Draft rules aim to curb monopolistic behavior of internet platforms

China's draft rules aimed at preventing monopolistic behavior of internet platforms will help regulate online economic activities, stop anticompetitive practices, promote fair competition in the market and safeguard consumer interests, experts said.

The State Administration for Market Regulation unveiled proposals on Tuesday that include guidelines on how anti-monopoly measures should be applied to internet companies. The authority is seeking reviews and feedback on the proposals from the public by Nov 30.

Dong Yizhi, a lawyer at Shanghai Joint Win Law Firm, said the draft rules reiterate that internet platform companies, including e-commerce marketplaces, must not abuse their dominant position to force merchants to "choose one platform over others" and block fair competition.

The antitrust regulations are aimed at promoting fair and free competition in the market and promoting innovation, he said.

The regulations target unfair price behavior, below-cost and tiein sales, restricted transactions and additional unreasonable trading conditions. It would also consider whether a transaction treats different customers in different ways based on big data, payment ability, consumption preferences and usage habits, said Dong.

Cui Zhijuan, a professor at the Beijing National Accounting Institute, said the platform economy is a new type of economy, field and mode, and some internet platforms may monopolize and control trading prices through setting rules and allocating information resources.

"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.

The new rules may apply to major internet platforms such as e-commerce giants Alibaba and JD, technology behemoth Tencent and food delivery platform Meituan. Shares of these internet companies fell sharply on Tuesday.

The draft rules emphasize ensuring fair competition and bolstering innovation, and safeguarding the interests of all parties, Tencent Holdings Ltd said during a conference call after releasing its third quarter financial results. The company said it will comply with regulatory policies.

Tencent said such regulations are not new, nor are they unique to China. "As technology companies become bigger and contribute more to the economy, more regulations will reflect the new realities needed. It's not just the case for China, it's also the case globally," it said.

The company said the authorities are very supportive of the internet and technology segment, especially the innovative development of the industry, with purpose of avoiding improper behavior and ensuring the long-term, healthy development of the industry.

"Our platform is naturally open and we work with lots of partners," Tencent said, adding they become stronger because of competition, and there will be a good competition mechanism within the company. The rules tend to focus more on transaction-based platforms than on Tencent's entertainment businesses.

Geng Shuai, partner of Shanghai Shenhe Law Firm, said the authorities have attached great importance to the healthy development of e-commerce platforms, and taken active measures to effectively regulate and adjust behavior that undermines the normal market order.

Geng said it is of great significance that the country has issued the guidelines to prevent monopolistic behavior among major internet platforms, which are fending off new rivals that are eating into their market share.