China amends law to keep platform economy fair

China's amendment to the Anti-Monopoly Law, based on international practice, will greatly drive the healthy development of the platform economy and the innovation-driven development of more small and medium-sized enterprises, industry experts said.

They made the comments after the revised Anti-Monopoly Law was passed at a session of the Standing Committee of the National People's Congress, China's top legislature, in late June and will take effect on Aug 1.

According to the revised law, platform operators shall not use data and algorithms, technology, capital advantages, and platform rules to conduct monopolistic behaviors which, according to Shi Jianzhong, a member of the expert advisory group of the Anti-Monopoly Commission of the State Council, is to adapt to the competition rule of the digital economy.

"As a typical and the most important form of the digital economy, platform enterprises have an impact on economic and social life and have gone beyond other types of business forms. With the deep integration of digital technology and economic development, it is necessary to accelerate the fair competition supervision system and drive the high-quality development of the digital economy," said Shi, who is also vice-president of the China University of Political Science and Law.

Shi noted that the healthy development of the platform economy requires a market with fair competition, which the market itself cannot provide.

"Therefore, the amendment timely responds to the core elements of competition in the platform economy, which will drive the healthy and sustainable development of the platform economy," he added.

According to the State Administration for Market Regulation (SAMR), the market regulator investigated and dealt with 175 monopoly cases last year, up 61.5 percent year-on-year, and fined companies with monopolistic behaviors 23.59 billion yuan ($3.49 billion) in total.

The platform economy was a key area of focus for antitrust investigators last year. The market regulator looked into over 100 cases and levied fines involving 98 monopolistic instances in the internet sector, involving companies like Tencent, Alibaba, Meituan and JD, the SAMR said.

The revised law also added encouraging innovation to the goal of the Anti-Monopoly Law, which echoes other major revisions introducing a safe harbor mechanism, which is an exemption for certain behavior that does not in principle violate established rules.

Under the revised law, when an operator and its counterpart reach an agreement that could result in a monopolistic situation, if the former can prove that its market share in the relevant market is lower than the standards set by antitrust authorities, the agreement will not be prohibited.

Zhong Chun, an associate professor at the Intellectual Property Research Institute of Jinan University, said that the safe harbor mechanism is an international practice and economies like the European Union have used such rules for years.

"Such improvements will boost market expectations for operators and allow businesses, especially SMEs and startups, to conduct their business activities in a safer range and avoid being punished, and further drive their innovations," she said.

In another series of supporting drafts to the Anti-Monopoly Law, the country also raised the bar for companies to declare such behavior, from the current 10 billion yuan and 2 billion yuan to 12 billion yuan and 4 billion yuan, respectively, in terms of global and China turnover.

The concentration of operators is a practice where one business operator obtains control over another, which may lead to a monopolistic or quasi-monopolistic situation. Antitrust authorities in many countries require operators to declare many mergers and acquisitions in advance to prevent potential monopolies.

"Based on estimates, it will effectively reduce the institutional transaction costs of businesses and create broad development space for various market players, especially for more SMEs," said Wang Xianlin, director of the Center for Competition Law and Policy at Shanghai Jiao Tong University.