A New Anti-trust Era in the EU & China
Please note that this is a courtesy translation of the Italian language article originally published in the Panorama Magazine Issue at: https://www.panorama.it/economia/la-nuova-era-dellantitrust-in-cina
As regulators around the world seek updated rules on how to oversee competition in the digital sector, both China & the EU are on the brink of formally approving amendments and new legislation to tackle this emerging industry.
In the EU, The Digital Markets Act (DMA) will impose a stringent regulatory regime on large online platforms (gatekeepers) and give the European Commission new enforcement powers, including an ability to impose severe fines and remedies for noncompliance. Additionally, on the 24th of June 2022, China’s amended Anti-monopoly Law (AML) was adopted (after more than two years in the making), taking effect on 1st August 2022. The AML is a notable landmark as it is the first amendment since the original law was introduced 14 years ago (China's first comprehensive competition law) but more significantly, clearly updates the law in consideration of the country’s tech giants and their increasing power in the marketplace.
Within this new anti-trust era, how are authorities pursuing anti-competitive behaviour by tech companies, while also modernising the approach to anti-trust law?
Modernisation of anti-competition in China’s digital economy
With the digital economy a significant driving force in China's future development, the new AML pays particular attention to preventing anti-competitive practices by digital platforms. The original AML was in force for well over a decade, during which time certain gaps developed as digital platforms evolved and technology giants emerged within the Chinese marketplace.
In order to protect competition and consumers in relation to data and algorithms, technology, and platforms, it has been necessary to create distinct rules to avoid and prevent abusive conduct by dominant companies. In recent years, China’s anti-monopoly authority has already carried out several investigations into the practices of large domestic platforms, such as Alibaba (Chinese multinational technology company specializing in e-commerce, retail, Internet, and technology) for implementing an exclusivity agreements with merchants, Tencent for failing to properly report certain deals, (Chinese multinational technology conglomerate holding company, best known as developer of social media app Wechat) and Meituan (Chinese shopping platform for locally found consumer products and retail services) for leveraging merchants’ deposits, algorithms and data.
Instead of completely overhauling the law in this area, the AML adds to the pre-existing standards for determining “dominance” or an “abuse of a dominant market position”, with provisions specifically targeting conduct undertaken by digital economy businesses. For example, the AML features general principles prohibiting companies, regardless of whether they are deemed “dominant”, from using data, algorithms, technology, capital advantages or platform rules to engage in anti-competitive conduct.
The law also specifies that a “dominant” firm can be found to have abused its dominant market position if it uses data, algorithms, technology or platform rules in a way that harms competition. This is an elegant means of updating the AML to account for modern practices of all companies, but most notably those within the digital sphere.
The EU’s Digital Markets Act
In comparison to the subtle approach of targeting China’s the giants within the AML, the Digital Markets Act is set to drastically revolutionize the way in which Big Tech is regulated in the EU.
The DMA establishes a wide range of obligations for so-called “gatekeepers” of core platform services in relation to data, advertising, e-commerce, interoperability and the commercial relationship between service providers, customers and end users. Gatekeepers is an assumed status of a company which provides a “core platform service” in at least three EU Member States and meets a number of quantitative criteria (including EU turnover of at least €7.5 billion or a market capitalization of at least €75 billion and 45 million monthly active end users and 10,000 yearly active business users in the EU). The likes of Google, Apple, Facebook, and Amazon would act as prime examples of gatekeepers.
Certain obligations and prohibitions limiting gatekeepers in the EU are quite similar to the provisions affecting digital platforms adhering to the AML in China, preventing a gatekeeper from using, in competition with business users, any data that is not publicly available and that is generated or provided by those business users in the context of their use of the relevant core platform services, including data generated or provided by the end users of those business users.
In relation to mergers, The DMA will also require gatekeepers to inform the EU Commission of all intended acquisitions of tech companies or any transactions that enable the collection of data, even mergers that would normally be below the threshold for review, such proposed mergers would be subject to greater scrutiny in the form of audits or reporting requirements.
This will allow the Commission to review the gatekeeper’s status & monitor broader contestability trends within the sector. In addition, such information will be relayed to national competition authorities (NCAs) within the EU member states, which allows NCAs to request the Commission to examine acquisitions under the EU Merger Regulation (EUMR) and further broadening the scope of regulation for Big Tech.
European Companies in China
With respect to anti-trust compliance, as the European Commission and the national competition authorities in all EU Member States cooperate with one other through the European Competition Network (ECN), The Compliance Working Group of the European Chamber of Commerce in China has outlined their hopes within the European Chamber of Commerce Position Paper 2021/22 that the Chinese Government, as a part of continuing efforts to provide increased transparency, could also engage in similar activities and learn best practices from other jurisdictions in order to help businesses operating in China combat the everchanging compliance challenges, not least within the digital economy.
Additionally, while the European Chamber of China’s Legal and Competition Working Group commends some of the notable changes now codified within the AML, it remains concerned that, in practice, certain policies create the potential for discrimination between domestic and foreign companies, with 36% of European companies outlining that they encounter unfavourable treatment in comparison to their domestic counterparts in the Chinese marketplace according the European Chamber’s Business Confidence Survey 2022.
The amended AML, among many notable other fresh aspects for anti-competitive behaviour in China (including increased liabilities for violations of the law and expanding the purview of China's antitrust authorities), indicates that scrutiny on the activity of large digital platform companies is here to stay, with prohibiting the use of technology to engage in monopolistic behaviour a clear signal to big tech.
It is, however, important to note that the AML functions as a foundation for a healthy competition regime,
Ensure that the AML is implemented and enforced equally among all companies, domestic and foreign, including in the area of merger control enforcement and conduct issues.with other regulations recently released by the SAMR providing more detailed implementation provisions, which will greatly assist in the enforcement of China’s anti-monopoly legislative framework in practice once all are in effect.
While in Europe, it has long been the consensus among EU institutions and politicians that competition law had not been effective in constraining big tech’s market power. Compliance with the DMA should go a long way towards addressing such concerns expressed by market participants in recent years, with the European Commission and national competition authorities provided with more teeth in anti-competitive practices across the trade bloc.
Both legislations impose a series of far-reaching obligations on large players within the digital economy, signaling a new era of digital regulation with material changes to the business models of the larger digital platforms required for compliance.