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China drafts new antitrust guideline to rein in tech giants, wiping US$102 billion from Alibaba, Tencent and Meituan stocks

  • Draft guideline ‘targeting tech giants’ in e-commerce, online food delivery and ride hailing, Atta Capital’s Alan Li says
  • Tech giants plunge broadly in Hong Kong trading on Tuesday, with Meituan and JD.com both down by more than 8 per cent

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China is seeking to curb monopolistic market practices as a handful of technology companies begin to control every sphere of economic life. Photo: Handout
Yujing LiuandDaniel Ren

China has released a draft antitrust guideline to rein in internet-based monopolies, signalling policymakers’ heightened concerns over the growing power, influence and risks of digital platforms and their market practices in the economy. The move immediately erased about US$102 billion of market value from Alibaba Group Holding, Tencent Holdings and Meituan.

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Monopolistic practices by internet platforms, such as demanding vendors to transact only on one platform exclusively, or providing differentiated prices to customers based on their shopping history and profiles, could potentially be outlawed, according to the guideline released by the State Administration for Market Regulation on Tuesday.
This is the first time the market regulator has attempted to define what constitutes anti-competition practices among internet companies under the law. An overhaul to the Anti-Monopoly Law in January went only as far as tweaking the language to encompass internet companies. It will seek public opinion on the draft until the end of November.

“The policy is clearly targeting the tech giants, with e-commerce, online food delivery and ride hailing platforms likely to receive the biggest blow because of how concentrated these sectors are,” said Alan Li, portfolio manager at Atta Capital in Hong Kong. “This is probably just the first warning shot.”

The guideline also deems activities like platforms offering steep discounts to eliminate rivalry, colluding on sharing sensitive consumer data, and forming alliances to force out competitors, as potentially monopolistic.

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The latest move has put China watchers on alert as Beijing appears to start clipping the wings of some of the biggest companies that helped revolutionise consumer spending behaviour in the world’s second-largest economy. Just last week, it surprisingly halted Ant Group’s record-breaking stock offering by throwing new microlending rules at the Jack Ma-controlled fintech company.
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