SAMR tells firms to rectify anti-competitive practices
China yesterday ordered 34 internet corporations to rectify their anti-competitive practices within the next month, signalling that Beijing’s scrutiny of its most powerful firms hasn’t ended with the conclusion of a probe into Alibaba Group Holding Ltd.
Shares in Tencent Holdings Ltd and Meituan extended losses after the State Administration for Market Regulation issued a stern statement emphasising it will continue to eradicate abuses of information and market dominance among other violations.
Also summoned to an ad-hoc meeting with the watchdog yesterday were industry leaders including TikTok owner ByteDance Ltd, search giant Baidu Inc and JD.com Inc.
Regulators warned internet companies to “heed Alibaba’s example,” reaffirming their intent to abolish forced exclusivity among other practices.
The meeting — organised jointly with the cyberspace and tax regulators — came days after Beijing wrapped up a four-month probe into Alibaba by slapping a record $2.8 billion fine on the e-commerce giant for abuse of market dominance.
The penalty was less severe than many feared and lifted a cloud of uncertainty hanging over founder Jack Ma’s internet empire. It also came after the Chinese central bank ordered an overhaul of his Ant Group fintech titan.
The overhaul outlined by regulators and the company on Monday will see Ant transform itself into a financial holding company, with authorities directing the firm to open its payments app to competitors, increase oversight of how that business fuels it crucial consumer lending operations, and ramp up data protections. It will also need to cut the outstanding value of its moneymarket fund Yu’ebao.
Alibaba’s shares have gained 7% since the start of the week, but its fellow Chinese internet giants have gyrated while investors digest the rapid-fire announcements and concerns grow that Beijing’s scrutiny will extend beyond Alibaba.
Tencent gave up early gains to finish down slightly yesterday while Meituan, video service Kuaishou Technology Co Ltd and JD.com all slid more than 3% in Hong Kong.
“The base line of policies cannot the crossed, the red line of laws cannot be touched,” the SAMR said in the statement.
The investigation into Alibaba was one of the opening salvos in a campaign seemingly designed to curb the power of China’s internet leaders, which kicked off after Ma infamously rebuked “pawn shop” lenders, regulators who don’t get the internet, and the “old men” of the global banking community.
Those comments set in motion an unprecedented regulatory offensive, including scuttling Ant’s $35 billion initial public offering.
The 34 firms summoned yesterday must now undergo complete rectification after conducting internal checks and inspections over the next month, and make a pledge to society to obey rules and laws.
Regulators will organise follow-up inspections and companies that continue to engage in abuses like forced exclusivity — a practice that “flagrantly trampled and destroyed” market order — will be dealt with severely.
They also highlighted abuses like acquisitions that squeeze out smaller rivals and burning through cash to grab market share in community group buying, currently the hottest e-commerce arena in China.
Firms also need to address issues like counterfeiting, data leaks and tax evasion, according to the statement.