Companies told to toe the line or face the consequences . . .
On Tuesday, Chinese regulators summoned 34 of the country’s largest technology companies to a meeting at which the State Administration for Market Regulation (SAMR) instructed them to “self-inspect” and announced that it would conduct investigations in the coming month to ensure compliance with regulatory laws. The SAMR also made it clear that those who failed to comply within the allotted time would receive severe punishment. Negative behaviours highlighted in the meeting by the SAMR included the use of hostile bidding tactics, tax evasion, the misuse of big data, and the selling of substandard products, among others.
Record fine levied at Alibaba . . .
Alibaba, an affiliate of Ant Group, was hit with a record C$3.5-billion fine last Friday. This is the largest fine ever levied on a tech company in China and signals the severity of the Chinese government’s crackdown on monopolies. Alibaba has been under investigation for monopolistic practices since December 2020, and market regulators have found evidence that the company was using its data and leverage to ensure merchants could only sell their goods on the Alibaba platform. The investigation has been viewed with suspicion by some as it began soon after Alibaba founder Jack Ma made some comments disparaging the ruling party. The 34 tech companies schooled this week were also encouraged to “give priority to national interests,” leading some to believe that this heightened crackdown aims to bring big tech further under the control of the Chinese Communist Party.
Implications for global tech regulation . . .
Some observers have expressed concern that China’s crackdown will deter innovation. Jack Ma stated in October 2020 that the government’s regulations stifled technological innovation. But since then, regulatory oversight has only increased. However, SAMR argues that curtailing monopolistic practices and punishing illegal practices will encourage innovation by preserving a genuinely competitive market. This is not the first time governments have attempted to levy tighter controls over their tech giants. Japan enacted a law to increase transparency in the tech sector in May 2020. Over the next several years, governments will have to navigate the fine line between protecting merchants and consumers from illegal or monopolistic practices and deterring innovation in the tech sector through over-regulation.
- The Japan Times: Japan enacts law toughening transparency regulations on tech giants
- South China Morning Post: Tencent, JD and dozens of Chinese tech firms ordered to ‘learn from Alibaba’ as antitrust regulator keeps foot on crackdown pedal
- The Verge: China fines Alibaba $2.8 billion after antitrust investigation