China Targets AI-Powered Price Manipulation with New Antitrust Guidelines

The State Administration for Market Regulation (SAMR) has proposed new anti-monopoly guidelines for online platforms, targeting risks from algorithm-driven price manipulation. The draft focuses on sophisticated methods platforms use to exploit technological advantages and harm consumer interests.

The "Anti-Monopoly Compliance Guidelines for Internet Platforms" were published over the weekend, addressing opaque ways online platforms with significant market power can exclude rivals. The document identified eight "new risks" associated with these technological exploitations.

These risks include collusion among platforms through coordinated algorithms to fix pricing and commission fees. Dominant players forcing merchants into exclusive contracts, excessive subsidies, or unjustified refusals to allow merchants to operate stores are also prohibited.

SAMR explicitly banned platforms with a dominant market position from "imposing application-layer or network-layer blockade or exclusion measures against transaction counterparties". This follows a period where Chinese internet companies previously built "walled gardens".

Examples of these "walled gardens" include Alibaba Group Holding's Taobao not offering Tencent Holdings' WeChat Pay, or WeChat not redirecting links from ByteDance's Douyin app. Restrictions on these practices began to ease last year.

SAMR now demands that platform operators "conduct targeted screening and dynamic monitoring of core algorithmic models, including pricing algorithms, recommendation systems, ranking, and advertising placement strategies". Regulators emphasised paying "particular attention to identifying discriminatory design, unfair transaction practices, excessive price adjustments, and uniform pricing promotions".

Public opinion on the draft regulation is being solicited up to Nov. 29.

Li Qiangzhi, an expert at the government-backed China Academy of Information and Communications Technology, stated that internet platforms commonly use algorithms to regulate traffic and pricing. Li noted that new big data and AI-powered technologies carry risks of misuse in "collusive communication, information exchange, and minimum price restriction".

He clarified that anti-monopoly measures do not oppose price competition, but rather go against excessive price competition. Earlier this year, China's top food delivery platform Meituan faced challenges from rivals JD.com and Alibaba, which were engaged in months-long price wars.

After SAMR's intervention, all three pledged in August to stop "irrational competition". Algorithm-driven price manipulation has also drawn scrutiny from the Cyberspace Administration of China.

In November, the internet watchdog urged platforms to address "typical issues with algorithms", including those creating "echo chambers" and inducing addiction. The Cyberspace Administration of China also called for crackdowns on unfair pricing and discounts targeting different demographics.

Since 2020, China's market regulator has initiated a regulatory storm targeting Big Tech's monopolistic practices. Alibaba, for example, was fined USD 2.8 billion for abusing its market dominance by forcing online merchants to open stores or participate in promotions on its platforms. Meituan received a fine of 3.4 billion yuan (USD 478 million) for a similar "picking one from two" strategy.

---

• China's SAMR has proposed new anti-monopoly guidelines to tackle AI-driven price manipulation on online platforms.

• The guidelines target "new risks" including algorithmic collusion, forced exclusive contracts, excessive subsidies, and blockades against rivals.

• Platform operators are required to monitor core algorithmic models for discriminatory design, unfair practices, and excessive price adjustments.

Source: SCMP