By Melissa Cox
Your commercial awareness dose.
Last month, a draft for new antitrust laws made by China’s antitrust authority, State Administration for Market Regulation (SAMR) was released. These new antitrust laws specifically target and will impact big tech giants in China such as Alibaba, Tencent, JD.com, and Meituan. Over the past years, there have been concerns over the rapid growth of these e-commerce giants, who practice have had little regulation. One of SAMR’s main reasonings for the new antitrust laws is to protect small/mid-size businesses who have been impacted by COVID-19 and who currently cannot compete with the likes of Alibaba or Tencent.
The draft released showed that various practices will be looked at and what could be considered as breaching antitrust rules. Pricing, payment methods, use of data for targeting online shoppers will be looked at to determine the best course of action to protect shopper’s personal data and privacy. Guo Shuqing, Chairman of China Banking and Insurance Regulatory Commission believes that several questions must be considered such as, “Have big tech blocked newcomers? Have they collected data improperly?… Have they engaged in conduct misleading users and consumers?”
The new antitrust laws will also be homing in on marketplace e-commerce and the use of exclusivity agreements to tie merchants down to just one platform. Meituan and Alibaba’s Tmall both use this method to ensure that they exclusively secure the best services and disarm competition at the same time.
JD.com have previously imposed lawsuits against Alibaba Group for these kinds of actions and other various monopolistic practices. Alibaba holds an imposing stronghold on the e-commerce sector; they make up 20 per cent of all retails sales in China. For comparison, Amazon makes up only 5 per cent of all retail sales in the US.
After the announcement, which came at the same time of the Singles Day Sales, large tech firms in China saw drastic drops of share prices and it has been estimated that big tech firms combined lost around $260 Billion USD over a two-day period. These new antitrust rules that have been released could seriously stunt the growth of big tech, specifically e-commerce giants in China, as the rules target almost all the practices that allowed the companies to bloom at the rapid pace that they did. Alibaba and Tencent harvest great amounts of data to create personalised ads and target shoppers, however, the way they do this could be changed completely, drastically stunting their growth.
The new antitrust rules have come at a time where large tech firms are facing serious competition from slightly smaller firms. Alibaba and Tencent used to and still do dominate market shares, however other smaller firms have managed to creep up on them and they do not dominate how they used to a few years prior.
Pinduoduo, an e-commerce platform that predominantly is used for food shops, have targeted the more rural areas and middle to low-class shoppers, a demographic that Alibaba has just begun to realise the importance of. The past year or so has seen other tech firms gaining a higher percentage of retail sales, and the new antitrust laws will ensure this keeps on happening to even out the playing field.
As the services that top tech giants offer have become so ingrained into Chinese society and Chinese economic growth, it will be interesting to see how restrictions will affect them. WeChat, for example, owned by Tencent, has around 1 Billion monthly users and many use the app to shop, pay rent, book holidays etc.
So, it is unknown yet how the new antitrust rules will affect these services that rely on data to create a personalized experience. With the other possible restrictions to be imposed on price discrimination practices, exclusivity agreements and data usage, big tech firms in China could begin to find it hard to fend off up and coming competitors.
To keep up to date with the latest commercial news, click on commercial awareness to get your daily dose.
Donate & Support