On Sep. 9, 2021, the Ministry of Industry and Information Technology of the People's Republic of China (“MIIT”) held an administrative guidance meeting urging Chinese platform operators to stop blocking access to rivals’ links, which bring the topic of whether Internet platforms should open up external links to each other back into the spotlight. As pointed by MIIT, the blocking of website links without justification has seriously affected the user experience and rights and also disturbed market order. Chinese tech giants including Tencent, ByteDance and Alibaba have proactively responded to the requirements. Tencent, as a target of controversy, has now allowed its users to access external links in the one-to-one chat scene after upgrading to the latest version of WeChat.
I. Background of the practice of blocking external links in the Chinese Internet industry
It has been a common practice for Internet platforms to manage external links by implementing internal rules about how and where external links can be placed as a platform owner should enjoy basic operational autonomy. WeChat, the most popular instant messaging App in China, has been enforcing a strict rules and regulations related to external links which impose various restrictions on external links, primarily related to either the content or the source of the link.
The official rules of WeChat specify the violating content that may be blocked, e.g., “rumors or false information that may cause harm to individuals, corporations, or other institutions”, “content designed for the collection of users’ personal data or information without the user’s knowledge or consent”.
In addition to the external links restricted by content, WeChat also blocks links from certain e-commerce and social media platforms. In practice, links from these platforms cannot be directly opened within WeChat. Instead, the user has to open the link in a browser such as Safari or Chrome. The platforms blocked on WeChat mainly include:
- Taobao and Tmall, the largest e-commerce platforms in China, both operated by Alibaba Group.
- Douyin, a popular short video platform, owned by ByteDance.
- TouTiao, an intelligent news aggregation platform that recommends news to individual users, also owned by ByteDance.
The restrictions related to the content of the link has not caused disputes as it is designed mainly based on security and compliance considerations. However, the blocking practices by source have raised extensive doubts over the intent behind the behavior and concerns about the competitive order of the industry.
II. Is the blocking of external links a monopoly conduct?
A. What is the competitive implication of blocking external links?
To understand why the blocking of external links might lead to competitive concerns, we should first figure out why an instant messaging platform, an e-commerce platform and a short video platform see each other as competitors.
a) Bilateral or multilateral nature of the platform economy
Though the service offered to the individual users by different platforms varies, it is not difficult to realize that these platforms usually compete with each other on the other side by selling “attention” gained from individual users to commercial users for marketing promotion. Therefore, platforms increasingly reluctant to direct their users toward each other’s sites as it may cause the user's attention to flow to competitors.
b) The role of data
Data is not only one of the key ingredients of Artificial Intelligence but also a crucial input to many online services provided by platforms.Allowing external links may provide other platforms the access to collect and use the users’ data, which may weaken the competitive advantage of a platform.
Large platforms have incumbency advantage to develop ecosystems due to its possession of large amount user data and thus have strong incentives to engage in the blocking practices, making the new entrants or the competitors in the neighboring market where the tech giants envisage to enter into more difficult to success.
B. Why antitrust enforcement is silent on the blocking practices of the platforms?
There has been a long-standing discussion about whether the blocking of external links constitute monopolistic behaviors, which has been fueling up as ByteDance on Feb. 2 this year announced to sue Tencent for restricting users to share Douyin content on WeChat and QQ.
a) Possible legal basis for ByteDance’s allegation
As announced by ByteDance, Tencent was accused of abusing its market dominance and thereby excluding and restricting competition.However, it is not clear which specific abusive behavior was accused in the lawsuit.Among the six types of abusive behavior stipulated in Article 17 of the Anti-Monopoly Law, it is likely for ByteDance to claim that restricting users to share Douyin content on WeChat and QQ constitutes:
- Without legitimate reasons, restricting transaction behavior
This strategy was adopted in the case of Qihu 360 v. Tencent in which Tencent was accused of product incompatibility, similar to the blocking practice.ByteDance may claim that the restriction has exclusionary effect that indirectly entice the users to use short video services provided or invested by Tencent.
- Without legitimate reasons, refusing to trade with the trading partners
Another guess is that ByteDance may allege that WeChat constitutes an essential facility and thus restricting users to share Douyin content on WeChat and QQ may constitute refusing to let their trading partners in the production and business activities to use their necessary facilities with reasonable conditions.
