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The Chinese approach to countering anti-competitive agreements and abuse of the dominant position of e-commerce platforms

Обновлено 21.02.2024 05:35

 

In 2020, due to the impact of the COVID-19 pandemic, there has been a steady increase in the volume of transactions made through e-commerce platforms. This has further led to the need to develop rules to protect competition in the digital environment. This article examines the experience of identifying the abuse of e-commerce platforms by the dominant position in the market of one of the world leaders in the field of digitalization - China. The author analyzes the provisions adopted in February 2021. The Antimonopoly Commission of the State Council of the People's Republic of China "Antimonopoly Guide to the platform economy". This document contains tools, the use of which allows you to determine the dominant position of the e-commerce platform in the market, as well as the conclusion of anti-competitive agreements using computer algorithms. In China, the ability of the platform operator to influence the market, sellers and buyers is used as the main feature to identify the dominant position of the platform. Based on the analysis of the Chinese experience, the article provides recommendations for the development of rules in Russia on antitrust regulation of e-commerce platforms.

 

Keywords: e-commerce, competition, electronic platform, monopoly, China, digital economy.

 

The COVID-19 pandemic and forced "self-isolation" have significantly increased the number of users of various electronic platforms and further contributed to the fact that many commercial processes have moved to the digital environment. As a result, those organizations whose business is connected to the Internet, not only did not suffer losses due to the pandemic, but on the contrary, they benefited. The classic format of providing services for the purchase and sale of goods is giving way to various online hypermarkets (aggregators) - E-bay, Taobao, Yandex.Market, etc., as well as platforms that combine many services, ranging from communication, ending with money transfers pages and stores, such as VK and in Russia. All of the above actualizes the issues of countering monopolization on the Internet and combating anti-competitive actions that are carried out by e-commerce platforms or with their help <1>. As indicated in a study by the Analytical Center under the Government of the Russian Federation, "the traditional approach, which is based on the current Russian legislation in the field of competition, does not always allow us to take into account the peculiarities of digital markets" <2>. Therefore, "digital platforms require special rules, including in terms of antimonopoly regulation" <3>. Currently, neither the Federal Law "On Protection of Competition" <4> nor the Order of the Federal Antimonopoly Service of Russia "On Approval of the Procedure for analyzing the state of competition in the commodity market" <5> contain provisions that take into account the results of the development of the digital economy. In this regard, it is of interest to study foreign experience in the antimonopoly regulation of online platforms, in particular the criteria used to determine the abuse of a dominant position by a platform.

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<1> Kasymov R.S. Control of monopolization in the digital economy // Competition law. 2019. N 4. pp. 27-30.

<2> Regulation of digital platforms - ensuring competition while maintaining incentives for development // Bulletin on the development of competition. 2020. N 32.

<3> Kartskhiya A.A. Digital technological (online) platforms: Russian and foreign regulatory experience // Civil law. 2019. No. 3. pp. 25-28.

<4> Federal Law No. 135-FZ of July 26, 2006 "On Protection of Competition" (as amended on 02/17/2021).

<5> Decree of the Government of the Russian Federation of April 28, 2010 No. 220 (as amended on 03/12/2020) "On approval of the procedure for holding a competition for compliance with the requirements of the legislation of the "market".

 

China is rightfully considered one of the world leaders in the field of electronic commerce and digitalization <6>. His senior political leadership places the development of e-commerce as one of the national priorities <7>. In 2019, the volume of e-commerce in this country reached 34.81 trillion yuan <8>. Chinese e-commerce companies such as Alibaba, Tmall, Voodoo, and Sunbathe are among the leaders in the field of online commerce and occupied about 44% of the global e-commerce market in 2020 <9>. Perhaps the Chinese mobile application WeChat reports that it is a desktop computer, which allows you to connect to the messenger network, a payment system, ordering goods and services, and much more.

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<6> Yu H., Panshin B.N. Features of the development of electronic commerce in China in the context of trends in the world economy // Trends in economic development in the XXI century: materials of the Second International Scientific Conference / edited by A.A. Korolev (chief editor) [et al.]. Minsk: Publishing House of BSU, 2020. Pp. 616-620.

<7> Xi Jinping. Managing China. Part III. Beijing: Publishing House in Foreign Languages, 2020. Page 546.

<8> E-commerce in China - statistics and facts.

<9> 44% Of Global E-Commerce Belongs To 4 Chinese Companies.

 

In order to regulate the activities of e-commerce participants, China adopted the Law "On E-Commerce" in 2018 <10>. He settled the responsibility of operators of e-commerce platforms; established their rights and obligations; determined the procedure for sellers who have placed their stores on e-commerce platforms with operators of such platforms and buyers; provided mechanisms for resolving disputes arising in connection with the activities of platforms and their participants. So, an analysis of the provisions of the Law of the People's Republic of China "On Electronic Commerce" concerning the duties of the operator of the e-commerce platform showed that "in China, aggregators are treated not as information resources, but as persons ensuring the functioning of the market" <11>.

