Cut off the Taobao and Jingdong e-commerce links, Kuaishou needs to face three major cross-examinations

On February 22, 2022, Kuaishou issued an announcement announcing that due to the change of the cooperation agreement between the third-party e-commerce platform and Kuaishou, from March 1, Taobao Alliance commodity links will not be able to publish product and service links in Kuaishou live shopping carts, short video shopping carts, product detail pages, etc.; Jingdong Alliance product links will not be able to publish product and service links in the shopping cart between Kuaishou live broadcasts, and can publish product and service links in short video shopping carts, product detail pages, etc.

Is Kuaishou's "broken chain" a legitimate business act, or is it an act that exceeds the necessary limits and is suspected of excluding and restricting competition? Internet Law Review invited special expert Tan Yuan to analyze from a legal perspective.

In the context of the current regulatory authorities to promote "interconnection", Kuaishou's behavior of cutting off external links is particularly prominent. Because Kuaishou refuses to display the links of Taobao and Jingdong products in the Kuaishou live broadcast room, etc., it is essentially a refusal to trade.

Generally speaking, whether or not to carry out transactions with the transaction counterpart is a kind of business freedom enjoyed by the operator, and the operator cannot be forced to carry out transactions with the transaction counterpart.

However, in some special circumstances, the operator's freedom to operate will be restricted and he will be obliged to conduct transactions with the counterparty.

The most typical is the public utility enterprises in the field of natural monopoly, such as electricity and gas companies, and then the operators with market dominance in the field of competition.

In both cases, if the operator does not start a transaction with the counterparty, the counterparty will not be able to obtain basic services or will be forced to withdraw from the market.

Kuaishou is clearly not a utility company, and whether it has a dominant market position also involves a very complicated determination.

However, only a basic understanding of China's Internet digital market can be drawn to a relatively safe preliminary conclusion, that is, Kuaishou does not have a dominant market position in the e-commerce market, and even in the short video market, Kuaishou does not have a dominant market position.

However, this does not mean that Kuaishou cutting off Taobao and JD.com's external links is a completely legitimate business practice.

The author believes that kuaishou's "broken chain" must at least face three major questions from the outside world.

I. Are you taking advantage of your dominant position and suspected of engaging in self-preferential behavior?

Although self-preferential treatment is not an independent monopolistic behavior, the United States, the European Union and other jurisdictions have expressed greater competitive concerns about the self-preferential behavior engaged in by platform enterprises. The mainland is no exception.

On 29 October 2021, the State Administration for Market Regulation issued the Guidelines for the Classification and Grading of Internet Platforms (Draft for Solicitation of Comments) and the Guidelines for the Implementation of Entity Responsibilities of Internet Platforms (Draft for Solicitation of Comments), drafted by the Department of Online Transaction Supervision, in which Article 2 of the Guidelines for the Implementation of Entity Responsibilities of Internet Platforms (Draft for Solicitation of Comments) clearly stipulates: "Operators of super-large platforms shall abide by the principles of fairness and non-discrimination. When providing relevant products or services, treat the platform itself (or affiliated enterprises) and the operators within the platform equally, and do not implement self-preferential treatment. ”

According to the Guidelines for the Classification and Grading of Internet Platforms (Draft for Comments), Kuaishou has at least met the criteria of large platform operators, that is, the annual active users in China in the previous year are not less than 50 million, with outstanding platform main business, the market value (valuation) at the end of the previous year is not less than 100 billion yuan, and has a strong ability to restrict merchants from contacting consumers (users).

The latest operating data of Kuaishou shows that in the third quarter of 2021, Kuaishou's monthly active users reached 570 million, and normally, the annual active users in 2021 will definitely be much higher than 50 million; Kuaishou has a prominent platform main business, that is, short videos; at the end of 2021, Kuaishou's market value exceeded 200 billion yuan.

Judging from the above data, Kuaishou has a high market share in the short video market and has a strong ability to restrict merchants' access to consumers.

