China Targets Digital Sector in Antitrust Law Revision


Recently it was announced that for the first time China had included the internet industry in the planned revision and overhaul of its antitrust legislation, potentially giving regulators the power to regulate the increasingly dominant technology giants effectively.

Proposed changes, published last week, has covered multiple areas, such as monitoring of the impact that internet companies have on the online sector, based on their scale and market power. New provisions potentially might mean that there will be a revision of the sanctions applied to the companies found to be engaging in the anti-competitive practices. For example, according to Bloomberg, companies found to have violated the law could be fined as much as 10% of their revenue or a maximum of 50 million yuan ($7.2 million) if they don't generate significant sales, according to the revised rules posted on the State Administration for Market Regulation's website. The draft is currently open to public consultation.

The proposal is not surprising, considering the rise of the scrutiny against BigTech worldwide, as regulators investigate the extent to which internet giants can use and manipulate valuable data to protect and strengthen their position and thus their dominance in the underregulated market. BigTech harvests the unique advantages of the digital market, such as the network effect, gatekeepers rent in the form of data, information asymmetries and many others. Overall, those conditions act as a breeding ground for monopolies. Considering the fact that China itself is home many of the world's largest digital corporations, the incorporation of digital aspect into the legal overhaul is an essential step for the country's economy. Zhan Hao, a managing partner of Beijing-based Anjie Law firm in his interview to Bloomberg, has noticed that: - "Over the past years, China has encouraged innovation and development in the internet sector, going through a phase where regulators are more tolerant. There will be closer scrutiny going forward." and explained the importance of this step by stating that - "Online platforms and consumers don't have equal bargaining powers, and platforms will tend to abuse their dominant positions in the market". 

Revisions proposed in the draft are an apparent attempt to update laws for the internet era. Competition in itself and the way the companies are competing in the new digital markets are changing globally. It is more important than ever to keep up with the changing reality. The inclusion of the internet industry in the planned overhaul is an excellent sign of the regulators waking up and starting to catch up to the BigTech.