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China targets big tech companies with new draft rules

China targets big tech companies with new draft rules
Shares of Chinese tech company stocks including Tencent dropped Tuesday after China’s antitrust arm said that it will ban unfair practices among Internet firms. File Photo by Stephen Shaver/UPI | License Photo

Aug. 17 (UPI) -- China disclosed a preliminary version of laws that it claims will prohibit unfair practices that have become increasingly common among China's leading Internet companies.

Beijing's State Administration for Market Regulation, the government's antitrust arm, said Tuesday that the objective of the new rules is to level the playing field for smaller Internet players who are at the mercy of tech giants like Alibaba and Tencent.

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The plan is being made known after a crackdown against China's big tech companies caused their share values to fall by billions of dollars this year, the Financial Times reported Tuesday.

The government body also has imposed heavy fines, including a $2.8 billion penalty against Alibaba, the e-commerce behemoth.

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Analysts, including Angela Zhang at the University of Hong Kong, say the legislation could be necessary amid allegations of false advertising, fake online reviews and big companies muscling out smaller competitors, the report said.

Li Chengdong, founder of a tech-focused think tank in Beijing, said that companies "using monopoly status to suppress small and medium businesses" are the target of the rules.

Other regulations would ban the use of algorithms to promote products and make illegal forced exclusivity arrangements, Al Jazeera reported Tuesday.

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The rules also are designed to prevent companies from using technology to interfere with the operation of competitor platforms.

The government has claimed it is enacting new measures to protect consumers. Tech companies in China have been charged with misusing consumer information and violating consumer rights in a freewheeling Internet economy, the report said.

Michael Norris, a research and strategy manager at Shanghai-based consultancy AgencyChina, said that the regulations will "likely increase compliance burdens for transaction platforms, including e-commerce marketplaces and shoppable short video apps."

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Shares in Hong Kong-listed stocks, including Tencent, Alibaba and a leading food delivery provider dropped several percentage points Tuesday after the announcement, according to reports.

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