Materials

Antitrust Guidelines for Platform Economy issued in China

At the backdrop of the rapid growth of platform economy and the development of new services and business models, the antitrust regulation is challenged by new forms of anticompetitive behavior. In order to protect fair competition and consumer rights, to promote healthy development of platforms, to encourage innovations and scientific regulation approach, the Antimonopoly Committee of the State Council of China issued the Antitrust Guidelines for Platform Economy (“the Guidelines”). The Guidelines are based on the Antimonopoly Law of China (“the AML”) and dedicated to clarify the principles of antitrust regulation in the context of digital industry.

The Guidelines state that the basic provisions, principles and analysis framework, provided by the AML, are totally applicable to the undertakings of platform economy, but one must also consider the specifics of new economy sector. The document consists of 6 chapters (Basic Principles, Anticompetitive Agreements, Abuse of Dominant Market Position, Economic Concentrations, Abuse of Administrative Power to Eliminate or Restrict Competition and Miscellaneous), total 24 articles.

The Basic Principles declare the purpose and basis of the Guidelines, define key concepts (“a platform”, “a platform operator”, “a platform actor” and “an undertaking of platform economy”), introduce basic regulation principles of Chinese platform economy (to protect fair competition, to perform scientific and effective regulation, to protect legal interests of all parties) and address the criteria to define a market in both product and geographic dimensions.

The chapter on Anticompetitive Agreements provides significant factors for determining if an agreement, a decision or concerted practices that restrict competition take place (market power of platform operator, competitive situation, access to market etc), specify agreement types (vertical, horizontal, hub-and-spoke) and how they might be executed on the platform (by data collection, technologies, algorithms etc). The Guidelines also confirm that leniency policy applies to undertakings that wish to self-report.
The Abuse of Dominant Market Position offers criteria to determine market position (market share, ability to control the market, financial and technical conditions, dependence of other undertakings etc), describe forms of such abuse (unfair pricing, selling for the price lower than prime costs, refuse to deal, tie-in sales etc) and advise on how to indentify the unlawful behavior.
The Economic Concentrations recognize that methods of turnover calculation depend on industry business practice, payment methods, business model, role of platform operator etc. The Guidelines explicitly state that the obligation for premerger filing applies not only to traditional undertakings, but also to variable interest entity structures – in VIE-structures investors exercise their control not through share ownership but through various agreement; such model refers to Alibaba, Sina, Netease and other big tech companies. If a transaction does not require filing but an enforcement body of State Council suspects possible impact on competition, it may launch investigation at its own discretion. The key factors to determine M&A deal impact on competition include market share, ability to control the market, market concentration level, competitive situation, as well as impact on the market access, consumers and growth of technology. If M&A is not stopped, the enforcement body may impose structural or behavioral remedies.

As provided by the Guidelines, the abuse of administrative power to eliminate or restrict competition may refer to discriminating non-local undertakings, blocking regional commodity circulation, forcing undertakings to carry out monopolistic conducts under the AML or stipulating regulations that eliminate or restrict competition.

Recently, the operation of digital sector in China receives special attention of both public and authorities. The State Administration for Market Regulation have launched several antitrust probes into tech companies (Alibaba, vip.com) and imposed administrative penalties (unfair pricing by vip.com, unfiled acquisitions by Alibaba, China Literature and Hive Box) etc. The SAMR indicated that the Guidelines were a further step to tighten oversight of Internet industry. It would continue to study the specific features of platform economy, to develop regulatory rules and to promote to establishment of health market order.