On November 10, 2020, China’s antitrust authority (State Administration for Market Regulation, “SAMR”) published an exposure draft of Anti-monopoly Guidelines on Platform Economy Sectors (the “Platform Guidelines”).  As the eighth (draft) antitrust guideline published by SAMR this year, the Platform Guidelines represent SAMR’s determination to strengthen regulation on cyber business industry, especially those giants operating online platforms.  It also echoes the trend of increasingly active antitrust enforcement in digital sector in US and EU, and if implemented in its current form, will have profound implications on current and emerging digital market players operating in China.

Below are some highlights in the Platform Guidelines:

  • Highlight 1 – Broad scope of players: It not only covers the activities of the platform operators (e.g. e-commerce, social network, search engine, advertisement distribution activities), but also the activities of the businesses providing goods or services on such platforms (so-called in-platform players). (Article 3)
  • Highlight 2 – Digital metrics as key factors: Algorithms, data, technical tools and platform rules are included as key factors in assessing market power, analyzing monopoly conducts (such as cartel, vertical restraint, hub-and-spoke scheme, refusal to deal, exclusive dealing, discrimination, etc.), and can also be integral parts of merger remedies. (Articles 6, 7, 8, 14, 15, 17, 21)
  • Highlight 3 – Platform and data as possibly essential facility: Digital platform and data controlled by a platform operator (or possibly by an in-platform player) may be deemed as an essential facility which, coupled with a dominant market position, entails an obligation to grant access to competitors or users. (Article 14)
  • Highlight 4 – Certain platform tactics as exclusive dealing: Common platform conducts, such as exclusive dealing (e.g. so-call “pick-one-side”), user data based price individualization, search downranking, traffic restriction, technical blockage and subsidizing may be considered as abuse of dominance by online platforms. (Article 15)
  • Highlight 5 – Discrimination through profiling: Online platform operators with dominance are not allowed to treat users with same standing differently through big data and algorithm.  In determining whether there is a “same standing”, businesses may consider end-users’ differences in transaction security, transaction cost, credit status, transaction duration, etc., but not factors such as user privacy-related information, transaction history, individual preferences and consumption habits. (Article 17)
  • Highlight 6 – VIE-structured deal expressly covered: VIE-structured deal is notifiable if it has crossed the merger filing threshold. (Article 18)
  • Highlight 7 – Below-threshold “killer acquisition”: Below-threshold “killer acquisition” faces higher risk of merger review scrutiny. (Article 19)
  • Highlight 8 – Lowered burden of proof: The step of market definition may be skipped (in certain cases) for finding/proving a platform player’s monopoly conduct if there is sufficient direct evidence and the conduct at issue is persistent and has significant anti-competitive effect. (Article 4)

We will submit comments to SAMR by November 30 (the deadline for public comments).  If you have any comments on the Platform Guidelines that you want to relay through us, please let us know.