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China Enforces Antitrust Guidelines on its Online Economy – China Briefing

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  • A string of investigations into and penalties imposed upon Chinese internet companies, including leading e-commerce giants, in recent months signaled China’s seriousness about regulating its internet industry to promote fair competition and double down on monopolistic practices. The enforcement of the Antitrust Guidelines for the Platform Economy will strengthen the monitoring and regulatory capacity of financial and local industry authorities.

On February 7, 2021, China’s State Administration for Market Regulation (“SAMR”) promulgated the Antitrust Guidelines for the Platform Economy (“Guidelines”) with immediate effect.

The final version of the Guidelines does not substantially differ from the initial draft unveiled by the SAMR at the end of November 2020. A breakdown of the Guidelines can be found here.

The short time needed to finalize the Guidelines reveals the urgency felt by China to regulate its fast-growing digital economy to prevent and stop monopolistic behaviors and promote the sustainable and healthy development of online commerce.

Curtailing monopolistic behavior on online platforms

Chinese authorities, by means of the Guidelines, intend primarily to prevent monopolistic behaviors.

Horizontal, vertical, hub and spoke agreements, and concentration of undertakings have been forbidden, and in doing so, the Guidelines provide ad hoc definitions of market dominance and abuse of such position in the online market; this has its own peculiarities.

The main purpose of the Guidelines is to create a fair and competitive market on online platforms and to safeguard consumer interests.

This goal is pursued by establishing rules that define what must be considered as an anti-competitive behavior and by identifying the practices that must not be adopted by platforms operators, such as squeezing other operators out of the market, sharing sensitive consumers’ data, adopting the “choose one between two” practice (also called “choose one over the other” whereby a seller cannot operate on different platforms and must choose one single platform), or using big data to manipulate the market to their own advantage (for example, drafting the profile of a user, based on their online behavior, with the aim of setting different prices).

As explained by the Office of the Anti-Monopoly Commission of the State Council during a press interview released on February 7, 2021, monopolistic behaviors on the platform economy have their own characteristics, for instance:

  • The behavior is more concealed, and the use of tools, such as data and algorithms, among others, may help operators to quickly exchange sensitive information making it more difficult to discover and determine monopoly agreements.
  • On the platform economy, it is easier to reach hub and spoke agreements, made possible by using algorithms or other technical tools, to assume the role of market organizer and coordinate the activities of other operators on the platform, as well as determine or interfere in the price setting mechanism.
  • Platforms operators may impose better or equal trading conditions, in terms of price and quantities, to operators compared to those of other platforms, thus restricting the competition among the different platforms.

The Guidelines clarify that a monopoly agreement is identified when different operators behave in a coordinated way due to the use of data, algorithms, and other tools that allow them to synchronize their activity.

Recent antitrust cases involving internet giants

We spotlight a few important and recent cases where Chinese internet giants been accused, or even punished, for anti-competitive or monopolistic conduct.

Given their outsized presence and influence in the online market, Chinese authorities have begun to pay acute attention to their respective commercial and business activities to ensure fair competition in the platform economy. Such antitrust regulation will come under the Guidelines going forward.

“Choose one over the other” case

In December 2020, the SAMR officially announced that it had initiated an investigation into Alibaba Group Holding Ltd for suspected anti-competitive conduct. The investigation was based on allegations that the company forces merchants on its website to sign exclusive cooperation agreements, preventing them from selling products on rival platforms. SAMR reported to have conducted and completed an on-site investigation on the same day. This is the SAMR’s first major publicly announced investigation on a case of abuse of dominance in the internet sector. For sake of clarity, it shall be noted that under the Anti-Monopoly Law, SAMR can confiscate the offender unlawful gains and, in addition, it may impose a fine up to 10 percent of its revenues.

Concentration of undertakings case

On December 14, 2020 SAMR punished Alibaba Investment Co., Ltd, Tencent-backed China Literature Group, and Shenzhen Fengchao Network Technology Co., Ltd in accordance with Articles 48 and 49 of the Anti-Monopoly Law, by imposing a fine equal to RMB 500,000 (US$76,500) each for having failed to make the mandatory declaration prescribed under the law to implement the concentration of undertakings. In this case, the Chinese competent authorities also ascertained that the concentration of business operators involved an agreement control structure (variable interest entity structure). An investigation by the SAMR revealed that the failure of the three companies to fulfill their legal obligation to declare equity purchases of other companies – as required by the Anti-Monopoly Law – constituted an illegal concentration of operators.

Unfair competition case

On December 30, 2020, SAMR penalized the online discount retailer Guangzhou Vipshop E-commerce Co., Ltd. – together with Beijing Jingdong Century Information Technology Co., Ltd. (JD.com), Hangzhou Haochao E-commerce Co., Ltd. (Tmall) – with a fine of 500,000 RMB (US$76,500) for conducting manipulative pricing. After that, SAMR announced in mid-January that it was investigating the said company for unfair competition behavior. On February 8, 2021, right after the promulgation of the Guidelines, SAMR fined Vipshop (China) Co., Ltd. for anti-competitive behavior, accusing the company of developing and using an information-gathering system that helped it influence consumer choices on the buying platform and block sales of certain brands. This led to disruption of normal market competition orders and constituted a breach of the Anti-Unfair Competition Law. The administrative fine imposed was RMB 3 million (US$464,000), the maximum amount stipulated by the law.