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<10> No. 7 of the Law of the Republic of Kazakhstan "On Electronic Commerce" dated August 31, 2018.

<11> Alekseenko A.P. Regulation of the activities of electronic platforms under the Law of the People's Republic of China "On electronic commerce" // Lawyer. 2020. N 7. P. 66.

 

The Law of the People's Republic of China "On Electronic Commerce" also contains a significant number of provisions that stimulate competition. In particular, Articles 19, 40, 77 regulate the fair use of technology for search algorithms for goods and services hosted on platforms. Thus, the Law of the People's Republic of China "On Electronic Commerce" obliges to label search results, the issuance of which is paid for by the seller on the first lines. In addition, it is prohibited to generate search results based on the seller's access to information about the buyer's previous search queries, since this does not allow consumers to independently exercise their right to know and purchase the necessary goods <12>. It seems that "the consolidation of these requirements makes it possible to protect the rights and interests of consumers and prevent network platforms from using technologies, algorithms and user data obtained to violate rights and interests" <13>.

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<12> Zhang Linghan. Analytical expertise in the closed mode of "E-commerce" and its confirmation // Journal of the Beijing University of Informatics and Astronomy (Series: Joint Sciences). 2018. N 6. P. 19.

<13> Alekseenko A.P. Regulation of the use of search algorithms in accordance with the Law of the People's Republic of China "On Electronic Commerce" // Territory of new opportunities. Bulletin of Vladivostok State University. 2020. Vol. 12. N 2. P. 122.

 

Despite the existence of competition-protecting norms in the PRC's Law on E-Commerce, China continues to work to limit monopolism in the digital environment by establishing antitrust rules for e-commerce platforms. Thus, in February 2021, the Antimonopoly Commission of the State Council of the People's Republic of China issued the "Antimonopoly Guide to the Platform Economy" <14> (hereinafter referred to as the Guide), which clarifies the norms of the Law of the People's Republic of China "On Countering Monopolies" <15> and contributes to the implementation of its provisions in the platform economy <16>.

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<14> Antimonopoly Guidelines of the Antimonopoly Commission of the State Council on the Platform Economy dated February 7, 2021

<15> The Law of the People's Republic of China "On Countering Monopolies" dated July 30, 2007.

<16> Zhang Wei. The normative paradigm of duopoly for super-large digital platforms // Financial and Economic Law. 2021. N 1. P. 18.

 

The management pays great attention to the form of a monopoly agreement. This is due to the fact that currently e-commerce platforms can use computer algorithms that independently coordinate price changes and actually maintain a single pricing policy. According to the researchers, "monitoring market parameters to develop a pricing strategy using price algorithms may be a violation of antimonopoly legislation if such monitoring leads to parallel behavior (coordinated actions) competing business entities using the same price algorithm to calculate their own prices" <17>. Some foreign researchers have suggested that this new approach to the implementation of the cartel raises questions about whether the legislative framework allows to hold accountable for anti-competitive agreements or anti-competitive actions of persons who do not interact with each other and have no connection with each other <18>. The scientific works of Chinese scientists also explore the problems of algorithmic transparency and protection of intra-platform and inter-platform competition <19>.

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<17> Kozhina K.E., Artyushenko D.V. Price algorithms as a business tool: antimonopoly risks and issues of admissibility // Russian Competition Law and Economics. 2019. N 4. pp. 54-59.

<18> Legislation on digital competition in Europe: A brief guide.

<19> Wang Qinghua. Multiple aspects of algorithm transparency and algorithm accountability // Comparative Legal Studies. 2021. N 6. P. 163.

 

In Articles 5-7 of the Manual, the Chinese legislator provides clear answers to solve the problems that have arisen in the market as a result of the use of algorithmic technologies on e-commerce platforms. Thus, Article 5 of the regulatory legal act in question stipulates that an anti-competitive agreement is considered concluded if the platform operators have largely coordinated their behavior using data analysis, algorithms, platform rules or other means. According to art. 6. Algorithms that collect information such as price, sales volume, cost and customers allow you to enter into horizontal anti-competitive agreements or carry out coordinated actions that lead to price fixing, market segmentation, sales restrictions and difficulties in introducing new technologies (products) on the market. In addition, Article 7 of the Manual states that algorithms can be used to build vertical monopolies by automatically setting prices, direct or indirect price restrictions, and other trading conditions. Such types of vertical monopolies include, for example, a situation where platform operators require that an intra-platform business provide customers with trading conditions equal or better than those of other e-commerce platforms.

