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Beijing out to kill abuses by its tech giants

China data security
In the past 12 months, Alvarez and Marsal’s Disputes and Investigations Forensic Technology team has seen a 20% increase of engagements concerning cross-border disputes involving China. File photo: AFP.

(ATF) This week “Big data killing” has been a popular topic trending on China’s version of Twitter, and one of the latest targets was Meituan, a taxi-hailing software service that was accused of setting different prices for the same customers.

Recently, “big data killing” has been a subject of frequent internet searches. 

Experts pointed out to the Economic Daily that the government’s “Anti-Monopoly Guidelines on E-commerce Platforms” refine provisions of the Anti-Monopoly Law to regulate illegal activity on the internet and push large platforms to take more social responsibility. It is hoped these new modifications to the law will eradicate the chaos caused by companies’ malicious use of “big data”.

Consumer fightback

On December 17, an article titled “I was cut by a member of Meituan” was popular on social media. The author of this article discovered from his own experience of ordering takeaway food that the same store on Meituan charged different prices according to the service’s instructions.

This revelation led to a barrage of consumer complaints – Meituan getting “killed” online by multiple users.

After that, Meituan Food Delivery issued a statement that said the difference in delivery fees had nothing to do with big data, but was in fact an error due to the “location cache” in the software, which incorrectly used the customer’s last historical location. That resulted in a deviation from the user’s actual location and resulted in an incorrect estimated delivery fee.

The Economic Daily said consumer complaints about “big data” involved a lot more than just food delivery platforms. During the “Double 11” sales period last month, Beijing consumer Ms Han found that when she booked a hotel through an app – “at the same time, using different mobile phones” – the difference in the booking price it gave was about 1,000 yuan (US$153).

State media outlet CCTV started the trend that seeks to “kill big data frauds” by focusing on online travel platforms. And the phenomenon is spreading.

In March 2019, the Beijing Consumers Association released a survey on the issue of “big data familiarity”, which showed that 88% of respondents believed that the phenomenon of “big data” used by apps was common, and about 57% of respondents said they had experience of being “killed (ripped off) by big data”.

Respondents also said that online shopping platforms, online travel, and online car-hailing apps had the most problems. But it was online travel that topped the complaint list. So, this focus has lead to changes in China’s laws and regulations.

Sophisticated data gathered about users

Now that big data algorithms are becoming more and more advanced, information customization can meet people’s diverse and individual needs. Liu Peng, an expert in the field of big data and artificial intelligence, said that internet platforms can collect social data and behavioural data that creates an accurate portrait of netizens, thereby reducing the cost of acquiring information about users, improving the quality of service for them, “and adding convenience to life”.

According to Wang Wei, director of the Department of Information Security at Beijing Jiaotong University, there is no technical difficulty in using “big data” – the issues involved are more likely to be moral or ethical questions. He pointed out that after the platform has mastered users’ personal information, behavioural habits and other data, it judges its preferences, user stickiness, price sensitivity, other factors, and uses big data technology to achieve “thousands of people”, so that different users can see different prices while searching for the same thing.

Shen Hao, a professor at the Big Data Research Center of Communication University of China, had a similar view. He noted that internet platforms can easily work out if someone is a “raw customer” or a “regular customer” based on the amount of user data and the frequency of data updates. The usual result is that the platform makes a lot of money, the interests of businesses and consumers are damaged, and it is easy to lead to a monopoly-type situation.

According to Shen Hao, in general, there are two routines for platforms: one is to raise prices for users who are price-insensitive, and the other is to cultivate old users to develop consumption habits and reduce discounts to old users. “It’s better for new users than for old users.” The “new user” here not only refers to newly registered users, but also refers to users who have stopped using the app for a period of time then returned.

International moves

Judging from regulatory moves in Europe and America, acts such as “big data abuse” will be strictly prohibited once offences like price discrimination are identified as unfair activities.

In 1914, the United States passed the “Clayton Act” to clarify prohibited practices such as price discrimination, exclusive deals, and mergers and acquisitions that would severely weaken competition. Amazon was exposed to differential pricing in 2000, and the prices displayed before and after users deleted cookie data were different. Amazon CEO Bezos apologized later, saying it was “just an experiment.”

In May 2018, the EU’s General Data Protection Regulation came into effect, and the rights of internet organizations to freely collect, analyze and manage user information was strictly limited and supervised. 

And just last week, on December 15, 2020, the European Union announced its draft Digital Market Law. Hong Yanqing, a senior researcher at Peking University’s Institute of Rule of Law and Development, said that the “explanatory memorandum” part of the draft noted that a small number of large platforms are increasingly acting as gateways or “gatekeepers” between businesses and end users. These “gatekeepers” have substantial control over access to the digital market, and have lead to many corporate users to rely heavily on them, and in some cases this has led to unfair behaviour towards corporate users. 

Article 55 of the draft Chinese law stipulates clear requirements for the use of data by “gatekeepers”. To ensure that enterprise users can obtain relevant data, “gatekeepers” should allow users to obtain data for free without hindrance according to their requirements, and enterprises should also allow a third party contracted by the user to access this data. The “gatekeeper” should also adopt appropriate technical measures to facilitate real-time access to relevant data, it says.

