On Monday, China issued a new regulatory warning to its digital behemoths, instructing them to stop blocking one other’s connections on their websites or suffer repercussions. The internet in China is dominated by a few tech behemoths that have previously banned rivals’ links and services on their platforms.
“Restricting normal access to internet links without proper reason “affects the user experience, damages the rights of users, and disrupts market order.” Since launching an examination of industry practices in July, MIIT spokeswoman Zhao Zhiguo said the ministry has received reports and concerns from users.
“At present, we are guiding relevant companies to carry out self-examination and rectification,” he said, citing instant messaging platforms as one of the first areas they were targeting.
He didn’t say what the repercussions would be for firms that didn’t follow the new rules. The MIIT did not identify any businesses, but the 21st Century Business Herald daily said on Saturday that Alibaba Group Holding Ltd and Tencent Holdings Ltd were among the corporations instructed to stop doing so last week by an undisclosed deadline.
On Monday, shares of Alibaba Group and Tencent Holdings plummeted more than 6% and 3%, respectively, against a 3% drop in the Hang Seng Tech Index.
The MIIT has identified a prevalent practice.
Tencent’s instant messaging applications WeChat and QQ prohibit users from sharing material from ByteDance-owned short video service Douyin.
Douyin filed a case with a Beijing court in February, alleging monopolistic behavior. Tencent has dismissed the allegations as unfounded.
In some situations, Tencent’s payment service WeChat Pay is not accepted as a payment option on Alibaba’s Taobao and Tmall e-commerce platforms.
Tencent stated that it agreed with the MIIT’s recommendations and that it would implement the required modifications in stages. Alibaba stated that it would adhere to MIIT’s criteria and that it “is looking forward to establishing common ground with other platforms.”
Byte Dance said in a statement “called on all Internet platforms to take action, not make excuses, clarify timetables and actively implement them to provide users with a safe, reliable and convenient network.”
Michael Norris, research and strategy manager at Shanghai-based consultancy AgencyChina, said “Forced cracks in China’s walled gardens has the potential to re-write China’s digital advertising and e-commerce landscapes,” said
“In the short term, all eyes will be on Tencent as it comes to grips with what it means to open WeChat to Alibaba and ByteDance,” he said.
The MIIT also said on Monday that China had “too many” electric vehicle (EV) makers and the government would encourage consolidation.
(Reporting by Brenda Goh and Shen Yan; Additional reporting by Yingzhi Yang; Editing Ana Nicolaci da Costa and Edmund Blair)