Landmark case of abuse of market dominance

On February 7, 2021, the Beijing Intellectual Property Court accepted a case filed by China’s largest video-sharing platform Douyin (the Chinese iteration of TikToK owned by ByteDance) against the internet giant Tencent over alleged monopolistic behavior. More specifically, Douyin alleged that Tencent had blocked its users from sharing content from Douyin on its social networking platforms, WeChat and QQ, thus constituting “a monopolistic behavior achieved by abusing market domination to exclude and limit competition”. On this basis, Douyin appealed to the said court asking to order Tencent to stop its monopoly practice, remove the negative impact caused by the act, and claiming RMB 90 million (US$13.9 million) as compensation for losses and expenses. In response, Tencent argued that ByteDance’s move is “maliciously framing it” and the company will countersue ByteDance for illegal infringement. These two Chinese internet giants have fought several legal battles over monopolistic practices over the years, but this is the first case that has been filed since China promulgated the Guidelines. Market watchers will be observing if the court’s judgment will be impacted and how – given the tightening antitrust regulation of the platform economy.


About Us

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com

We also maintain offices assisting foreign investors in Vietnam, Indonesia, Singapore, The Philippines, MalaysiaThailand, United States, and Italy, in addition to our practices in India and Russia and our trade research facilities along the Belt & Road Initiative.

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Economists predict slight rebound and moderate growth for B.C. economy in 2021 – North Shore News

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VICTORIA — Finance Minister Selina Robinson said she’s encouraged by predictions that British Columbia’s economy will rebound this year and next. 

Robinson heard Friday from economists on the province’s Economic Forecast Council who estimate B.C. is on track for real GDP growth of 4.7 per cent this year and 4.3 per cent next year, before growth slows. 

The same measurement for the provincial economy in 2020 shows a 5.1 per cent decline, the worst contraction since 1980.

“We can see the light at the end, but we’re still in the tunnel,” Robinson said in an interview after the hearing from the council. 

The council of economists from major financial institutions and business associations warned that the strength of recovery depends heavily on the rollout of COVID-19 vaccines. 

Recovery is expected to escalate as the province reaches herd immunity and consumer activity increases, while work ramps up in areas like construction on resource projects.

All signs point to a strong recovery in the United States, which will also help boost B.C.’s rebound, several economists said during the session. 

But Robinson also heard the recovery won’t be felt evenly, with certain hard-hit industries and low-wage earners tending to suffer the greatest ongoing impacts of the pandemic. 

Women, people of colour and those without more than a high school education have fared worse than others, Robinson heard. 

At the same time, the skilled labour market is expected to tighten, suggesting good government policy could involve investment in training, education and financial support for those transitioning to new industries, she heard. 

“Obviously, here we are 10 months out and there are some doing really well and others being completely left behind,” Robinson said. 

“What caught my attention was making sure that we’re investing right now in people, but also into the future.”

Online shopping will likely change retail in the long term, while struggling sectors like tourism may see a strong, if delayed, rebound thanks to pent-up demand for travel and leisure, Robinson heard. 

The challenge will be to bridge the current situation to the time when there is herd immunity, while maintaining an active tourism sector, she said. 

The minister said the next B.C. budget will focus on continuing to support British Columbians through the emergency of the pandemic while investing in the future. 

The government will table its budget on April 20 after legislation passed in December allowed it to delay its introduction from the traditional date in February.

The B.C. government announced late last year that the deficit forecast had grown and the budget shortfall was expected to hit $13.6 billion this fiscal year. 

The Finance Ministry predicted B.C.’s economy would decline by 6.2 per cent in 2020, but growth was expected to rebound to three per cent in 2021. 

Liberal finance critic Mike Bernier said the economic forecast report makes clear there is much more work in store for the New Democrat government on the road to economic recovery. It begins with fixing “growing problems” in their current support programs, he said in a statement. 

“The forecast council is doing important work looking ahead to the economic future of British Columbia, and that is certainly vital, but we cannot let the government forget about the here and now,” Bernier said. 

He accused the government of fumbling the provision of economic support at nearly every turn, from delayed pandemic pay to a “botched” rollout for small and medium-sized businesses. 

Of the $300 million set aside for B.C. businesses at the beginning of the pandemic, only $21 million has been distributed, Bernier said. 

“We need to see (Premier) John Horgan and his government take immediate steps to fix their ineffective programs and provide people with the relief they need to make it through this pandemic.”

This report by The Canadian Press was first published Feb. 26, 2021.

