SAMR to investigate Alibaba for anticompetitive practices: Сommentary

SAMR to investigate Alibaba for anticompetitive practices: Сommentary
Source: 28.12.2020 209

The State Administration for Market Regulation of China announced on December 24 that it had launched an antitrust investigation into Alibaba Group for the alleged forcing of exclusive dealing, so called “either-or” choice.

In China “either-or” choice, also known as “choosing one from two”, is a type of anticompetitive practice: a platform requires a seller to sign exclusive cooperation deals and to stop offering their products on competitive platforms. Following the development of the digital economy and e-commerce, such behavior became so common that the SAMR had to make an explicit warning before almost every sale, but the violations continued to happen frequently. “Either-or” choice was even mentioned in the draft Antitrust Guidelines for Platform Economy, however, once adopted, the Guidelines will still serve as a recommendation only, with no absolute power binding over the digital sector.

The ongoing probe into Alibaba is an important step in enforcing the antitrust control of the Internet, significant for the regulation of the industry and the healthy development of digital platforms.
Over the past years the online economy has experienced a rapid growth, new formats of operation and business models are created every day, giving high-quality development a great boost and satisfying people’s needs for a better life. Unfortunately, these new developments have also brought some unknown and unprecedented challenges, including the remarkable increase in online market concentration, as major market resources are moving towards the key digital actors. During the recent meeting of the Political Bureau and the Central Economic Working Conference, the participants addressed the issues of antitrust law enforcement and the prevention of disorderly expansion of capital. Such topics captured wide attention from the public and exposed the pressing issues of digital economy.

Monopolistic practices are a widely recognized threat to fair competition, reasonable resource allocation, legal interests of business entities and consumers – since the humanity entered the era of digital economy, they have constantly been a focus area of competition watchdog’s control. Fighting monopolies is a common practice worldwide: being the first country to adopt the Antimonopoly Law, the US has continuously increased the intensity of antitrust probes into the abuse of dominant position, suppressing competition, blocking innovations and damaging consumers’ interests by US tech giants.

As one of the leading digital economies, China faces similar challenges and uses the competition law to promote the economic development and the establishment of healthy market system. These years, China has already made several big steps forward: the drafts of the first Amendments to the Antimonopoly law and the Antitrust Guidelines for Platform Economy were released to solicit public opinion and seek to be adopted soon.

As the Chinese saying goes, “you can’t make a circle without a compass”, which means that nothing can be accomplished without norms or standards. The opening of investigation does not stand for any lack of will to encourage the development the platform economy – on the contrary, it ensures its better and healthier progress. On the day of SAMR’s announcement Alibaba Group stated through its official Weibo account, that they would actively cooperate with the investigation and the Company’s business operations remained normal.

At the same time Chinese key financial regulators, including the People’s Bank of China, the Banking and Insurance Regulatory Commission, the Securities Regulatory Commission and the State Foreign Exchange Administration, focused their attention on the financial activities of Alibaba’s affiliate company – the Ant Group. On December 26 they announced several rectification points, such as to enhance transaction transparency, to prohibit unfair competition, to enhance competition compliance, to protect, to improve corporate governance etc. According to the Sohu News, the Ant Group has already established a working group to meet the requirements.

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