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Market regulation: Platform Economy development

2020-11-10 6 minute read China

ACOLINK China Updates: Market Regulation

The State Administration for Market Regulation (SAMR) has issued a draft Antitrust Guidelines on the Platform Economy and is currently soliciting public opinion to promote its sustainable and healthy development. This is another development that foreign brands keen on China’s market should be watching closely.

With the world’s largest shopping event — China’s Double-11 shopping season — culminating later this week, its scale and performance is a manifest for how far China’s online economy has come in 12 years.

Although there are numerous e-commerce platforms in China, the online B2C retail industry has been dominated by Alibaba and JD.COM for years — during the Double-11 festival in 2019, their combined total sales volume (GMV) was 472.8 billion yuan ($67.6 billion USD). Not far behind them is the third largest player, Pinduoduo. It is rapidly increasing its market share, already surpassing JD.COM’s number of active users in 2018.

As the platform economy develops and the market matures, giants such as Alibaba, JD.COM, and Pinduoduo work hard on maintaining their position. To mitigate the risk of monopolistic behaviours and ensure a fair, healthy market development, the Chinese government’s task is to ensure there is a right balance between market forces and regulation.

On 10th of November, the State Administration for Market Regulation (SAMR) has issued a draft Antitrust Guidelines in the Field of Platform Economy (Draft for Comment) (关于平台经济领域的反垄断指南). The Administration is currently (between 10 and 30 November 2020) soliciting public opinion on the platform economy and invites relevant organisations and individuals to propose amendments and provide feedback.

The main objective set out in the draft is to prevent and stop monopolistic behaviours that eliminate and restrict competition in the platform economy, guide operators in the platform economy to operate in compliance with laws and regulations, and promote the sustainable and healthy development of the online economy.

The guidelines focus on 5 key areas:

  1. Create a fair competition order to prevent and stop monopolistic behaviours that eliminate and restrict competition.
  2. Strengthen scientific and regulatory supervision, and improving the analytical framework of the Anti-Monopoly Law (反垄断法).
  3. Innovation and creativity.
  4. Healthy development of the industry.
  5. Safeguarding the legitimate interests of all parties.

As with the previous adjustments and reforms to policies and regulations in the area of E-commerce, this development aims at creating a more level playing-field in China’s rapidly developing online economy that is becoming increasingly competitive, as well as further stimulate innovation and creativity. At the same time, such developments help drive consumption by giving consumers more alternatives, as well as through strengthening protection of consumer protection.

The bottom line

The key takeaway for businesses that want to list their brands on the largest platforms, is that they will have more freedom to execute their omni-channel strategies and create more holistic promotional activities. The new regulations will make it harder for platforms to demand listing and promotions exclusivity, freeing brands to market their offer on multiple, even competing, platforms.

At ACOLINK, we’re closely monitoring such developments to stay ahead of the curve and help our clients — overseas brands and exporters that eye China — navigate the market and pro-actively take advantage of the opportunities. Get in touch and let’s discuss how we can help your business sell to consumers and channels in China.

About the Administration

The State Administration for Market Regulation (SAMR) 国家市场监督管理总局 is the People’s Republic of China’s governmental authority for regulating areas such as market competition, monopolies, intellectual property, and drug safety. The Administration was created in 2018 when the Chinese government as part of its reform has merged or phased out a number of previous agencies to effectively streamline trade and reduce administrative burden to business.

The Administration consolidates in one ministry-level agency the market regulation functions previously shared by three separate ministries, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the China Food and Drug Administration (CFDA), and the State Administration of Industry and Commerce (SAIC). The National Medical Products Administration (NMPA), whose function was previously the responsibility of CFDA, is now a vice ministry-level agency under the SAMR. NMAP is dedicated to supervision on the safety of medical devices, pharmaceuticals, drugs, and cosmetics.

Source: 国家市场监督管理总局 / State Administration for Market Regulation (SAMR)