Thus, the Management provides the antimonopoly authority of the People's Republic of China with effective tools for recognizing actions that were not formally committed by legal entities, but were actually carried out using automated program code, as restrictive agreements (coordinated actions).

In order to stimulate the disclosure of anti-competitive agreements, the Management has fixed in Article 10 a "System of leniency", which allows to cancel or reduce the amount of the fine against participants in a horizontal monopolistic agreement who voluntarily stopped violating the law and cooperate with the antimonopoly authority. Such an approach, in cases where the antimonopoly authority does not have sufficient technical means, may serve, perhaps, as the only way to disclose anti-competitive agreements between electronic platforms.

Chapter III of the Manual is devoted to the specifics of identifying the abuse of e-commerce platform operators by their dominant position in the market. In particular, Article 11 of this regulatory legal act establishes a number of features that allow determining the dominant position of the platform: market share; the ability to control the market; the degree of dependence of other operators; financial and technical capabilities of the platform; freedom for other operators to enter the market.

Article 11 of the Guidelines also provides criteria that the antimonopoly authority should use when identifying signs of the dominant position of the platform. So, in order to determine the market share of the platform, according to the Guide, you should take into account the transaction amount, the number of transactions and sales, the number of active users, clicks, duration of use and other indicators. The financial and technical conditions of the platform are determined based on the size of its assets, profitability, intellectual property objects registered by it, and the ability of applications to analyze and collect data from customers and sellers. The ability of an e-commerce platform operator to control the market is determined by identifying the impact of the platform on the ability of other operators to attract customers, enter the relevant market, place an intra-platform business on their base, independently determine prices or other terms of transactions.

The list of the above criteria is not closed and can be expanded by the antimonopoly authority when considering a particular case. The approach used by the People's Republic of China significantly strengthens the positions of government agencies in the fight against platform monopolies, but most importantly, it creates benchmarks that allow modernizing methods for determining market boundaries. According to Russian experts, "for digital markets, it is the assessment of a company's ability to influence the market that should occupy a key place in establishing the fact of dominance" <20>. China is following exactly this path. Therefore, his experience can be recommended to the Federal Antimonopoly Service of Russia for studying and developing rules based on it for determining the dominant position of the e-commerce platform.

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<20> Regulation of digital platforms - ensuring competition while maintaining incentives for development // Bulletin on the development of competition. 2020. N 32.

 

Articles 12-16 of the Manual provide examples of abuse of e-commerce platforms by their dominant position in the market, as well as ways to identify these violations. In addition to such types of abuses as setting monopolistically high (low) prices, imposing unfavorable conditions on the counterparty, Management pays special attention to how platform operators can influence the restriction of transactions with counterparties.

It is known that in some cases, applications for their normal operation require users who have installed them to stop using competing programs. As the researchers note, "in concentrated markets with a network effect, platforms and service providers may seek to limit consumers' ability to change suppliers and the availability of alternative suppliers, creating friction and limiting the possibility of interaction between systems" <21>. In art . 15 of the Guide states that such requirements are a sign of abuse of a dominant position in the form of restrictions on consumer transactions and intra-platform business. The Antimonopoly Commission of the State Council of the People's Republic of China on the Platform Economy also provides other signs that may indicate that the counterparty's transactions are limited by the e-commerce platform. In particular, these include the requirements to conduct transactions using designated payment channels; actual restrictions on intra-platform business transactions through the use of algorithms that reduce the visibility of search queries for certain goods (services) for the consumer; blocking stores; traffic restrictions; technical obstacles to data access; increasing traffic, providing discounts or other benefits if the intra-platform business acts in the interests of the platform, etc. At the same time, the Guide provides examples of legitimate restrictions on transactions, such as the protection of intellectual property, trade secrets, personal data, consumer rights, etc. This approach allows the antimonopoly authority to distinguish market abuses from other actions.

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<21> Egorova M.A., Kozhevina O.V., Kinev A.Yu. Legal protection of competition in the conditions of emerging digital markets // Lex Russica (Russian Law). 2021. N 2. P. 43.

 

Thus, the PRC has developed clear criteria to help identify anti-competitive agreements and abuse of e-commerce platforms by dominating the market. The FAS of Russia, as well as the domestic legislator, can be recommended to take into account the experience of China when preparing regulations and legislation related to digital platforms. Therefore, first of all, it is necessary to consolidate the concept of an e-commerce platform. Secondly, when determining the dominant position of an e-commerce platform, its ability to influence the market should be taken into account. Thirdly, the restriction of intra-platform business traffic by the dominant e-commerce platform, its access to data and other restrictions affecting the possibility of concluding transactions, it is advisable to recognize as types of abuse of a dominant position in the market. Fourth, to determine that agreements restricting competition can be made without the direct participation of business entities, but only through their use of price algorithms.