China Curbs Algorithmic Pricing and E-Commerce Monopoly

China has introduced a comprehensive set of 29 articles designed to stop electronic commerce platforms from forcing merchants to offer specific discounts or using algorithms to set prices based on user data. These regulations were issued jointly by the National Development and Reform Commission, the State Administration for Market Regulation, and the Cyberspace Administration of China. According to SCMP, the new mandate against algorithmic pricing and platform monopoly, the regulation targets several long standing pain points that have eroded the rights of consumers and merchants.

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The rules prohibit platform operators from using their dominant market position to demand lowest price agreements from their partners. Furthermore, platforms are now banned from using traffic throttling or search ranking demotions as a way to pressure merchants into predatory price cutting or exclusive pricing arrangements.

The regulation also addresses the practice of charging different prices to different customers for the same goods or services based on their consumption habits or willingness to pay. Platforms are forbidden from using data or algorithms to implement such pricing strategies without obtaining explicit consent from the user first. This includes using information related to user preferences and the ability to pay to adjust the charging standards for various products.

To improve transparency for shoppers, the rules mandate that estimated prices must be clearly labelled alongside final settlement prices. This is intended to stop price traps where platforms display lower costs on homepages or other prominent locations that do not match the product detail pages. Any goods or services appearing in paid search rankings must now display the word advertisement in a prominent manner to avoid confusing the public.

These measures also cover services such as express checkout without inputting a password, bundled sales, and auto renewals. Such features will now require clear consumer consent and the provision of prominent cancellation options for every user. The new regulation is scheduled to come into full effect on the tenth of April next year. Expert analysis suggests that large platforms have frequently used their scale to demand that brands guarantee the lowest possible prices which has infringed on the operational autonomy of those businesses. Li Chengdong of the Dolphin consultancy noted that such practices have forced brands to create many different product variants with distinct model numbers across different platforms to manage the requirements. This fragmented approach has historically driven up the operational costs for merchants trying to survive in the digital marketplace.

The market regulator has recently warned that platforms demanding the lowest prices across the entire internet could face significant antitrust action. This follows draft guidelines that were issued in November to address the hidden risks of algorithm driven price manipulation. Authorities have intervened several times this year to address the vicious pricing strategies seen across various online platforms. By establishing these detailed compliance requirements, the government seeks to restore merchant autonomy and protect consumers from unfair algorithmic practices.