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China regulator warns e-commerce platforms to stop monopolistic practices

China regulator warns e-commerce platforms to stop monopolistic practices
FILE PHOTO: A logo of Alibaba Group is seen at the World Internet Conference (WIC) in Wuzhen, Zhejiang province, China, October 20, 2019. REUTERS/Aly Song -
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ALY SONG(Reuters)
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By Pei Li and Josh Horwitz

SHANGHAI (Reuters) – China has warned top e-commerce platforms including Alibaba <BABA.N> and JD.com <JD.O> to stop practices that could be deemed as monopolistic, as industry frictions grow ahead of the country’s banner Singles Day shopping event on Nov. 11.

State news agency Xinhua reported on Tuesday that China’s State Administration for Market Regulation (SAMR) called more than 20 platforms to a meeting and urged them to stop a practice that requires merchants to sign exclusive cooperation agreements preventing them from selling products on rival platforms.

The regulator’s move comes as Alibaba’s Tmall marketplace has in recent weeks been accused by a number of competitors and merchants of adopting such a practice, which is also known as “choosing one from two”.

Competition for shoppers among China’s top e-commerce platform has been heating up as the world’s second-largest economy grapples with a slowdown. Singles Day, the country’s biggest shopping event of the year, is also a very competitive event, with platforms rolling out various promotions.

“The SAMR’s relevant person in-charge pointed out that recently there have been some problems that have arisen as a result of activities among network operators,” Xinhua said.

“For example, platform competition is intensifying and the problem of the “choosing one from two” practice has emerged, which has attracted the concern of many parties,” it said, adding that the practice violated anti-monopoly and e-commerce laws.

Two units of JD.com filed a lawsuit in the Beijing high court against Alibaba’s Tmall demanding that the latter pay it compensation and apologise for using such agreements and abused its market dominance. Details of the case were made public by the court last month.

Local government-backed media outlet The Paper reported on Wednesday, without saying where it had obtained the information, that Chinese e-commerce platforms Pinduoduo (PDD) <PDD.O> and Vipshop Holdings <VIPS.N> had applied to the Beijing court to join JD.com’s case. All three companies are backed by Tencent Holdings <0700.HK>.

“We believe strongly in open, fair and legal competition, but not everyone in the industry agrees,” JD.com said in a written statement to Reuters.

“We believe that brands and consumers should be able to sell and shop where they want without interference and will continue to support the ability of brands to choose to sell on however many sites they want,” it said.

Vipshop and Pinduoduo declined to comment on whether they had applied to join JD.com’s lawsuit. PDD said “the e-commerce law has made it abundantly clear that monopolistic practices, particularly coercive exclusivity arrangements, are illegal.”

Alibaba and Tencent did not respond to requests for comment.

Alibaba is also the target of a separate lawsuit filed by Chinese home appliance manufacturer Galanz, which on Tuesday said its case had been accepted by a court in the southern province of Guangdong. Galanz says it was penalized by Alibaba after it refused to stop selling its goods on Pinduoduo.

(Writing by Brenda Goh; Editing by Simon Cameron-Moore)

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