Authors 丨 Guo Meiting, Wu Liyang, Zhu Huiyi
Editor 丨 Li Runzezi
Figure Source 丨 Figure worm
Recently, the U.S. Senate Judiciary Committee passed the American Innovation and Choice Online Act (hereinafter referred to as the Innovation and Choice Act) by a vote of 16 in favor of 6 against. At the same time, another bill, the Open App Markets Act, is also under discussion.
Experts interviewed said that the two bills in the United States are of great significance to protect small and medium-sized enterprises, protect consumers' fair choice rights, and restore distorted competition in digital markets. Nowadays, through legislative innovation, it has become the global norm to improve the regulatory legitimacy and legitimacy of the leading operators of new formats. For the mainland, it can find an Internet governance path suitable for the mainland by observing and learning from the practices of jurisdictions such as Europe and the United States, combined with China's actual conditions.
Follow-up to the Digital Market Competition Survey Report
The Innovation and Choice Act, introduced in October 2021 by a democratic and Republican senator, aims to prohibit big tech companies from abusing their market positions to harm competition and innovation dynamics. On January 20 this year, the bill was passed by 16 votes to 6 on the Senate Judiciary Committee and will officially enter the Senate voting stage.
Another bill against tech giants, also introduced by lawmakers from both parties last August, the Open App Market Act, is also under discussion.
"These two bills are a follow-up to the U.S. House Judiciary Committee's Antitrust Subcommittee's publication of the Digital Market Competition Investigation Report." Deng Zhisong, a senior partner at Dentons, told the 21st Century Business Herald.
The 449-page Digital Market Competition Survey explicitly focuses on GAFAs — Google, Apple, Facebook (now renamed Meta) and Amazon. The report, which lasted 16 months, summarizes the basic characteristics of competition in the digital market, points out the problems, and makes a series of suggestions for reforming regulatory measures and promoting competition in the digital market.
Deng Zhisong said that the provisions of the two bills correspond to the results of the investigation report, targeting the technology giants, regulating their discriminatory self-preferential behavior and ensuring fair competition in the digital market. As "new solutions" specifically aimed at platform monopolies, the two bills may play an important role in preventing the "tipping" trend of the digital market, protecting small and medium-sized enterprises, ensuring consumers' fair choice rights, and restoring distorted competition in digital markets.
Wang Xinrui, a partner at Shihui Law Firm, also believes that unfair behavior carried out by super-large platforms is widespread, and existing anti-monopoly tools generally face the risk of failure. The two bills directly refer to the core model and commercial interests of platform enterprises, and in order to compensate for the failure of anti-monopoly tools, they set new obligations for platforms to prohibit advantageous platforms from harming the competition of small businesses, entrepreneurs and consumers.
Chen Bing, professor at Nankai University Law School, director of the Competition Law Research Center, and special researcher of the Institute of New Generation Artificial Intelligence Development Strategy, placed the Innovation and Choice Act and the Open Applied Market Act into the US judicial-led market competition governance system for observation, believing that these two bills are still based on their antitrust laws of the antitrust system, and their original intention is to activate market innovation and competitiveness and restore the market competition environment.
However, considering that the United States, as a case law country, may not have the immediate effect of regulation as in the European Union or China, where administrative law enforcement agencies dominate competition enforcement. "Even if formally passed, these two bills will only provide a tool for the U.S. judiciary, but it remains to be seen whether they can have the desired effect on those they wish to regulate." Chen Bing said.
Focus on the app store area
Both the Innovation and Choice Act and the Open App Market Act prevent certain dominant technology platforms from favoring their own products or services, but their scope and focus are different.
The Open App Market Act, which regulates companies that operate app stores with more than 50 million users in the United States, such as Apple and Google, focuses on encouraging competition in the app distribution market, creating effective competitive restrictions on the collection of "Apple tax" and "Google tax".
