Fine on Vipshop strengthens consumer protection

The State Administration for Market Regulation, China's top market regulator, has imposed a 3 million yuan ($464,000) fine on online discount retailer Vipshop on Monday for unfair competition.

The regulator said in an announcement that between August and December last year, the company developed and used an inspection system that obtained information about brands on its platforms and others to gain a competitive edge.

The Guangzhou, Guangdong province-based company embedded a certain technology in its software interface to influence user choices and block the sale of particular brands that limited transaction opportunities and channels of other retailers in the market, the announcement said.

Such behavior disrupted the order of normal market competition and constituted a breach of the Law of the People's Republic of China Against Unfair Competition, it added.

Vipshop said that it had no objections to the facts about its illegal conduct as stated in the regulator's findings. It assured that it will take immediate remedial measures and corrective action as required by the law.

The fine and related moves came a day after the Anti-Monopoly Committee of the State Council unveiled new guidelines on anti-monopoly actions tailored for the online platform economy, as the country strengthened scrutiny of key internet-based sectors to ensure healthy economic development.

"China's platform economy is thriving on the back of a faster-than-expected development of the internet sector. Though the sector saw widespread development, there was hardly any regulation (so far)," said Wang Peng, an associate professor of the Hillhouse Research Institute at the Renmin University of China in Beijing.

"Anticompetitive measures do not help companies to stand out. In the long term, they are expected to leverage product, content or technology to generate fresh growth engines," Wang said.

Song Jia, director of the machinery innovation center affiliated with the State-owned Assets Supervision and Administration Commission, said that anticompetitive measures are "not aimed at tripping over one leading firm but made for the overall development of the industry and for industrial innovation".

Sun Nanxiang, a researcher with the Institute of International Law, which is part of the Chinese Academy of Social Sciences in Beijing, said antitrust measures are a worldwide trend.

"For governments globally, the ultimate purpose (of such measures) is to leverage legal tools to restore fair and effective competition in the market to stimulate innovation and entrepreneurship and at the same time, maximize the protection of consumers' interests," he said.