On Monday, China’s State Administration for Market Regulation announced that it had imposed a fine on Alibaba, China Literate (Tencent’s online reading affiliate) and Hive Box (affiliate of SF Express) for violating anti-trust regulations.

Each of the three failed to seek clearance prior to an acquisition that could result in market concentration. Each was fined CNY500,000 (US$76.3k) for the violation.

A tiny sum for the size of any of these companies, indeed. In addition, the watchdog would not seek to revert the acquisition – essentially closing the case.

There are different interpretations of how significant this would be. While many are arguing that this sends a strong signal to the market (which we agree), and that it marks the end of an era that platforms could amass power unchecked, we tend to hold the belief this is a positive for the market, as well as for the players.

As you can see from the recent community groupbuy craze, many big players probably felt compelled to join the battle, otherwise it would cede ground (and potentially lose out) to competitors who were also moving into that space.

Yes, successful internet companies in China are as paranoid as they are battle hardened. Many of their activities are defensive rather than offensive, but achieving both at the same time.

The same mentality caused bike sharing companies to dump too many bikes on the street; the same which caused licensed Chinese payday loan businesses in Indonesia to launch an illegal/unlicensed affiliate.

When rules are not imposed and enforced from the regulators or other authorities, companies would need to play offence to defend.

The recent Anti-Monopoly draft regulation is a step towards putting the market in order – and they are necessary.

When the tech giants are willingly, and deliberately, challenging the spirit of the legislation, now enforcers have the legal tools to fight back.

However, the very existence of this regulation should give companies a more certainty that their competitors are kept on the level playing field. So they do not have to overreact and be overly paranoid – they can just focus on building the current businesses, well.

 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.