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China has tightened the noose around the country’s tech companies as lawmakers on Friday passed the amended anti-monopoly law which prescribes stiff penalties for violating Beijing’s rules of fair competition. The new China antitrust law will come into effect on August 1, 2022, a Xinhua News Agency report said.
This is the first change to the anti-monopoly law that came into effect in 2008. The new rules were in the making since 2018 and have been reflected in Beijing’s crackdown on tech giants over the past two years. The revised law improves rules related to the platform economy and concentration of operators.
“With the amendment, rules and systems related to anti-monopoly matters have been further improved. Notably, some revisions are based on international practice,” said Wang Xiang, an official with the NPC Standing Committee’s Legislative Affairs Commission.
Changes made to China antitrust law
Under the amended antitrust rules, China will establish and improve the review system for fair competition, while formulating and implementing competition rules compatible with a socialist economy. The law says that platform operators who have a clear market dominance will not abuse their position through data, algorithms, technologies, or platform rules.
Penalties for violators have been increased, with serious offences now demanding double to quintuple the normal amount. Market regulators and other government authorities may also seek criminal charges for major violations.
Companies failing to report mergers and acquisitions will now face significantly higher fines, whereas if the non-disclosure hurts competition, the penalty may go up to 10% of the previous year’s revenue.
Alibaba, Tencent, Baidu and Didi have been fined over the past two years for non-disclosure of certain acquisitions. Alibaba has paid $2.7 bn in fines for abusing its dominant position.
The new China antitrust law seeks to promote sustainable development of small and medium-sized enterprises, a move which fits the “common prosperity” initiative of Beijing.
In 2021, China’s State Administration for Market Regulation (SAMR) investigated and handled 175 monopoly cases, an increase of 61.5% year-on-year. Businesses in violation were fined a total of 23.59 bn yuan ($3.52 bn), up from 400 m yuan ($59 m) in 2020.
