CHINA – World’s second largest market China has drafted new rules aimed at preventing monopolistic behavior by internet platforms, a move that will increase scrutiny on e-commerce marketplaces belonging to the likes of Alibaba Group.
The decisions to draft the rules follows an earlier call by China’s Financial Stability and Development Committee, for the the need to improve mechanisms to ensure fair competition.
The cabinet-level body headed by Vice Premier Liu He has also called for the strengthening of anti-monopoly law enforcement.
China’s State Administration for Market Regulation (SAMR), which issued the draft, said it wanted to prevent platforms from dominating the market or from adopting methods aimed at blocking fair competition.
The definitions it provided for internet platforms mean the new rules could apply to e-commerce sites such as Alibaba Group’s Taobao and Tmall marketplaces or JD.com.
Payment services like Ant Group’s Alipay or Tencent Holding’s WeChat Pay and Food delivery platforms like Meituan could also be included.
The draft rules would also consider whether a transaction treats different customer in different ways based on big data, payment ability, consumption preferences, and usage habits.
Deal Street Asia reported that a number of competitors and merchants have accused Alibaba of previously adopting monopolistic practices on its platforms.
In response to complaints, SAMR called more than 20 platforms last year to a meeting to ask them to stop requiring merchants to sign exclusive cooperation agreements.
The draft rules seek to legislate these directives by looking to prevent e-commerce practices such as “choose one between two”, under which an e-commerce marketplace restricts brands from selling on multiple platforms.
Earlier this month, Ant Group, an Alibaba affiliate surprised stock markets when it suspended the planned $37 billion share market listing.
The suspension became effective not long after regulators warned the company its lucrative online lending business faced tighter government scrutiny.
Xie Wen, a former Yahoo China president, said China had previously avoided taking a hard line with its technology sector in order to help local tech giants grow and compete against U.S. rivals.
With the focus now turning to building up domestic capabilities, Beijing was moving to rein in these companies and foster healthy competition.
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