In April, the SAMR ordered Alibaba, which operates China’s two largest e-commerce platforms, Taobao and Tmall, to pay a record fine of 18.2 billion yuan (US$2.8b), equivalent to 4 percent of Alibaba’s total domestic sales in 2019.
The agency concluded the company had abused its monopoly status by imposing exclusivity agreements that prevented merchants from selling products on rival e-commerce platforms, a practice known as “choosing one from two.”
While such deals have long been controversial, authorities had adopted a passive position despite frequent complaints from merchants and rival platforms.
According to Wang Xiaoye, a former member of the consultative expert team of the Anti-Monopoly Commission of the State Council, there has been debate over which market criteria to apply when calculating Alibaba and other e-commerce companies’ market shares.
As Alibaba initially emerged as a challenger to traditional retailers, its market share was calculated as the ratio of the total retail sales of social consumer goods. Fastforward to 2020, although transactions conducted on Alibaba’s platforms made up about 80 percent of China’s e-commerce market, it accounted for only around one-fifth of the total retail sales of consumer goods excluding vehicles.
But as internet companies have become industry giants, the regulator finally changed its stance. In the antitrust guideline issued in February, it specifically stated that the market applicable to Alibaba and other e-commerce companies will be the domestic online retail market.
On October 8, the SAMR imposed a fine of 3.44 billion yuan (US$530m) on Meituan, an online food delivery giant, following an investigation into “monopolistic practices” similar to Alibaba’s “choosing one from two.” The amount is equivalent to 3 percent of the company’s domestic sales in 2019.
The fine was announced amid increasing pressure on China’s tech giants to open their platforms to rival companies. In a meeting held on April 13, days after Alibaba’s fine, the SAMR emphasized that a key focus of its regulation is to “ensure internet ecosystems are open and inclusive” and to “prevent the establishment of closed systems.”
Aiming at establishing their own tech ecosystems and spheres of influence, Chinese tech giants have been guarding their realms. It is common practice for internet companies to block links from rival products and services on their platforms.
For example, some of China’s most powerful companies – Tencent, which dominates social media via WeChat, Alibaba with e-commerce platforms Taobao and Tmall, and more recently, ByteDance with its video-sharing apps TikTok and Douyin – block links from within their services to rival platforms.
Now these practices have increasingly come under scrutiny. On September 13, the Ministry of Industry and Information Technology told media that it summoned executives from the country’s tech companies to discuss the need to open their services to one another. According to ministry spokesperson Zhao Zhiguo, companies are encouraged to “voluntarily correct their actions” according to the guidelines. He warned the ministry would resort to other measures if companies do not comply.
According to Xu Ke, a professor at the University of International Business and Economics in Beijing and executive director of the school’s Digital Economy and Legal Innovation Research Center, with the heavy fines meted out against Alibaba and Meituan, authorities hope the two cases will serve as deterrents to minimize the future costs of regulatory enforcement.
So far, progress appears limited. Although executives from Tencent and Alibaba acknowledged the importance of keeping their platforms open, and both have reportedly unblocked links to their rivals on smaller apps they own, their flagship platforms such as WeChat, Taobao and Tmall remain closely guarded.
It remains unclear whether authorities will adopt tougher measures. But most experts believe China must carry on with its antitrust crackdown. “As China’s internet companies have become more powerful, changing people’s ways of life, the risk they will grow out of control can no longer be ignored,” Xu said. “This is now a global challenge.”