Chinese Regulators Crackdown On Internet Companies Ordering Them To "Rectify" Irregularities
Chinese Regulators Crackdown On Internet Companies Ordering Them To "Rectify" Irregularities
BY TYLER DURDEN TUESDAY, APR 13, 2021 - 11:20 AM
Thirty-four tech firms attended an administrative and
supervisory meeting held on Tuesday. They were given approximately one month to
"rectify their monopolistic acts and tax-related irregularities or
violations" after an internal government probe. These firms were told they
had about a month to correct any practices that "harms competition.
The meeting also outlined how these tech firms create unfair
competition in the economy that prevents innovation and development and harms
business operators and consumers' interests. It was also noted at the meeting
the tech firms must change their ways to conform to national interests
During the meeting, SAMR officials told the tech firms that
Alibaba's anti-trust case should be a big wake-up call. On
Saturday, SAMR slapped Alibaba
with a monstrous $2.8 billion fine after a months-long probe.
SAMR found the e-commerce company violated the country's Anti-Monopoly Law.
Regulators also ordered Alibaba affiliate Ant Group to overhaul its
business.
"Following
the decision and penalties levied by SAMR's anti-monopoly investigation of
BABA, we think the street has more color about the latest updates on Ant
Group," Jefferies said in a note published Monday.
Alibaba, which owns about 33% of Ant Group, operates a popular
mobile payments app called Alipay. In November, regulators suspended Ant's IPO
due to changes in the financial technology regulatory environment.
Both Alibaba and Ant's restructuring plans,
forced upon by regulators, are part of Beijing's much broader push to reign in
the power of the country's largest technology companies.
China's digital platform-based economy has experienced record
growth, but regulators are not fond of unhealthy business practices.
One of the practices that regulators are not happy about is tech
companies forcing merchants to "choose one from two platforms." They
call it an abuse of market dominance, along with other noncompliance and
tax-related violations. Regulators want these tech companies to rectify these
violations in the near term. Also, business operators are given a limited
choice of one from two platforms is an "unruly and unchecked expansion of
capital, blatantly breaching market competition order and hampering innovative
development," said Global Times.
The meeting outlined that tech companies should strictly comply
with government demands to restructure their business practices and place
national interest first.
Specially,
the regulators asked the platform companies to stop "unruly expansion of
capital" to ensure economic and social safety, to stop monopolistic moves
that harm fair competition, to stop strangling competitors with technologies
that harm innovation, and to stop abuse of rules and algorithms and to ensure
every market player's legitimate rights and interests.
The
regulators ordered platform companies to review all internal processes within a
month and thoroughly rectify monopolistic actions that harm fair
competition.
Meanwhile,
the regulators will undertake inspections to ferret out any irregularities or
violation of market rules.
Strengthening
management of the platform business doesn't mean that the country's attitude of
supporting and encouraging platform economy will be changed, but the move will
serve as a wakeup call for the platforms to always help promote fair
competition, to be innovative, and to serve the society. - Global Times
With Beijing's domestic clampdown apparently still in effect,
Chinese stocks pared an earlier advance as gains by tech firms almost
evaporated on mounting regulatory concerns. The CSI 300 Index closed right
on top of a key support: the 200 day moving average.
Over the last several months, Beijing has been getting tougher on big tech as part of Xi's shakedown of millionaire oligarchs like Jack and Pony Ma, and traders expect the Chinese president to expand his crackdown in the coming weeks and months.
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