The Seven Deadly Sins of the Internet Industry

Takeaway platforms, travel platforms, e-commerce platforms, etc. have sprung up, bringing convenience to people's food, clothing, housing and transportation, while individual platform companies abuse their market dominance, force the implementation of "two alternatives one", "big data killing" cases emerge in an endless stream, and the problems are prominent.

In April this year, the State Administration for Market Regulation issued a large fine of 18.228 billion yuan for Ali's "two-choice one" monopoly behavior, and Meituan and Ele.me were also punished for unfair competition.

The "two alternatives" of major platforms have constituted the abuse of market dominance to limit transactions, which may lead to and exacerbate the risk of data monopoly, build market barriers, squeeze the profit margins of small and medium-sized businesses, and fundamentally subvert the order and situation of market competition.

The 24 Internet anti-monopoly law enforcement cases announced in 2020 cover almost all large Internet enterprises in China.

In addition, the pricing mechanism of the travel platform still needs to be regulated, and the Xinhua News Agency survey revealed the "dynamic pricing" mechanism of the online ride-hailing platform, which takes more than 20% of the fare, sometimes as high as 50%.

The phenomenon of disorderly expansion of capital in the Internet field is prominent. Unlike the Investment Layout of the Internet Giants in the United States, which mainly focuses on the core business, Chinese enterprises mainly expand their business territory on a large scale through cross-border penetration of capital, which is very easy to cause disorderly development and expansion in popular fields.

Taking community group buying as an example, under the catalysis of the epidemic, community group buying has quickly gained a large amount of capital favor, and a number of Internet giants have entered the market to seize market share in the form of burning money subsidies, and the total financing of community group purchase platforms in 2020 has exceeded 2 billion US dollars.

The excessive concentration of capital has disrupted the otherwise benign and orderly market competition environment and harmed social interests.

On the one hand, it breaks the boundaries between online and offline and impacts the real economy. There is a certain cycle and regularity in the traditional online penetration and transformation of offline fields, for example, e-commerce plays a role in supplementing the market for physical retail, rather than completely replacing, but capital promotes the Internet to focus on the field of people's livelihood such as grocery shopping and education, breaking the original online and offline development model, which will cause social problems and impact the real economy.

On the other hand, it inhibits the sustained and healthy development of the industry. The strong pursuit of profits by capital in the short term will inhibit or stifle technological innovation and form a monopoly, and most of the existing laws and regulations are based on the traditional model, and the rapid expansion and penetration of Internet capital lack effective supervision, forming a "vacuum period" and affecting industry innovation and sustainable development.

Platform violations infringe on the rights and interests of users occur from time to time. The profit model of China's Internet industry has changed from online advertising to targeted push and precision marketing based on big data. The cost of enterprise violations is low, and violations of user rights and interests occur from time to time, among which mobile APP collects personal information in violation of profit and infringes on user rights and interests is prominent.

The total number of APP on the shelves in China has exceeded 3.5 million, and the huge number of APP, frequent iterations of versions, and rich application scenarios have brought severe challenges to APP governance methods such as supervision, inspection and disposal.

At the same time, the "gray and black industry" has accelerated the collection and use of personal information in violation of the law and even illegally bought and sold. In April, the Ministry of Industry and Information Technology informed the public of the list of 93 APP companies that infringed on the rights and interests of users, among which the illegal collection of personal information, compulsory, frequent, excessive request for authority, deception and inducement of users to provide personal information, etc. were more serious, and the work of APP rectification and purification had a long way to go.

At the same time, China's protection of consumer rights and interests in the Internet environment mainly relies on the "Consumer Rights and Interests Protection Law" and "Online Transaction Management Measures", but due to the complexity of Internet consumption behavior, users still face problems including false promotions, overlord clauses, online counterfeiting, online fraud, and difficulty in returning goods in the process of consumption, and the legitimate rights and interests of users are greatly damaged.

The social security of workers in new formats represented by online ride-hailing drivers and delivery workers is not yet perfect. According to the "China Sharing Economy Development Report (2020)", there are 6.23 million employees in platform enterprises in the form of new formats, and the number of jobs driven by the platform is about 78 million.

The corresponding social security mechanism that followed could not meet the new type of labor relations. Some Internet platforms require workers to register as "individual industrial and commercial households", the two sides seem to be "cooperation", but in fact, it is still an employment behavior, for example, the number of riders on the takeaway platform has reached tens of millions, and the platform is outsourced and has no direct labor relationship, it is difficult to meet the insurance conditions of the current work injury security system, coupled with the problems of overwork and accident compensation, and the right to remedy is also restricted. This chaos has affected the protection and realization of a series of workers' rights such as social security contributions, labor protection, education and training, working hours, rest and leave.

Transparency in workers leads to difficulties in the industry. Conventional labor relations and new formats based on Internet platforms are very prone to the phenomenon of "inner volume" of algorithms, which leads to problems such as overwork of workers, high proportion of platform commissions, non-open and transparent distribution mechanisms, and arbitrary adjustment of pricing rules, infringing on the legitimate rights and interests of employees.

In order to obtain higher market share and operating income, some platforms will use big data and algorithm analysis to drive workers to increase working hours, such as commissioning, intelligent scheduling, and inducing incentives, while occupying an absolute advantage in pricing power and income distribution, this mechanism has a large information asymmetry, it is difficult for the outside world to evaluate the rationality of the platform, which may lead to a doubling of the work pressure of workers, coupled with the lack of safety guarantees, and the new format has begun to have a dilemma.

Source: China Academy of Information and Communications Technology, White Paper on the Development of China's Digital Economy