Draft rules target unfair competition, data misuse

China's top market regulator on Tuesday issued a draft regulation for the internet sector, which aims to ban and prevent unfair competition and prohibit business operators from using technologies to hijack traffic or influence users' choices. The rules are the latest efforts to tackle unfair competition and monopolistic actions and restore market order.

According to a document published on the website of the State Administration for Market Regulation, business operators should not use data, algorithms or other technical information or means to influence users' choices, hijack traffic or disrupt the operations of website products and services provided by other business operators.

The rules, open to public feedback until Sept 15, require internet companies not to use technical means to illegally capture or use other business operators' data.

Ma Kainong, a lawyer at Zhejiang Zeda Law Firm, said the draft regulations indicated the market regulator's determination to further regulate online economic activities and promote fair competition.

"The rules will play a positive role in restricting the improper operations of internet platforms, safeguarding consumers' legitimate rights and bolstering the healthy long-term development of the digital economy," Ma said.

In recent years, with new dynamics and new business models emerging, China's online economy has flourished, but competition has become increasingly fierce in some sectors, and the problem of unfair competition has also emerged, said Wang Xianlin, a professor of economic law at Shanghai Jiao Tong University.

Unfair competition not only damages the interests of businesses and consumers, but also distorts and destroys normal market competition mechanisms, Wang said.

The draft rules reiterated that internet-based business operators should not abuse their dominant position to force merchants to "choose one platform over others "nor block fair competition, said Dong Yizhi, a lawyer at Shanghai-based law firm Joint-Win Partners, adding unfair competition in the internet domain will face stricter and more detailed supervision in the future.

Shares of Hong Kong-listed tech stocks fell on Tuesday after the draft regulation was published. Tencent dropped 4.14 percent, Alibaba fell 4.77 percent and Meituan declined 3.52 percent.

The draft regulations came after the State Administration for Market Regulation imposed various restrictions and punishments on tech giants in an effort to restrict anti-competitive or monopolistic behavior.

In April, the administration fined e-commerce giant Alibaba Group Holding Ltd a record $2.5 billion for engaging in unfair competition. Last month, it ordered internet giant Tencent Holding Ltd to give up its exclusive music licensing rights and imposed a fine of 500,000 yuan ($77,150) for its acquisition of China Music Corp in 2016.

The regulator noted that firms cannot use technological means to maliciously impose incompatible barriers on other legal internet products and services.