On April 16, Alibaba promised to obey antitrust rules and to assist regulators in maintaining “market order”.
Internet watchdog CAC and six other regulators jointly released on April 23 new rules to regulate live streaming in the country’s e-commerce sector, which were to be implemented on May 25.
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.
Tencent, Didi and eight other major internet companies were each slapped with a 500,000 yuan fine by SAMR on April 30 for failing to report the acquisition of smaller competitors and starting new joint ventures.
MAY
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.
10:19
China’s e-commerce and live-streaming booms are opportunities for private equity, Carlyle Group says
China’s e-commerce and live-streaming booms are opportunities for private equity, Carlyle Group says
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.
A few days later, SAMR and six other Chinese regulators ordered online platforms to ensure food delivery riders earn above the country’s minimum wage, be freed from unreasonable demands placed upon them by algorithms, and have access to social security and a place in a union under new guidelines published on July 26.
AUGUST
SAMR issued on August 17 a draft of new rules that will empower the agency’s bureaus across the country to target “unfair competition activities” online. The agency’s municipal and provincial branches are authorised to look into and discipline internet firms for practices such as faking traffic data and blocking links from competitors.
On August 31, the market regulator released for public feedback proposed updates to the country’s e-commerce law that promise harsher punishments for selling fake products online.
SEPTEMBER
Chinese regulators summoned 10 of the country’s biggest internet platform operators – including Alibaba, Tencent, Meituan and Didi – to a meeting to discuss their efforts to protect the basic rights of gig economy workers, following new guidelines issued by the government in July.
Tencent pledged to follow an order by the Ministry of Industry and Information Technology on September 13 to unblock online links, in line with a campaign for the country’s major internet firms to open up their “walled gardens”.
OCTOBER
Meituan was handed a 3.44 billion yuan fine by SAMR on October 8 for abusing its dominant market position through its “pick one from two” practice, putting an end to the government’s five-month antitrust investigation.
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.
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.
On November 15, female agricultural scientist Gan Lin was named by the State Council as the new chief of the State Anti-monopoly Bureau within market regulator SAMR.
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.
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