How China has been clamping down on big tech empires

China’s new antitrust guidelines, which it released in February, are aimed at clamping down on the “monopolistic behaviors” of the country’s big tech firms, tightening the government’s grip on the internet space.

At the same time, the increasing efforts to regulate the opaque private equity space mean the environment is even more precarious for tech companies and investors.

Photo credit: BP Miller on Unsplash

Around the world, the internet sector is generally becoming more regulated. But in China, the impact is imminent.

Past investment deals of companies including Alibaba and Tencent are under an antitrust probe. With the rising scrutiny in China, perhaps neighboring Southeast Asia could benefit from having a more lenient environment.

War on tech monopolies

The fight against these tech firms has been a long time coming.

China established the State Administration for Market Regulation (SAMR) – the regulator for market competition, monopolies, intellectual property, and drug safety – in March 2018. The move was a significant change to China’s antitrust enforcement since the anti-monopoly regulation came into force a decade prior.

But at the end of last year, the iron fist came down hard.

In November, SAMR released a draft of the antitrust guidelines targeting the platform economy. The move led the stock value of many listed tech companies to plummet.

In the same month, regulators halted Ant Group’s planned dual listing in Shanghai and Hong Kong.

But more regulatory actions soon followed. In December, SAMR issued fines to Alibaba and affiliates of Tencent and logistics giant SF Express over three separate acquisition deals in what was said to be the first wave of antitrust law enforcement.

In February this year, China formalized the draft laws, banning internet platforms from forcing merchants into exclusivity deals, offering different prices based on user data, and using algorithms to manipulate the market.

The sweeping clampdown affected companies across several sectors, including ecommerce, video-streaming, fintech, and logistics.

The screws are not only tightening on tech firms but also on the private equity space. In January, Chinese regulators issued 14 new measures to bolster transparency in the traditionally opaque 54segment. Large private equity firms have also been ordered not to raise funds from retail investors.

Timeline: Companies under increased regulatory scrutiny

A warning

Spillover effect?