China to revise anti-monopoly law
China will revise the anti-monopoly law, the company law and the corporate bankruptcy law to build a modern economic system and promote technological innovation, the Standing Committee of the National People’s Congress (NPC), China’s top legislature, said in a work report on Monday.
Analysts said the top lawmakers’ move may give priority to regulations on the digital economy, including terms that make data requirements an important criterion for determining a market entity’s dominant position.
The new law aims to rectify irregularities in the market and better regulate giant online platforms, like Alibaba, Ant Group, JD.com, Didi Chuxing, Meituan and Pinduoduo, so that their businesses could be placed under a set of transparent, operable scrutiny and rules, analysts said.
The legislation could also regulate how foreign companies like Tesla acquire and use Chinese customers’ data, as their customer bases in China are growing rapidly, industry observers said.
Li Zhanshu, chairman of the Standing Committee of the NPC, gave a briefing on China’s legislative plans in the NPC Standing Committee’s work report, including revising the anti-monopoly law.
Yu Xinmiao, an associate professor at the Shanghai International College of Intellectual Property, told the Global Times on Monday that the revision could focus on supervising China’s booming digital economy and drawing on the experience of foreign regulatory counterparts, such as Germany’s newly enacted legislation that aims to curb anti-competitive practices.
The current version of the anti-monopoly law was enacted in 2008, and it’s often inapplicable to many current online operations. China’s market watchdog released a draft on revising the law last year, soliciting public opinion. But the draft law has yet to be put into effect.
Chen Danzhou, associate professor of Beijing Institute of Technology in Zhuhai, said that the online economy’s rapid expansion has had a great influence on the traditional economy, and capital is now increasingly concentrated in the sector.
“Supervision of the digital economy has been loose in China. Although this has allowed the online sector to develop very fast, it is also causing an imbalance of the economic structure and needs to be changed,” Chen told the Global Times.
For example, there have been cases where internet companies didn’t report mergers and acquisitions to government authorities, but the current penalties are too low to deter such practices.
Chen predicted that the new law will be stricter about company reporting procedures and increase penalties.
Yu predicted that the new law will include more diversified standards – in particular on the scale of databases – to determine an enterprise’s dominant position, in addition to financing volume and market share.
It may also put forward a new term called advantageous market position, which is inferior to market dominant position but still confers a market edge, according to Yu. The position would be based on companies’ holdings of users’ data and could serve as a reference in settling disputes among internet companies.
“The law does not target any particular online companies. Instead, it will make the industry more standardized and healthy by proposing market rules that are clearer and more transparent,” Chen said, adding that it will also provide protection for disadvantaged groups in the market, particularly those being hurt by online enterprises.
Analysts pointed out that the law may also set an example for overseeing global technology giants such as Tesla, which are increasing their presence in the Chinese market.
“For example, the number of Tesla’s Chinese customers is growing at an exponential rate as its cars become more affordable. As data is growing more and more important, the new law could prevent the US company from abusing the data to squeeze out potential rivals,” Yu explained.
The legislative move is similar to a number of proposals by NPC deputies and Chinese People’s Political Consultative Conference (CPPCC) members.
Tencent’s founder Pony Ma Huateng, also an NPC deputy, said in his proposals that internet companies should strengthen their business ethics and put innovation under effective supervision.
Well-known Chinese economist Li Daokui, also a CPPCC member, proposed to this year’s two sessions that China’s State Council, the country’s cabinet, could lead in the setting up of a digital economy development and supervision committee, as China’s digital industry has developed in a vacuum of supervision.
The committee will help improve the governance of internet platforms and promote Chinese enterprises’ role in the rule-making of the global digital economy, according to Li.
In December, China’s market regulator fined Alibaba Group and China Literature, a Tencent-backed company, for failing to seek approval before proceeding with some acquisitions, a violation of the anti-monopoly law.
China also imposed a 3 million yuan ($458,791) fine on online discount retailer Vipshop for unfair competition. The company was found to have run a system that obtained information about brands on its platform and others to gain a competitive advantage.