China’s Warning to Big Tech: You’re Not Bulletproof

By Tim Culpan, Bloomberg

Antitrust is a relatively new concept in China and has been used most notably against foreign companies. Now, a draft update to China’s existing law puts local internet giants firmly in regulators’ sights. That should keep even the most ambitious executives from getting too big-headed as President Xi Jinping keeps power where it belongs — with the ruling Communist Party.

China’s first antitrust law was passed in 2007, a decade after the U.S. sued Microsoft Corp. over its then-dominant web browser and operating system in what remains one of the largest such cases in history. In 2009, local regulators blocked the Coca-Cola Co.’s $2.3 billion purchase of China Huiyuan Juice Group Ltd. Six years later, U.S. chip designer Qualcomm Inc. narrowly escaped being labeled a monopolist in the market for smartphone chips. It was fined $975 million and forced to lower the royalties it charged handset makers.

Today, big names like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. already attract government scrutiny because of their huge size and the role they play in China’s consumer, content and financial sectors. While Beijing’s policy of promoting competition is more than just window-dressing, broadening the anti-monopoly laws gives authorities another tool with which to keep them in line. Penalties could be stiff: up to 10% of a violator’s revenue from the previous year.

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