Tech

How China is targeting Big Tech

Earlier this year, Alibaba’s internal bulletin boards were flooded with questions from staff as Chinese antitrust authorities began formally investigating tech giants.

However, company executives were unable to answer many questions. China’s high-tech industry has never experienced serious enforcement of national competition law.

Staff said regulators interviewed them and downloaded chat records from Alibaba’s internal communications platform. Officials had the power to take whatever data they wanted, and even struck a surprise attack that might stop operations. As the investigation unfolded, executives told staff that they were ready to investigate antitrust proceedings in the EU and the United States.

A sudden surge in activity from the State Market Regulatory Authority (SAMR) has upset the technology sector.

Alibaba’s shares have fallen by about 18% since the investigation began in December and have not recovered significantly since the regulators closed their first proceeding. You will be fined $ 2.8 billion. Food delivery company Meituan’s rating has fallen by about 5% since it became the second target of a formal survey at the end of April.

More than 30 other tech companies, including ride-haling company Didi Chuxing, are also being asked to “self-correct” and inform SAMR. Uncertainty Faster than planned Blockbuster USIPO..

“Everyone was surprised at the speed of U-turns. In China, regulators can act very quickly. In fact, China is catching up with US and EU regulatory standards and the direction is right,” the venture said. Daisy Kai, head of the Beijing office of capital firm B Capital, said.

The anger of the people is causing the incident

Lawyers and technicians said the antitrust wave has become an integral utility during the coronavirus pandemic, but has not shared huge numbers of some technology companies such as online grocery platforms and food delivery companies. Earnings with an overworked delivery driver who said he had partially responded to the public’s anger at the power.

Beijing’s goal is also to curb the most well-known tech billionaires like Jack Ma, Alibaba’s candid founder, whose Ant Group IPO was withdrawn last year, and bring the company back to serving social and government ambitions. Seems to be focused.

“Whether it’s antitrust or anti-unfair competition law, these are for the government [laws] All tools for social governance. All of these are for setting standards of conduct and the most effective ones are used, “said Wei Sirin, a lawyer at Dentons.

Chinese delivery rider waiting for order in Wuhan

Chinese delivery rider waiting for order in Wuhan © Getty Images

Guoshan agreed with Beijing consultancy Plenum that the enforcement of competition law is not just about improving the market, as authorities have been scrutinizing FinTech and the treatment of workers. “Antitrust law can be a useful tool for keeping these tech giants disciplined,” she said.

In March, Li Shouzhen, a member of the Chinese Government Advisory Board, said China focused on “regulation of science and innovation” from “comprehensive and prudent regulation” that allowed tech giants to grow freely. He told the state media that he was moving to. About protecting consumers and tech start-ups from established giants.

Beijing also wants technology companies to carry out basic research to support long-term technology separation with the United States, as well as focus on attracting as many consumers as possible to their platform. I will.

Regulators lack resources

But in many ways, antitrust regulators outperform Chinese tech companies. As of March, SAMR had only about 50 staff, according to Huang Yong, a member of the State Affairs Commission’s Antitrust Advisory Board.

According to Fay Zhou, Head of China’s competitive practices at Linklaters, there is no independent team of economists to analyze the case and instead may contract with a private consultancy or scholar. Meanwhile, tech companies are busy hiring lawyers and government officials to protect themselves.

The current antitrust campaign could help expand SAMR, a law professor at the University of Hong Kong. Exceptionalism in China’s Antimonopoly Act..

“The Chinese government sector at all levels is relentlessly competing for policy management,” she said. “Antitrust regulators certainly see the current campaign against Big Tech as a great opportunity to be in the limelight, which allows the small bureau to demand more budget and personnel. ”

SAMR’s sharpest stick is antitrust law, which allows fines of up to 10% of a company’s annual domestic revenue. This is the same penalty proposed by EU Digital Markets Law.

However, investigations under the law can be delayed, and its main purpose is deterrence, Mr. Wei said. SAMR is working on several anti-competitive practices by tech companies, including forcing merchants to limit themselves to one platform. This is the main reason for Alibaba’s fines, discounts after seducing customers, offering different prices to different customers.

However, many of these behaviors are difficult to define and prove, and SAMR lacks the resources to track all companies involved in such behaviors, lawyers say.

Technology companies begin to hone their public image

Instead, regulators are focusing on companies whose actions lead to public protests. “Companies can be alert to complaints from consumers, clients and the media,” Zhou said. “When corporate behavior rises to the level of public dissatisfaction, even regulatory inquiries and interventions are at increased risk.”

Companies that get the attention of regulators can expect long-term private negotiations and communication, even if the case is published, before anything is published.

In response to pressure, Chinese technology founders have begun to bring public opinion to court by strengthening their commitment to improving society. In April, Tencent announced that it would spend RMB 50 billion ($ 7.7 billion) on social and environmental initiatives. Tencent founder Pony Ma has also promised to donate $ 2 billion in his stake to a charity.

Other tech executives, such as Pinduoduo’s Colin Huang, who said he wanted to do scientific research, and ByteDance’s Zhang Yiming, who said he would “give back to society,” haven’t been in the limelight.

The biggest blow will be stricter rules about data

It remains unclear how terrible the enforcement of the rules will hurt Chinese tech companies. After announcing antitrust fines, Alibaba said its revenues would increase 30% year-on-year to RMB 930 billion. Meituan’s CEO has assured investors that the company is likely to stick to merchants and has not changed its growth goals.

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Oliver Louis, a professor of finance at China Europe International Business School in Shanghai, warned that strict control over data collection poses the greatest risk to businesses. It’s just like Apple has hit the global advertising industry through strict tracking controls.

Investors are confident in helping current industry leaders. “These companies are leaders because they have built a highly competitive moat. Their platform still has a significant focus and they will continue to be leaders,” added venture capitalist Kai. I did.

Additional report by Nian Liu

How China is targeting Big Tech Source link How China is targeting Big Tech

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