China Is Joining the Global Push to Rein In Tech Giants

01/24/2021 | 05:44am
Jack Ma

By Sam Schechner, Liza Lin and Chong Koh Ping

Beijing is adding new momentum to efforts in Brussels and Washington to curb the power of big tech companies.

China recently joined the chorus of governments advancing plans to impose new competition obligations on a small cadre of large technology companies, including Amazon.com Inc., Facebook Inc. and Alibaba Group Holding Ltd.

In November, China unveiled its first draft guidelines overseeing competitive behavior by digital giants. The proposals include blocking companies from crunching consumer data to set discriminatory prices, or selling products at prices below cost to gain market share. This month, it heightened scrutiny of electronic-payment companies, warning that nonbank payment firms, if found to be dominating the market, could face antitrust investigations.

China's moves come as the European Union and the U.K. pursue similar efforts. In December, an EU bill was proposed to oblige major digital platforms to refrain from many potentially anticompetitive actions, such as promoting their own products over those of competitors. The U.K. plans legislation empowering a new digital-competition unit to enforce codes of conduct for companies that dominate strategic digital markets.

Driving the proposals are a growing number of policy makers, competition specialists and smaller tech rivals in Europe, Asia and the U.S. who say fresh laws are needed to ensure that new tech rivals can emerge to challenge the digital giants.

"With each passing year, it's increasingly clear that the platforms are very entrenched and that absent a policy change that's unlikely to change," said Jason Furman, a Harvard University economist who led a panel that provided the road map for the U.K.'s digital-competition proposals.

Some free-market proponents argue that proposed digital-competition rules go too far. They are likely to hobble digital markets or empower big companies that can exploit the rules, leaving consumers worse off either way, said Mark A. Jamison, director of the digital-markets initiative at the University of Florida and a visiting scholar at the conservative American Enterprise Institute.

"You're trying to turn these companies into utilities," Mr. Jamison said. "In the case of electricity, maybe that's great. But in the case of digital platforms, that's the opposite of how these markets work."

China's involvement in what has been a largely Europe-led push for tech regulation is a new twist. Chinese internet companies had been mostly spared antitrust scrutiny because of an overriding national policy to groom domestic technology champions. Instead, regulators often used antitrust rules as a tool to stem the market influence of foreign companies in the country.

The aura of invincibility for Chinese technology businesses disappeared after an October speech from Alibaba founder Jack Ma, who lashed out at the government's tight financial regulation, prompting a regulatory crackdown on his internet juggernaut.

While Mr. Ma's speech might have been the trigger for heightened digital-competition scrutiny, some said the new stance likely reflected broader worries about the growing influence of tech businesses.

"There have been longstanding concerns about the increasing concentration in the Chinese tech sector," said Angela Zhang, a law professor at the University of Hong Kong.

China has one of the shortest histories of antitrust regulation among the major global economies, having only adopted an antimonopoly law in 2008. This has allowed lawmakers to draft rules more tailored to the current industry and targeted at win-at-all-costs strategies used by internet platforms, said Kevin Xu, a venture capitalist who runs the technology blog Interconnected.

This month the head of the Chinese antitrust regulator reiterated in an interview on state media that strengthening antitrust and unfair competition rules is a priority. The moves bolster a government strategy of relying more on China's domestic economy and consumption for growth, he said.

Companies including Alphabet Inc.'s Google are facing increasing pressure in areas from competition to privacy and taxes. Antitrust regulators are pursuing cases in the U.S. and in Europe, and EU privacy regulators are expected to announce some of their first big-tech decisions this year. Policy makers in the U.K. and EU have proposed new content-moderation obligations for social-media companies.

Facebook has said it is open to the new competition proposals. "We support rules that help foster innovation, enable competition and protect consumer welfare, and we acknowledge that these rules must apply to us," a spokesman said.

An Amazon spokesman pointed to a blog post in which the company said the bloc should ensure that "the same rules apply to all companies."

Alibaba and Google declined to comment. When Alibaba was singled out for antitrust investigation, it said then that its businesses are operating as usual. Google has previously said the EU proposals would "appear to specifically target a handful of companies and make it harder to develop new products to support small businesses in Europe."

In the U.S., where Google and Facebook currently face multiple antitrust lawsuits, bipartisan momentum is growing for tech regulation.

Last year Democrats on the House Judiciary Committee released a report calling for changes to antitrust laws, including the creation of nondiscrimination requirements and rules prohibiting dominant platforms from engaging in self-preferencing. House Republicans, in their own report, endorsed a narrower set of changes, including requirements that tech giants make their services interoperable and allow clients to export their data from one company to another.

A global overhaul of digital competition faces obstacles. In China, any meaningful enforcement of antitrust rules would also mean cracking down on state-owned enterprises, monopolies that dominate industries such as telecom and finance. It could take years for the EU to debate and enact its proposed law. Partisan divisions in the U.S. could complicate passage of new tech regulations.

Christian Borggreen, vice president of the Computer & Communications Industry Association, which represents large technology companies, including Amazon, Facebook and Google, urged legislators to avoid "a patchwork of local, sometimes conflicting rules for the global digital economy."

Said Brussels-based Mr. Borggreen: "Legislators should work together to ensure that the digital economy remains open and competitive, and that it continues to enable growth."

Write to Sam Schechner at sam.schechner@wsj.com, Liza Lin at Liza.Lin@wsj.com and Chong Koh Ping at chong.kohping@wsj.com

(END) Dow Jones Newswires

01-24-21 0544ET

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