China proposes tough penalties for unfair practices adopted by tech companies

Beijing [China], November 24 : China's antitrust watchdog has proposed tougher curbs and penalties on unfair practices adopted by big tech companies such as Alibaba, Tencent and JD.com.
The State Administration of Market Regulation (SAMR), China's competition watchdog, released a draft revision Tuesday of the country's Anti-Unfair Competition Law and requested public comments until February 22, reported Caixin Global.
The move is another regulatory response to big tech companies' use of market dominance and advanced technology to undermine competition.
This would be the law's third time to be revised since its promulgation in 1993. Previous amendments were made in 2017 and 2019, reported Caixin Global.
The revised draft emphasises new rules for the digital economy, including a ban on using data, algorithms, technology and platform rules to facilitate unfair competition. Chinese regulators have been cracking down on such behaviour since late 2020 as part of Beijing's efforts to curb the growing power of China's big tech companies.
The draft revision adds a new chapter detailing fair competition rules for the digital economy and expands the categories of unfair practices to 20 from seven, reported Caixin Global.
The draft revision specifically lists practices of "picking sides" as anti-competitive. The tactic, where online vendors are forced to work exclusively with one platform, was a popular tool that large platform operators including e-commerce giant Alibaba Group and food delivery titan Meituan used to curb rivals.
The practice was banned by China's newly revised Anti-Monopoly Law and some industry regulations.
In 2021, the SAMR slapped a record 18.2 billion yuan (USD 2.8 billion) penalty on Alibaba citing violations including forcing vendors into exclusivity agreements. Meituan was also fined 3.4 billion yuan, 3 per cent of the company's domestic sales for 2020, for such practice, reported Caixin Global.
The draft revision of the Anti-Unfair Competition Law spells out six types of unlawful "picking sides" practices, including forcing business partners to sign exclusivity agreements, limiting partners' transactions with other parties and using technical and punitive measures to prevent merchants from working with competitors.
The draft law also would bar platform operators from using algorithms and big data to charge certain groups of consumers unfair prices. Such practices have been under regulators' scrutiny in recent years, reported Caixin Global.
In December 2020, the SAMR and the Ministry of Commerce summoned six major internet platforms including Alibaba, Tencent Holdings, JD.com and Meituan. They told them not to misuse big data technology to manipulate prices and undermine competition.
The draft would also ban internet businesses from using technical measures and platform rules to block rival links. That's part of a broader campaign by Beijing to eliminate the "walled gardens" or closed ecosystems that shore up internet platforms' control of consumer data and online profits, reported Caixin Global.
Since 2021, regulators have been pressing companies such as Alibaba and Tencent to eliminate barriers to their popular products set up to block rivals' access to users.
Severe violations would be subject to fines equivalent to between 1 per cent and 5 per cent of a company's annual sales, according to the draft revision. According to the draft, reported Caixin Global, regulators could also suspend violators' businesses or revoke their licenses.
The hefty fines set forth in the draft revision would pose a threat to large platforms.