In China, technical controls have been stepped up with rules on unfair competition and critical data

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China on Tuesday tightened controls over its tech sector and released detailed rules aimed at tackling unfair competition and the way companies handle critical data.

Beijing has cemented its influence over internet platforms in recent months, citing the risk of abuse of market power to stifle competition, abuse of consumer information and violation of consumer rights, which has been reversed after years of a more laissez-faire approach.

It has imposed heavy fines on companies like e-commerce giant Alibaba Group and social media company Tencent Holdings as part of a widening raid, and promised to enact new laws on technology innovation and monopolies.

On Tuesday, the State Administration for Market Regulation (SAMR) published a series of draft regulations that prohibit unfair competition and restrict the use of user data.

Hong Kong-listed Internet stocks slipped after the rules were released. Video platform Bilibili fell 7.4 percent, while Tencent, Alibaba and grocery delivery company Meituan fell 4.1 percent, 4.2 percent and 2.6 percent, respectively.

“The specificity of the proposed regulations demonstrates the clear priorities in setting the ‘engagement rules’ for online competition,” said Michael Norris, research and strategy manager at Shanghai-based consultancy AgencyChina.

“If the regulations get published, they will likely increase the compliance burden on transactional platforms, including e-commerce marketplaces and shoppable short video apps.”

No kidnapping of traffic

Internet operators “may not implement or support unfair competition on the Internet, disrupt the order of market competition, impair fair transactions in the market,” wrote the State Market Authority (SAMR) in the draft, which is open to public feedback before it expires the deadline of September 15.

In particular, the regulator said, entrepreneurs should not use data or algorithms to hijack traffic or influence users’ decisions. You are also not allowed to use any technical means to unlawfully collect or use data from other entrepreneurs.

Companies would also be prevented from fabricating or disseminating misleading information to damage the reputation of competitors and would have to stop marketing practices such as fake reviews and coupons or “red envelopes” – monetary incentives – used to attract positive reviews.

Shortly after the publication of the draft technical rules, China’s cabinet announced that it would also implement regulations to protect critical information infrastructures from September 1.

The State Council said that all purchases of Internet products and services that could compromise national security should be subject to security screening by operators.

The Chinese government has also acquired stakes in the domestic companies of social media giants ByteDance and Weibo, Reuters reported Tuesday, citing company documents.

© Thomson Reuters 2021

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