Major tech stocks in China dipped Tuesday after regulators issued a new set of draft regulations aimed at curbing unfair business practices and the improper use of consumer data. The lengthy set of draft regulations is the latest move by the Chinese government to rein in the dominance of major tech companies.
The draft regulations included new rules governing the use of user data and the prohibition of unfair business practices that stifle competition. Over the past few months, China has been tightening its grip on tech giants such as Alibaba and Tencent, which have dominated the internet and e-commerce industries.
In recent months, regulators have slapped hefty fines and sanctions against several Chinese tech giants. In April, Alibaba was slapped with a record $2.5 billion fine for engaging in anti-competitive and monopolistic business practices. Regulators also derailed Tencent's plans to merge its two video game streaming companies on anti-competitive grounds.
The tech companies' stocks listed in Hong Kong plunged Tuesday after the publication of the new rules by the State Administration for Market Regulation. Video-streaming company Bilibili saw its stock price drop by more than 5%. Tencent's share had dipped by 3.5%, while Alibaba's stock decreased in value by 2.6%.
The SAMR stated in the draft regulations published on its website that internet companies will now be prohibited from engaging in practices that promote unfair competition online. They are also prohibited from "disrupting the order of market competition."
The specific restriction applies to the practice called "two-choose-one," where e-commerce companies bar merchants from listing their products on other platforms. Companies caught engaging in the practice will be subject to hefty fines once the new rules take effect.
The new regulations also prohibit companies from "fabricating or spreading misleading information." This includes the spread of misinformation to damage the reputation of competitors. Companies will also be barred from misleading marketing practices such as fake reviews and coupons to increase their own ratings.
Of the use of consumer data, the regulations prohibit internet companies from using "data or algorithms to hijack traffic or influence users' choices." This includes using internet tools to capture users' and competitors' data illegally.