Draft amendment to law promises to clean up and better regulate the platform economy

On Oct 19, for the first time, China proposed major changes to its Antimonopoly Law since its enaction in 2008. The Standing Committee of the National People's Congress, China's top legislature, received a draft amendment to the Anti-monopoly Law for the first reading.

What necessitated the proposed amendment was the fervent desire to streamline and regulate China's massive platform economy that was tending to grow too big and too fast in a haphazard way that threatened to create monopolies and destabilize the economy.

Industry insiders said when the NPC Standing Committee amends the law after due deliberations, the revised law will ensure the healthy development of the multibilliondollar platform industry, which is now considered a key part of the larger economy.

The term platform economy refers to online marketplaces and other similar operations or businesses based on computer systems that allow consumers, entrepreneurs, businesses and the general public to connect, share resources, or sell products or services.

Industry insiders roughly divide platform-based companies into two categories: information aggregation platforms and platforms providing transaction, logistics and other services.

In an explanatory note, Zhang Gong, director of the State Administration for Market Regulation, said that since 2008, the Anti-monopoly Law in its existing form has already played an important role in protecting fair competition, improving the efficiency of economic operations, safeguarding consumers' and the public's interests, and promoting high-quality development.

Zhang, however, said some problems regarding inadequate penalties for certain monopolistic behavior emerged during the implementation of the law, and more efforts should be made to improve law enforcement.

The draft amendment this time will clarify the basic position of competition policy and the legal status of the fair competition review system. Fair competition reviews shall be conducted when rules involving the economic activities of market entities are made, Xinhua reported.

The move is a response to recent developments involving a string of Chinese internet heavyweights, including Alibaba Group Holding Ltd, Tencent Holdings Ltd, Meituan, JD and Suning.com－all have been investigated or fined for alleged monopolistic behavior since last year.

"One of the main goals of recent antitrust efforts is to offer timely responses to monopoly cases that are related to platform-based companies and the overall sector," said Sun Jin, director of the Competition Law and Policy Research Center at Wuhan University, who participated in the proceedings relating to the proposed amendment to the Antimonopoly Law.

"Why recent anti-monopoly cases are focused on platform-based companies is because a group of internet platforms developed into giant platforms in the digital era and have extensive market influence, which resulted in a series of new monopolistic behaviors that needed to be regulated in a timely manner," Sun said.