On January 20, the People’s Bank of China released the Draft Regulations for Non-Banking Payment Systems to solicit public opinion. The Draft Regulations set a ‘red line’ for third-party payment platforms and are widely considered an antitrust measure, ‘aimed directly at tech giants’.
Recent statistics show that Alipay and WeChat Pay have
already ‘crossed the line’: as assessed by iResearch, in the first half
of 2020 they had 55.4% and 38.8% of China’s e-payment market share
respectively, leaving the others (e.g. JDPay, Union Mobile Pay,
99bill.com, etc) with a common share of only 5.8%.
As stipulated by
the Draft Regulations, if a market share of a non-banking payment system
reaches 1/3, or a joint market share of two systems reaches 1/2, or a
joint market share of three systems reaches 3/5, the People’s Bank of
China may ask an antitrust enforcement body of the State Council to
arrange a warning meeting with such system or systems.
Considering a non-banking payment system with market share of 1/2 or more, or two systems with joint market share of 2/3 or more, or three systems with joint market share of 3/4 or more (on domestic market), the Bank is entitled to ask an antitrust enforcement body of the State Council to launch an investigation to identify whether such system or systems possess dominant market position.
The Draft Regulations explicitly request non-banking payment systems not to perform unfair competition, not to disturb competitive market order. For those not respecting the principle of safe, effective, honest and fair competition and significantly affecting the healthy development of payment service market, the People’s Bank may recommend an antitrust enforcement body of the State Council to take suchmeasures, as to stop the abuse of dominant position, to terminate economic concentrations or to separate platform’s businesses by the type of payment services.
At the same
time, the Draft Regulations provide the existing systems with a 1-year
period, starting from document’s effective date, to meet the relevant
conditions. Should a system fail to do so, the Bank will request a
temporary termination of its operations, and those not respected the
Bank’s requirements or committed other significant violations will have
their business licenses withdrawn.
