Regulating Competition in the Digital Platform Economy: Russia and China Compared

ABSTRACT

In many countries, the rapid evolution of digital platform technology has triggered significant shifts in competition law. Many have interpreted China’s recent moves as signaling a broader crackdown on private entrepreneurship. In Russia, even before the invasion of Ukraine, government policy became increasingly restrictive toward foreign internet platforms. This paper analyzes the development and enforcement of competition law in Russia and China. We show that both technologically driven changes in the ability of digital platform firms to exercise market power and changes in the external political environment affect the relative strength and coalitions of interested bureaucratic actors and influence policy outcomes.

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Notes

1. In the United States, early efforts to enforce rules of fair and free competition in the economy focused on the market power of giant financial and industrial trusts, such as J. P. Morgan’s steel, railroad, and shipping trusts, and Rockefeller’s Standard Oil Trust. As Senator John Sherman, author of the Sherman Anti-Trust Law, announced on the floor of the Senate in 1890, the law’s goal was to “prevent and control combinations made with a view to prevent competition, or for the restraint of trade, or to increase the profits of the producer at the cost of the consumer.” For historical reasons, therefore, American law targeting monopolistic conduct, including anticompetitive agreements and mergers restricting competition as well as the abuse of dominance, evolved around the concept of “antitrust.” As other countries followed the American lead, the term antitrust was sometimes used interchangeably with antimonopoly or competition law.

2. For example, in March 2022, Meta, which owns Facebook and Instagram, was declared an extremist organization.

3. For this reason, we are skeptical of the premise that in the era of the digital communications revolution, the strategies of autocracy have shifted from negative to positive control. Both were always part of the arsenal of communications control in communist regimes. Cf Guriev and Treisman 2020.

4. For example, in September 2021, Russia’s censorship agency, Roskomnadzor, warned Google and Apple of fines if they refused to remove from their app stores an app created by supporters of Aleksei Navalny encouraging voters to cast ballots against United Russia in the September 17, 2021, Duma elections. Roskomnadzor has also demanded that YouTube remove Navalny’s channel (Soldatov and Borogan 2021; Timberg, Dixon, and Albergotti 2021).

5. The list of changes and amendments under the 5th antitrust package is longer, and includes changing criteria for merger review and the introduction of the specific institution of trustee in merger review, among other things.

6. The safe harbor refers to exemption from competition law.

7. This type of critical assessment is not accidental. In fact, Russian competition enforcement is often concentrated on relatively small market participants. There are many explanations of this feature, including performance assessment and motivation of FAS.

8. The predecessor of the “weak anti-Apple” initiative is the rule on the preferential treatment of domestic software under public procurement (in force since January 2016).

9. Law 425–2019 introduces the following amendments to the law “On Consumer Protection”: “Under supply of technically complex goods with pre-installed applications the consumer should have the option to use pre-installed applications developed in Russia or in Eurasian economic union. The list of technically complex goods, list of applications to be-installed … is to be specified by RF Government.” The requirements for pre-installation are to come into force gradually. First, the list of apps for compulsory pre-installation took force on April 1, 2021. The list includes apps from relatively large digital companies in Russia—Yandex and Mail.ru—as well as public services and anti-virus apps.

10. See Article 21 in the draft of the amendment: http://www.samr.gov.cn/hd/zjdc/202001/t20200102_310120.html, accessed on September 3, 2021.

11. For example, a recent report by Xinhua News Agency indicates that Ant Group uses over 100 thousand indices, more than 100 prediction models, and over 3,000 risk management strategies to assess collateral-free loan applications from small and mid-size enterprises (http://www.xinhuanet.com/2020-04/23/c_1125892937.htm, accessed on April 28, 2021).

12. Among these were the Banking and Insurance Regulatory Commission, which regulates consumer financial services.

13. PBOC here refers to the Regulation on the Administration of Credit Investigation Industry, enacted in 2013.

14. “Choosing one of two” refers to the practice by Alibaba of forcing merchants to distribute their goods exclusively on a single platform.

Additional information

Funding

The author(s) reported there is no funding associated with the work featured in this article.