Chinese government aims to solve e-commerce anti-competitive practices

A few big companies dominate the Chinese e-commerce market currently. JingDong and Tmall/Taobao are the main players in the biggest e-commerce market in the world. Thus, it’s no surprise that companies looking to operate in China arrive at one of these giants. When you open an official shop on one of the platforms, you often have to agree to their terms. The terms prevent you from opening a shop on a competitor’s channel: the so called “choose one out of two” policy. Since there’s no law regarding this practice, it’s only natural that aforementioned companies implement these rules to boost their own market share. However, it looks like this will soon come to an end.

The Chinese government has issued a statement that they will combat the anti-competitor rules of the e-commerce giants. To maintain a fair competition in the market, the State Council has issued five policy measures to combat the anti-competitive practices by the e-commerce giants.

The five policy measures are summarized as follows:

• Optimize and improve market access conditions and reduce corporate compliance costs.
• Innovative supervision concepts and methods, implementation of inclusive and prudential supervision.
• Encourage the development of new platforms and accelerate the growth of new platforms.
• Optimize the platform economic environment and encourage the foundation of new business growth.
• Effectively protect the legitimate rights and interests of economic platform participants and strengthen the economic development for all platforms.

With the new policies it’s clear that the Chinese authorities want to boost competitiveness in the Chinese e-commerce market. Big companies like Alibaba and Tencent are often of such importance that they become so-called state-backed companies. This means that the companies receive government support, while the government has a certain degree of authority in the company’s decision. As a result, well-developed markets are often dominated by the state-backed companies. Despite this, it looks like the Chinese authorities wants to bring new players into the market. In other words, they are unhappy about the current oligopoly and want to boost new competitors such as PinDuoDuo and XiaoHongShu. It will be interesting to see where this leads the Chinese e-commerce market to in the future.