At present in China, there are laws such as the E-Commerce Law and the Consumer Rights Protection Law that regulate the behavior of “big data”, but in fact, consumers often face a difficulty of providing proof if they encounter “big data” fraud.

In 2019, when the Beijing Consumers Association released the results of a survey on the issue of “big data,” it pointed out that operators usually defend themselves on the grounds of product model or configuration, enjoyment of package discounts, and different time points, and do not disclose the details of algorithms, rules and data.

Consumer rights protections often fail when they fall into the difficult situation of proof. Reporters inquired about the Judgment Documents website and found that consumers once brought a certain food delivery platform to the court on the grounds of “big data fraud”, but due to difficulty in producing evidence, they lost the case in both the first and second instances.

Anti-monopoly law is a sword for ‘killing big data’

In this context, China’s completed Anti-Monopoly Law (Revised Draft) and the Anti-Monopoly Guidelines that have just concluded soliciting opinions, bear the expectations of all parties in society.

Zhai Wei, executive director of the Competition Law Research Center of East China University of Political Science and Law, said the guidelines detail the relevant parts of the Anti-Monopoly Law to regulate internet platforms. Article 17 of the guidelines clearly states that operators of platforms with a dominant market position may implement differential transaction prices or other moves based on big data and algorithms, or the payment ability, consumption preferences, usage habits, or trading conditions, differential standards, rules, and payment terms and transaction methods.

At the same time, the Anti-Monopoly Law (Revised Draft) clarifies four legitimate reasons that operators of platforms economy may have for discriminatory treatment, according to the needs of the counterparty and in line with legitimate trading and industry practices. Different transaction conditions, preferential activities carried out within a reasonable period for the first transaction of new users, random transactions based on the platform’s fair, reasonable, and non-discriminatory rules, and other reasons that can prove the legitimacy of the behaviour.

Associate Professor Zhong Gang, executive director of the Competition Law Research Center of East China University of Political Science and Law, further explained that clear justification is not to give merchants an opportunity, but to follow market logic and maintain normal profitability for merchants. According to Zhong Gang, the legal procedure to determine whether the “big data acquaintance” is established will also give both parties the same right of proof.

Companies ‘should attach importance to antitrust compliance’

The internet’s powerful scale and network effect inherently excludes competition. But Xiong Hongru, an associate researcher of the Innovation and Development Research Department of the Development Research Center of the State Council, noted that “big is not a problem – what is wrong is the use of big to bully the small, algorithmic collusion, and even the governance risks within the platform”.

China’s Anti-Monopoly Law is designed to protect the rights and interests of consumers. Zhang Dezhi, director of the Consumer Supervision Department of the China Consumers Association, said: “I hope the Anti-Monopoly Law can be reinstalled after the revision and the introduction of the Anti-Monopoly Guidelines help to create a business atmosphere of fair competition and let consumers become real beneficiaries.”

Yu Zuo, secretary-general of the Competition Policy Committee of the Chinese Society of Industrial Economics, said abuse of market dominance by monopolistic enterprises and unreasonably high prices definitely damage the interests of consumers. But it was expected that in the future, law enforcement agencies will strengthen law enforcement in accordance with the revised Anti-Monopoly Law and Anti-Monopoly Guidelines, and strictly investigate “big data abuse” and other things such as price discrimination and abuse of dominant market positions, to allow fair competition in the market and product quality, to benefit the majority of consumers.

“The life of the law lies in its implementation. Administration according to law is a key link in the implementation of the law, and conscious compliance with the law is an important condition for the implementation of the law.”

Zhong Chun, an associate professor at Jinan University’s School of Law, said internet companies do not lack professional knowledge or talent. They should strive to comply with regulatory requirements in terms of antitrust compliance. With the market maturing and greater attention by regulatory authorities, the level of enforcement was likely improve quickly.

Lu Laiming, a professor at the Law School of Beijing Technology and Business University and vice president of the Beijing Electronic Commerce Law Research Association, suggested that “fines are not the only way. The administrative supervision department can also adopt interviews, guidance, to further supervise law modification.”

But to solve the chaos of “big data”, as well as improving laws and regulations and strengthening law enforcement, it was more important for companies to abide by laws and regulations, and be honest and self-disciplined, Lu said.

An official in charge of the Anti-Monopoly Bureau at the State Administration for Market Regulation said: “Internet platform companies should strictly abide by anti-monopoly laws and regulations, and maintain fair market competition.” He advised companies to sort out their own business activities in accordance with the provisions of the law and not engage in prohibited monopolistic behavior. 

Xue Jun, director of the Research Center for Electronic Commerce Law of Peking University, suggested that companies can establish a socialized review mechanism based on the scenarios in which algorithms are used and their impact on citizens’ basic rights and interests to avoid possible antitrust consequences of algorithms.

Only when the laws and regulations have “long teeth”, and supervision works to counter monopolies, and businesses act with self-discipline and social governance, can we get rid of the lingering threat of “big data abuse.”


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Chris Gill

With over 30 years reporting on China, Gill offers a daily digest of what is happening in the PRC.


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