Platform Governance in China:

Antitrust Issues and Algorithmic Transparency

Huang-Chih Sung

 

ABSTRACT: The rise of the platform economy in the 21st century has also raised many legal issues, including anti-competitive practices. China’s competition law disputes stem from the fierce competition among e-commerce platforms, resulting in administrative sanctions against transaction platforms such as Alibaba and Meituan for abusing their market dominance due to the ‘choose one of two’ policy. I find two problems with the anti-monopoly decisions on transaction platforms in China. First, it seems unreasonable for the Alibaba decision to consider the business-to-customer and customer-to-customer models as the same relevant market, and for the Meituan decision to define the online food delivery platform service and the online food delivery service operated by food delivery companies as different relevant markets. Second, whether Alibaba’s and Meituan’s exclusionary conduct abused their market dominance and restricted market competition is still debatable, because the ‘choose one of two’ policy may not violate consumers’ rights to get better prices or services. From these cases, I conclude that algorithms are a controlling tool for transaction platforms to manage sellers on the platforms, so competition authorities should investigate whether platforms are using algorithms to treat sellers unfairly. There are calls from society for platforms to disclose their algorithms, but they often resist disclosing their algorithms to protect their trade secrets. This article suggests that platform governance policies can encourage companies to exercise self-discipline and to implement explainable artificial intelligence and AI audit systems to review the potential systemic risks of algorithms. This is likely to strike a balance between the platform’s algorithmic transparency obligations and the protection of trade secrets.