Information Technology

China publishes draft internet regulations on unfair competition, user data

On Tuesday, regulators in China unveiled a lengthy set of proposed internet regulations. The new regulation prohibits unfair competition and restricting the use of user data. This comes after China signaled a further crackdown in the tech industry.

In recent months, Beijing has tightened its hold on online platforms, citing the risk of exploiting market dominance to stifle competition, misuse of users’ data, and violations of consumer rights. This is a turnaround from years of a laissez-faire policy.

Michael Norris, research and strategy manager at Shanghai-based consultancy AgencyChina told the following to Reuters:

The proposed regulations’ specificity evidences a clear set of priorities in setting the ‘rules of engagement’ for online competition. If promulgated, the regulations will likely increase compliance burdens for transaction platforms, including e-commerce marketplaces and shoppable short video apps.

Following the announcement, shares of Alibaba, Inc, and Baidu Inc all plummeted between 2.9 and 3.5 percent in premarket trade on the New York Stock Exchange. Futu Holdings, a Tencent-backed online brokerage, fell 7% and was among the most actively traded stocks on U.S. markets.

The New Regulation

As per a paper published on China’s State Administration for Market Regulation (SAMR) website, business operators should not use data, algorithms, or other technical means to hijack traffic or influence consumers’ choices. Further, they may not use utilize technical tools to illegally obtain or use the data of other businesses. Additionally, firms cannot use technological tools to maliciously erect incompatible obstacles to other legal internet products and services. The paper further mentions that third-party institutions may be recruited to audit data in cases of infractions.

The new draft is open for public feedback before a deadline of Sept 15.

Shortly after the publication of the draft tech rules China’s cabinet declared to begin implementing measures on protecting vital information infrastructure operators on September 1.

These measures are an elaboration of the Cybersecurity Law passed in 2017. As per the State Council, operators must conduct security inspections and risk assessments once a year. In addition to this, they should prioritize acquiring “secure and reputable network equipment and services.”

Recent Crackdowns

Recently, China has imposed anti-monopoly and data security regulations on tech behemoths and cracked down on education firms. China has blown up what would have been the world’s largest initial public offering, begun investigations into some of its greatest technological businesses, and wiped away more than $1 trillion in market value. The government has even initiated an investigation into US-listed firms, apart from drafting a new cybersecurity industry plan.

Further, in the crypto industry, the Chinese government has blocked crypto-related social media accounts, arrested people involved in money laundering via cryptocurrency. Fearing such negative treatment and crackdown, crypto-miners have already halted their businesses in China.

The Chinese government has also taken ownership stakes in the domestic entities of social media giants ByteDance and Weibo. Shares of China’s Twitter-like Weibo dropped 2.6%.

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Rajat Chawda

Rajat is a student at the Institute of Law, Nirma University. Since a young age, he was fascinated by the technological advancements and his fascination with gadgets has helped him develop a keen interest in TMT Laws in his journey as a law student. He is associated with Mylawrd to further engage himself and learn in this area.

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