The accusations against the monopoly of Apple and Google's App Store have a long history. In 2020, the well-known game developer Epic Games's "unveiling" was eye-catching, and although the current verdict did not force Apple to open up payment channels outside the App Store, the momentum of the anti-tech giant monopoly did not weaken. Regulators in various countries are also paying close attention to this, and at present, many countries and regions, including the European Union, India, Japan, the Netherlands and other countries and regions, have filed lawsuits against Apple or Google on related issues. South Korea has previously directly enacted legislation to regulate the payment settlement method of platform application stores.
The Open App Marketplace Act requires app stores not to mandate developers to use in-app payment systems, allows developers to promote commercial offers (e.g., pricing terms, products or services) to users outside the platform, and allows users to download apps directly from outside the app store.
In Deng Zhisong's view, this move will directly impact the profit model established by Apple and Google based on their monopoly positions, giving app developers and other app store operators more space to participate in market competition. The bill has yet to pass a vote, but Apple and Google have made some compromises to avoid more difficult regulatory challenges ahead. Apple is reported to have reduced its rate from 30% to 15% for developers who make less than a million dollars on its platform, and Google has taken a similar approach.
It can be seen that the introduction of the relevant bills has a certain deterrent effect on platform monopoly behavior, and if it is officially passed in the future, law enforcement agencies will rely on more flexible and powerful law enforcement tools to severely stop the abuse of technology platforms." Enterprises themselves will also be forced by regulatory pressure to pay more attention to anti-monopoly compliance in business activities. Small and medium-sized technology enterprises will get more competitive opportunities, and the vitality of digital market competition will be further stimulated. Deng Zhisong said.
Zhongchun, an associate professor at Jinan University Law School, also predicted that related industries may usher in a favorable situation, taking the game and media industries that need to develop independent application software as an example, the bill prohibits app stores from implementing self-preferential treatment, which will be conducive to the establishment and promotion of their brands and market awareness, improve their own traffic, and accelerate innovation in the Internet industry.
Affected TikTok and Tencent
Deng Zhisong introduced that the focus of the Innovation and Choice Act is not limited to protecting the competition of the application distribution market, but to protect the development of various small and medium-sized technology enterprises and maintain the ecological balance of the entire digital market competition. For example, Google and Apple's App Store business will be directly regulated by the Open App Market Act, while its search engine services, intelligent voice assistant services, etc. will be regulated by the AOL Innovation and Choice Act, which prohibits better rankings of their products when searching. However, if both bills are formally adopted, they will only be different in terms of scope of influence and focus, and there is no difference in legal effect.
In response to the expansion of jurisdiction, Chen Bing analyzed that the US expansion bill includes more platforms, and behind it is the regulatory idea of global supervision. Platform supervision involves data, technology, copyright and other diversified issues, the Expansion of the Scope of Supervision in the United States will inevitably have an impact on the mainland's head platform enterprises involved in overseas business, and its judicial activities are also mixed with market-oriented activities to some extent, so Chinese enterprises need to increase the degree of attention to the field of compliance and do a good job in overseas market compliance construction according to local conditions.
The Open App Market Act and the Innovation and Choice Act have been controversial since their inception. In a letter to the Senate Judiciary Committee, Timothy Powderly, Apple's senior director of government affairs, wrote: "Given the risk of privacy and security breaches, these bills put consumers at risk. Apple and Google stressed that the bill will force them to take risky steps against user data, such as sharing data with other services or allowing users to download uncensored apps.
"The objections of Apple and Google are not without purpose." Deng Zhisong explained that according to the requirements of the two bills, platforms need to open up third-party download and payment paths and support interoperability for other third-party services, the former may cause global network security and privacy protection measures to fail to operate properly, and the latter may force platforms to provide users' personal information to third parties.
He mentioned that large platform enterprises do play a certain role in the mobile Internet ecology as the "gatekeeper" of network security and personal information. To solve privacy and security problems, on the one hand, we must do a good job in connecting the laws related to personal information and data protection and the laws related to platform governance, on the other hand, we must also rely on technological development, such as removing obstacles to data flow through technologies such as blockchain.
