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.
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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.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