- Without legitimate reasons, applying dissimilar conditions to equivalent transactions with other trading partners
It is also possible for ByteDance to claim that Tencent allows users to share Kuaishou (another popular short video platform) content on WeChat and therefore placing Douyin at a competitive disadvantage.
b) Difficulties in identifying the blocking of external links as monopoly behavior
For Bytedance, at least three barriers must be crossed in order to win the case: first, to properly define the relevant market and demonstrate market dominance of Tencent; second, to demonstrate that the restriction imposed by Tencent constitutes an abusive behavior and thereby excluding and restricting competition; third, to break through the justification defense by Tencent.However, crossing the above barriers is far from easy.
With respect to market definition and market dominance identification, the judicial precedents involving accusations against Tencent for abusing its dominant market position is unfavorable to the plaintiff. Though the accommodative and prudential regulatory environment has been changed and in theory it is possible to define a narrower relevant market encompassing only one side of the platform where the conducts in dispute occur, it is still of uncertainty about market definition and dominance identification in the platform industry as market boundaries might not be as clear as in the “old economy and they may change very quickly.
Even if Tencent were determined as holding a dominant position, it is still difficult to prove that Tencent has implemented abusive behavior. It is true that the restriction to share Douyin content may cause inconvenience to the users.However, the issue that to what extent could such inconvenience be regarded as limiting the end users’ right to choose other short video products thereby lead to exclusionary effect should be considered with prudence from the perspective of competition law. On the other hand, whether WeChat should be regarded as a public utility or even an essential facility under the antitrust law is still very controversial. In the judicial practice, only in rare cases, the courts have applied the doctrine of essential facility to order the defendant to open up certain infrastructure or provide certain input to the plaintiff.Most importantly, the great success of Douyin in the field of short video also shows that WeChat is not an indispensable way or an essential input for the marketing of short video products. If resorting to the rule for discrimination treatment, the greatest challenge would be to determine whether the transactions between WeChat and the various short video app developers are equivalent.
It is no doubt that Tencent will defend that its restriction on sharing Douyin content is with reasonable justification.According to Tencent, the blocking was due to the illegitimate practices of ByteDance, including obtaining WeChat users’ personal information in regulatory violation.
It seems that the blocking practices may to some extent violate the policy and spirit of the antitrust laws, however, things are more complicated in an individual antitrust case.
III. Observation and outlook
China is still exploring proper regulatory measures to safeguard the healthy development of the platform economy apart from antitrust supervision. The interconnectivity of the platforms is one of the acute issues to be resolved, which not only a monopoly issue: the industrial supervision may play a more efficient way. MIIT have long taken a positive approach to Internet industry connectivity and we believe that the recent development is just a beginning. With regard to the compliance trends of management of external links, some preliminary conclusions may be drawn, including:
- The platforms’ setting up the rules for managing external links is not a problem per se. However, as a regulator, platforms, especially those holding a dominant position have a responsibility to ensure that competition on their platforms is fair, unbiased, and pro-users. In theory, blocking links to rivals while giving preferential treatment to one’s own products can be identified as abusive self-preferencing practice resulting in a leveraging of market power if without reasonable justifications as with the antitrust enforcements in the western.
- As required to adhere to the principle of fair competition, non-dominant platforms also play a regulatory role in interconnectivity. MIIT has launched an APP rectification project in July this year focusing on eight types of malicious practices that can disrupt market order, such as the discriminatory blocking of links and the interference in the products and services operated by other entities. Moreover, the regulations addressing the issues of platform compatibility and blocking external links is also on the way. According to the Provisions on Prohibition of Unfair Competition on the Internet (Draft for Public Comment), operators shall not use technical means to implement the acts that interfere with the network products or services legally provided by other operators which include among others, without reasonable justifications, to block, intercept, modify, close, uninstall the network products or services legally provided by other operators thereby hindering their download, installation, operation, upgrade, forwarding, dissemination, etc. It is manifested that both dominant and non-dominant platforms are regulated by the law enforcement action and the upcoming regulatory provisions.
- It is clear that interconnectivity and openness between platforms is an irreversible trend. However, close supervision does not automatically lead to healthy development. It will also depend on the rules’ clarity and completeness. At current stage, neither regulations nor regulatory authorities has provided clear guidance on the compliance standard of managing external links except for some general principles. It is for sure that platforms will bear heavier compliance burden to tailor their platform rules on the management of external links. Any restrictions should be sensibly designed with objective justifications and the regulatory measures should be adopted under the principle of proportionality. It is also expected that the regulatory authorities or the courts could shed some light on the compliance boundaries or the best practices of interconnectivity in the future.