"The American Internet companies represented by Apple themselves take privacy protection as the core competitiveness of their products, and strong privacy as their global promotion 'moat'." Chen Bing believes that the key to the bill is not only to break its monopoly position, but more importantly, to shake the business logic foundation of the platform. From the perspective of the overall market competition pattern, for downstream application developers, strong privacy requirements invisibly raise industry standards and development costs, resulting in the Matthew effect of the strong Hengqiang, and even giving the platform the identity of a quasi-market regulator, which is not conducive to forming a good competitive environment in the long run.
Therefore, privacy protection and user security are certainly the focus of the industry, but how to prevent the head platform from using relevant thresholds for exclusive competition is also a key issue in compliance supervision that needs to be clarified in light of specific circumstances.
When global platform legislation is in progress
"At present, countries lack effective regulatory methods for the leading operators of new formats, so they all hope to improve the legitimacy and legitimacy of supervision through legislative innovation." Chen Bing said that providing a basis for supervision through the creation of normative documents has become the norm for countries to manage related emerging industries.
Coincidentally, at the same time that the Innovation and Choice Act was passed by the Senate Judiciary Committee, the European Union passed the Digital Services Act (DSA) to further strengthen the regulation of the operations of large Internet companies. Prior to this, the European Union's Internal Market and Consumer Protection Commission (IMCO) approved the Digital Markets Act (DMA). The bill opens the door to sideloading, requiring operating system platforms to open permissions to multiple app stores.
On the mainland, on January 5 this year, the State Internet Information Office solicited opinions from the public on the "Regulations on the Administration of Information Services for Mobile Internet Applications". The Provisions clearly propose that application platforms be included in the scope of supervision. The Ministry of Industry and Information Technology said that in 2022, it will achieve full regulatory coverage of app stores, third-party software development kits (SDKs), etc.
What is the reference value for mainland platform supervision?
Zhongchun believes that the comprehensive consideration of the two bills for the determination of illegality is worth learning. The two bills clarify the general principles and standards for determining the illegality of self-preferential behavior, comprehensively consider whether the behavior of the technology platform is a normal market commercial operation or an illegal means to harm market competition, and comprehensively consider the degree of abuse of the platform's dominant market position, the degree of user's dependence on the platform, and the competitive damage caused by the preferential treatment behavior in the process of determination.
At the same time, the bill does not blindly restrict the application of technology platforms, leaving room for development. If the preferential treatment provided by the technology platform to its own products is its own competitive advantage and reasonable use, and the restriction on third-party merchants is based on necessity, it should be considered legitimate.
However, Zhongchun also stressed that the two bills should be viewed rationally in light of China's actual conditions. Although the strong supervision of Internet technology platforms can restrict them from carrying out acts of unfair competition and protect the competitive environment, there are also certain drawbacks. First of all, the open sideload increases the difficulty of censoring third-party merchants on technology platforms, and it is difficult to play functions such as protecting user privacy in the application market, which is contrary to consumers' wishes. Secondly, it is difficult to require the technology platform to be completely neutral, and the bill will inhibit the innovation power of the technology platform to a certain extent.
"In recent years, both the EU and the United States have adopted the model of institutional innovation to regulate competition in the Internet field, and the two reflect different ideas in supervision. All along, in the supervision of Internet platforms, in the pre/post supervision, competition regulation / industry supervision, and behaviorism / structuralism, there have been many debates, we can observe and learn from the practices of Jurisdictions such as Europe and the United States, combined with the actual situation of the mainland, to find an Internet governance path suitable for the mainland. Deng Zhisong pointed out that in October last year, the State Administration for Market Regulation issued the Guidelines for the Classification and Grading of Internet Platforms (Draft for Comments) and the Guidelines for the Implementation of The Responsibility of Internet Platforms (Draft for Solicitation of Comments), which can be seen as in line with the innovative regulatory models in Europe and the United States.
"In addition, regulation also needs to pay attention to the balance of interests of all parties. Internet compliance supervision, especially for large platforms, often involves multiple interests, including large platform enterprises, application developers or retailers within the platform, small platform enterprises that directly compete with large platforms, and consumers, as well as multiple legal benefits such as fair competition and personal information protection. Deng Zhisong said.
Editor of this issue Wang Tingting Intern Lin Xiying
