China amends anti-monopoly law to tighten regulations on tech giants

Reuters file photo
Chinese President Xi Jinping speaks during the opening session of the 19th National Congress of the Communist Party of China at the Great Hall of the People in Beijing on Oct. 18, 2017.

BEIJING — The standing committee of China’s National People’s Congress has passed a bill to amend the anti-monopoly law that includes stiffer penalties for companies that violate the merger review process and tighter regulations on tech giants.

Under the revised law, the fine for failing to properly notify the antitrust authorities of a merger or acquisition will be increased from the current 500,000 yuan (about ¥10 million) or less to 10% or less of the previous year’s revenue.

The revised law, which will take effect on Aug. 1, is also likely to broaden the scope of screening of mergers.

Even mergers and acquisitions between foreign companies have to be checked by Chinese authorities if the firms have operation bases in China, which might affect Japanese companies.

In China, it is said that the authorities’ screening process is susceptible to the government.

China’s anti-monopoly law requires merger reviews to be concluded within 180 days, but there have been at least a dozen cases in which the process has exceeded the time frame.

If companies merge without filing an application, they could face hefty fines. Some people in Japanese business circles think the tech sector is the most likely target of the stiffer penalties.

Meanwhile, the tighter regulations on tech giants are believed to be aimed at homegrown companies such as Alibaba Group Holding Inc. and Tencent Holdings Ltd.

The amendment states that operators must not eliminate or restrict competition by abusing data, technology and platform rules, among other regulations.

The influence of tech giants is growing in China. The revision is believed to be motivated by a fear that the Communist Party might be losing its grip on such companies.

It is the first amendment to the antimonopoly law since it went into effect in 2008.