China’s State Administration for Market Regulation (SAMR) is looking for public comments on newly drafted guidelines for governing online platforms, as reported by The Paper on November 10. The rules aim to stop internet platforms’ monopolistic behaviors and prevent them from engaging in unfair competition. Specifically, the guidelines outline practices that could block fair competition, including selling unfairly priced products and treating consumers differently based on big data, consumption habit analysis, and so on. The guidance is one part of the Chinese government’s efforts to strengthen regulations on domestic e-commerce and mobile payment services providers. According to Reuters, Alibaba’s [BABA:US] e-commerce platforms, Taobao and Tmall, as well as Ant Group’s payment app Alipay, would fall under such rules.

Prior to the new guidance, on November 6, SAMR, the Cyberspace Administration of China (CAC) and the State Taxation Administration, together, warned 27 major internet platforms in China against engagement in unfair competition, including JD.com [JD:US], Meituan [3690:HK], ByteDance, Didi Chuxing Technology, Pinduoduo [PDD:US], etc. During the meeting, the three authorities reiterated that online platforms are prohibited from abusing their dominant market positions and forcing merchants to “choose one between two”. “Choose one between two” practice occurs when online platforms adopt measures to restrict merchants from operating on multiple platforms. Amid increasingly fierce competition in the Mainland’s e-commerce sector, companies are striving to retain merchants and consumers in order to maintain their market share. Early, during the online shopping festival around June 18, 2019, Chinese home appliances producers, including Galanz, Midea Group [000333:CH] and Joyoung [002242:CH], all reportedly faced pressure to choose Tmall over Pinduoduo. Separately, according to think tank 100ec.cn, in the business-to-consumer (B2C) e-commerce sector, Tmall made up 50.1% of the market in terms of total gross merchandise volume (GMV) in 2019, ranking at number one. JD.com and Pinduoduo followed with a market share of 26.51% and 12.8%, respectively.

References:

https://www.reuters.com/article/china-regulation-ecommerce/china-publishes-draft-competition-rules-for-online-platforms-idUSL1N2HW06M

http://finance.eastmoney.com/a/202011071692748238.html

https://www.sohu.com/a/430154416_161795

https://www.sohu.com/a/400072770_322372