Amy Smart, The Canadian Press

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Canadian dollar falls by most since October as risk appetite frays

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar tumbled against its broadly stronger U.S. counterpart on Friday as this week’s spike in bond yields weighed on investor sentiment, with the loonie extending its pullback from a three-year high the day before.

The Canadian dollar was trading 0.9% lower at 1.2710 to the greenback, or 78.68 U.S. cents, its biggest decline since last October. It touched its weakest since Feb. 18 at 1.2729, while it was down 0.8% for the week.

On Thursday, the loonie touched its strongest intraday level since February 2018 at 1.2464.

“The loonie is losing ground along with other risk assets as market volatility increased on a small tantrum over the rising U.S. yields,” said Amo Sahota, director at Klarity FX in San Francisco.

The safe-haven U.S. dollar rose against a basket of major currencies and global equity markets swooned, even as the bond selloff eased a bit. Fears of rising inflation still weighed on sentiment as data showed a strong rebound in U.S. consumer spending.

“The underlying fundamentals are unchanged so commodity demand strength will remain robust and that should help underpin the loonie and prevent this from turning into a complete rout,” Sahota said.

Oil prices settled 3.2% lower at $61.50 a barrel as forecasts called for crude supply to rise in response to prices climbing above pre-pandemic levels.

Canada‘s C$100 billion ($79 billion) stimulus plan is justified by the economic hole caused by the COVID-19 pandemic, government sources said, as analysts warned Ottawa against racking up too much debt and making investments that fail to boost growth.

Canadian government bond yields fell across a flatter curve in sympathy with U.S. Treasuries. The 10-year was down 6.8 basis points at 1.398%.

On Thursday, it touched a 13-month high at 1.486%, while it was up 18.5 basis points for the week.

 

(Reporting by Fergal Smith; Editing by Steve Orlofsky and David Gregorio)

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Economists predict slight rebound and moderate growth for B.C. economy in 2021 – The Tri-City News

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VICTORIA — Finance Minister Selina Robinson said she’s encouraged by predictions that British Columbia’s economy will rebound this year and next. 

Robinson heard Friday from economists on the province’s Economic Forecast Council who estimate B.C. is on track for real GDP growth of 4.7 per cent this year and 4.3 per cent next year, before growth slows. 

The same measurement for the provincial economy in 2020 shows a 5.1 per cent decline, the worst contraction since 1980.

“We can see the light at the end, but we’re still in the tunnel,” Robinson said in an interview after the hearing from the council. 

The council of economists from major financial institutions and business associations warned that the strength of recovery depends heavily on the rollout of COVID-19 vaccines. 

Recovery is expected to escalate as the province reaches herd immunity and consumer activity increases, while work ramps up in areas like construction on resource projects.

All signs point to a strong recovery in the United States, which will also help boost B.C.’s rebound, several economists said during the session. 

But Robinson also heard the recovery won’t be felt evenly, with certain hard-hit industries and low-wage earners tending to suffer the greatest ongoing impacts of the pandemic. 

Women, people of colour and those without more than a high school education have fared worse than others, Robinson heard. 

At the same time, the skilled labour market is expected to tighten, suggesting good government policy could involve investment in training, education and financial support for those transitioning to new industries, she heard. 

“Obviously, here we are 10 months out and there are some doing really well and others being completely left behind,” Robinson said. 

“What caught my attention was making sure that we’re investing right now in people, but also into the future.”

Online shopping will likely change retail in the long term, while struggling sectors like tourism may see a strong, if delayed, rebound thanks to pent-up demand for travel and leisure, Robinson heard. 

The challenge will be to bridge the current situation to the time when there is herd immunity, while maintaining an active tourism sector, she said. 

The minister said the next B.C. budget will focus on continuing to support British Columbians through the emergency of the pandemic while investing in the future. 

The government will table its budget on April 20 after legislation passed in December allowed it to delay its introduction from the traditional date in February.

The B.C. government announced late last year that the deficit forecast had grown and the budget shortfall was expected to hit $13.6 billion this fiscal year. 

The Finance Ministry predicted B.C.’s economy would decline by 6.2 per cent in 2020, but growth was expected to rebound to three per cent in 2021. 

Liberal finance critic Mike Bernier said the economic forecast report makes clear there is much more work in store for the New Democrat government on the road to economic recovery. It begins with fixing “growing problems” in their current support programs, he said in a statement. 

“The forecast council is doing important work looking ahead to the economic future of British Columbia, and that is certainly vital, but we cannot let the government forget about the here and now,” Bernier said. 

He accused the government of fumbling the provision of economic support at nearly every turn, from delayed pandemic pay to a “botched” rollout for small and medium-sized businesses. 

Of the $300 million set aside for B.C. businesses at the beginning of the pandemic, only $21 million has been distributed, Bernier said. 

“We need to see (Premier) John Horgan and his government take immediate steps to fix their ineffective programs and provide people with the relief they need to make it through this pandemic.”

This report by The Canadian Press was first published Feb. 26, 2021.

Amy Smart, The Canadian Press

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