Although the above two guidelines are still only drafts for comment, they still have great reference significance. The reason why Kuaishou wants to cut off the link between Taobao and JD.com is mainly to develop its own e-commerce business and use its dominant position in the short video market to give self-preferential treatment.

2. Will it harm the legitimate interests of third-party merchants?

Kuaishou was originally just a pure short video platform, and then entered the e-commerce industry to achieve huge traffic monetization.

In the case that the e-commerce market has been occupied by Taobao, JD.com, etc., Kuaishou initially chose to open up with Taobao and other platforms, allowing anchors on the Kuaishou platform to display goods on Taobao and other platforms in live broadcasts, short videos, etc. From this point of view, cutting into the e-commerce market will not compete with existing e-commerce platforms such as Taobao, but also be able to drain Taobao and other e-commerce, and Kuaishou has also realized traffic monetization, and consumers can also understand the goods more intuitively.

In the above-mentioned "win-win" situation, Kuaishou and Taobao and other traditional e-commerce platforms complement each other, Kuaishou promotes the sales of goods such as Taobao, and Taobao and so on can also have a positive feedback effect on Kuaishou live broadcast and short video, that is, the part of the consumers who shop by watching live broadcasts and short videos stay on the Kuaishou platform. Borrowing a ship to go to sea, so that Kuaishou's market share in the e-commerce live broadcast market is also getting higher and higher.

In this case, Kuaishou kicked away the operators who had objectively helped Taobao, JD.com and other operators to enter the e-commerce industry, which was inevitably suspected of "crossing the river and demolishing the bridge".

Assuming that Kuaishou did not have access to Taobao, Jingdong, etc. from the beginning, but independently developed its own e-commerce business, in the case of Kuaishou's development to today's scale, Taobao, Jingdong and other requests to access Kuaishou's live broadcast room, etc., then Kuaishou naturally has a reason to refuse, because it does not have the obligation to trade with other competitors.

However, the actual situation is the opposite, Kuaishou at first chose to start a transaction with Taobao, Jingdong, etc., and now refuses to continue to trade with Taobao, Jingdong, etc. in order to develop its own business.

Whether there was a transaction relationship before is of great significance for judging whether the refusal of the party who refuses to trade is legitimate.

In Aspen Highlands Skiing Corp. v. Aspen Skiing Co., the defendant's prior partnership with the plaintiff and the defendant's termination of such cooperation with the plaintiff had had an important impact on the U.S. Supreme Court's determination that the defendant's refusal to cooperate constituted an exclusive act.

Third, will it harm the interests of consumers?

Once Kuaishou cuts off the external links of Taobao and JD.com, consumers will no longer be able to purchase goods directly through the link to Taobao, JD.com and other platforms when watching Kuaishou live broadcast or short videos.

Although Kuaishou can fill this gap to a certain extent, which is also the purpose of cutting off the link, it is difficult for Kuaishou to completely replace it in a short period of time compared to the complete products on Taobao and JD.com.

This will not only limit consumers' choices, but also affect the consumer's consumption experience. As Kuaishou said in the announcement: "In order to protect the consumer experience, it is recommended that business friends do a good job of settlement and after-sales order processing in advance." "Obviously, Kuaishou is clear about the adverse impact of cutting off the Taobao JD link to the consumer experience.

IV. Conclusion

If Kuaishou can give a negative answer to the above three questions, then Kuaishou can firmly "break the chain". If not, we should avoid the "zero-sum game" and continue to build and maintain a good development ecology for the benefit of others and ourselves.

The monetization of Internet platform traffic itself is blameless and also conforms to the development logic of the Internet economic business model. However, traffic monetization should take into account the legitimate interests of relevant entities that contribute directly or indirectly to the development of this business model, and should not harm others for their own benefit.

Self-priority development, although it will benefit its own interests in the short term, may shake the foundation of its long-term development in the long run.