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Internet companies fined for violating portion of anti-monopoly law

Updated: Dec 15, 2020 By HE WEI in Shanghai CHINA DAILY Print
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Logos of Alibaba Group and Ant Group are seen during the World Internet Conference in Wuzhen, Zhejiang province, Nov 23, 2020. [Photo/Agencies]

China's bureau for regulating monopolies has fined three leading internet companies for failing to declare past acquisitions under the country's recently drafted anti-monopoly laws.

The penalties came on the heels of increased scrutiny of China's largest technology companies and a broader wave of antitrust efforts while preventing the disorderly expansion of capital, experts said.

The State Administration for Market Regulation announced on Monday it has fined e-commerce giant Alibaba Investment, Tencent-backed e-book site China Literature and logistics player Shenzhen Hive Box Technology 500,000 yuan ($76,450) each for not seeking regulatory approval before their respective buyout deals.

The administration said in a release on its website that the decisions were made after investigations into three acquisition cases-Alibaba's purchase of Intime Retail, China Literature's purchase of all shares of New Classics Media and Hive Box's acquisition of a subsidiary of China Post.

While the acquisitions were not reported, the government said the investigations failed to establish a prospective monopoly under the law, and found no de facto elimination or restriction of competition.

"While competition on the platform economy has exhibited some new features, the internet sector is not a 'land beyond law'," the release said. "All companies should strictly abide by anti-monopoly laws and regulations and maintain fair market competition. Only in this way can we ensure the healthy development of the entire industry."

Hu Yue, a senior partner at Shanghai Jiehua Law Firm, anticipated more anti-monopoly efforts in the pipeline and highlighted that it is the timing that matters.

"While the penalties aren't substantial in absolute amount, they do carry hefty symbolic weight: strengthening supervision will be a resounding signal," Hu said.

An economic planning meeting for 2021, chaired by President Xi Jinping on Friday, called for strengthened antitrust efforts and the prevention of disorderly expansion of capital.

The anticipation of tighter rules for major technology players was also reinforced by Guo Shuqing, Party secretary of the People's Bank of China, the central bank, who last week urged regulators to "pay close attention" to the potential risks of Big Tech firms. Guo said timely and targeted measures should be prepared to prevent systemic financial risks should any failures occur.

Alibaba said on Monday it had rectified the situation in accordance with policy guidelines and requirements. China Literature said it is "implementing requirements in strict accordance with regulatory authorities and has carried out ... compliance and declaration work".

The latest developments sent shares of Alibaba down 2.63 percent and Tencent down 2.89 percent as trading closed in Hong Kong on Monday.

The market regulator said on Monday that it is also looking into other cases, such as the merger of two livestreaming sites-Guangzhou Huya Information Technology and Wuhan Douyu Network Technology.

In November, Beijing introduced a slew of draft rules aimed at curbing anti-competitive behavior such as forming alliances to squeeze out smaller players, plotting to share sensitive consumer data and forcing merchants to take sides among competing platforms.

"The strengthened anti-monopoly supervision will play a positive and stable role in restricting improper operations of platform operators, protecting the legitimate interests of trading participants as well as bolstering the healthy development of the platform economy," said Cui Zhijuan, a professor at the Beijing National Accounting Institute.

While some enterprises have failed to guard against monopoly risks, it doesn't necessarily mean that similar mergers and acquisitions would be banned in a one-size-fits-all approach, Hu said. But he also warned of internet giants expanding or securing market leadership in less obvious ways.

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