Internet platforms get guidance on fair market play

Three top government departments, including the State Administration for Market Regulation, have urged Chinese internet platform companies to conduct a monthlong self-inspection and desist from monopolistic behavior and any action that hinders fair competition or hurts the interests of merchants and consumers.

The regulator said on Tuesday after a meeting with the Cyberspace Administration of China and the State Taxation Administration and 34 internet platform companies that severe punishment would be meted out to those who violate the rules and urged e-commerce giants to learn from the recent penalties imposed on Alibaba Group Holding Ltd.

The regulator said it was necessary to weed out and punish illegal behaviors or monopolistic malpractices among platform companies, including forcing collaborating merchants to choose between their own online marketplaces and those of its competitors’ for selling products, by abusing their dominant position in the market, “pinching off young shoots” by acquiring them, burning money to seize the “community group buying” market, hurting repeat customers with big data, ignorance of “fake and shoddy” products, leakage of customer information and tax-related illegal activities.

Among these malpractices, actions that have forced merchants to choose between the platform’s own marketplace and other competitors are the most severe, a reflection of sheer capricious and disorderly expansion of capital from the platform economy, which is blatant trampling and destruction of market competition, officials said after the meeting.

Actions that force merchants to choose marketplaces hinder innovation and stifle interest among merchants and consumers. This needs to be eradicated, they said. The meeting also called for strengthening regulations to tackle illegal behaviors and malpractices. The officials, however, clarified that stringent action does not mean any change in the government attitude toward the platform economy.

Rather, the emphasis will be on respecting industry development patterns and restore fair competition and innovation to build an open and safe new order among internet companies. It will also be an impetus for a more prosperous, vigorous and convenient online platform economy.

The State Administration for Market Regulation, which started a probe into Alibaba in December, fined the company 18.23 billion yuan ($2.78 billion) on Saturday for abusing its dominant position over rivals and merchants on its e-commerce platforms.

Alibaba Group Holding Ltd said in a statement that the company accepts the penalty with sincerity and will ensure its compliance with determination.

The three departments have asked platform-based internet companies to strictly prevent any disorderly expansion of capital to ensure economic and social security; strictly prevent monopoly and disorder to ensure fair competition; strictly prevent technology strangulation to ensure innovation and development of the industry; strictly prevent the abuse of rules and algorithms to ensure the legitimate rights and interests of all parties, and strictly prevent system closure to ensure ecological opening and sharing.