Google May Soon Face Antitrust Probe in China

may soon be facing an investigation in China, sources told Reuters on Wednesday, suggesting that financial damage to Chinese firms from recent U.S. trade policies could be the cause. The internet giant, which has a checkered history with the Chinese government, faces a possible probe into the dominance of its Android mobile operating system. At Reuters, Cheng Leng, Keith Zhai, and David Kirton put Beijing's forthcoming decision about whether to move forward with the probe into the context of the ongoing U.S.-China trade war:

The case was proposed by telecommunications equipment giant Huawei Technologies Co Ltd last year and has been submitted by the country’s top market regulator to the State Council’s antitrust committee for review, they added.

A decision on whether to proceed with a formal investigation may come as soon as October and could be affected by the state of China’s relationship with the , one of the people said.

The potential investigation follows a raft of actions by U.S. President Donald Trump’s administration to hobble Chinese tech companies, citing national security risks.

This has included putting Huawei on its trade blacklist, threatening similar action for Semiconductor Manufacturing International Corp 0981.HK and ordering TikTok owner ByteDance to divest the short-form video app. [Source]

Due to Huawei's reliance on Google's technology, U.S. sanctions have significantly hit the company's international business. Although domestic sales are unaffected by Huawei's loss of access to Google's app store and products such as Gmail—already banned in China—the lack of those features does undercut sales abroad. In an interview with Veta Chan for Forbes, analyst Paul Triolo explained how the lack of Google services on Huawei devices due to U.S. sanctions have seriously hurt its international sales:

But at some point, the big issue is that they can't compete internationally. When the initial entity list action happened, Google was not allowed to provide Google mobility services [to Huawei]. So right away nobody wanted to buy a [Huawei] handset outside of China, particularly in places like Europe, because they couldn't get Gmail and YouTube and all the other things they were used to. So Huawei's handset sales were already under stress from the software side; now, of course, you have the hardware part of it. [Source]

If Chinese authorities proceed with the investigation, it would not be the first time that Beijing uses antitrust laws in the ongoing . In an op-ed in the South China Morning Post earlier this year, associate professor of law at the University of Hong Kong Angela Huyue Zhang wrote:

This is not the first time the government has wielded the antitrust law as an instrument of trade and foreign policy. During US-China trade negotiations in 2018, China reportedly withheld antitrust approvals of large merger transactions as leverage against the Trump administration’s aggressive trade strategy.

The most well-known case is the collapse of Qualcomm’s US$44 billion acquisition of NXP Semiconductors, which received regulatory clearances from eight jurisdictions, with China the sole jurisdiction holding up the transaction. [Source]

Antitrust suits have also previously been used to investigate other major U.S. tech firms. Microsoft was targeted for a years-long investigation by antitrust authorities that began in 2014. Paul Mozur and Nick Wingfield at the New York Times reported in 2016 that authorities were then examining Microsoft's decision to end support for legacy Windows software.

As foreign tech firms have faced investigations and large fines, domestic Chinese firms have historically faced less scrutiny from antitrust investigators. In August, Caixin reported that few Chinese internet firms are investigated even when complaints are launched against them for monopolistic behavior, and noted that proposed amendments to China's Anti-monopoly Law could sharpen domestic regulation:

A total of 46 internet unfair competition cases filed from 2012 to 2019 were never even investigated, despite the accused companies failing to submit any response to regulatory questions, according to a study compiled by Liu Xu, a researcher at the Intellectual Property and Competition Law Research Center of Tongji University.

[...] The most recent draft of China's Anti-Monopoly Law, released in January, would give the watchdog serious teeth if enacted.

It would raise the top penalty for failing to file applications before buying new assets from 500,000 yuan ($99,080) - a drop in the ocean for a company like Tencent that turned a 33 billion yuan profit in the second quarter - to a punitive 10 per cent of the company's prior year's sales. [Source]

After a case against Tencent for monopolistic behavior on its instant messaging platform was dropped in April, Technode's Wei Sheng wrote about regulators' hesitancy to pursue Chinese internet companies:

China’s current legal framework is enough for antitrust authorities to take action against internet companies, but the authorities are just being very cautious because they may be afraid of getting it wrong in what are mostly very dynamic and fast-moving markets, said Adrian Emch, a partner at law firm Hogan Lovells in Beijing.

If China’s market regulators were to decide to carry out more aggressive enforcement against internet companies, then it could be undertaken within the existing legal framework, Emch wrote in a paper published in December. [Source]

Other evidence suggests that is beginning to change. At the end of July, China's central bank took the unusual move of urging the State Council's antitrust committee to investigate Alipay and WeChat Pay, which hold a duopoly over the burgeoning digital payment market. And just this week, the government released more details on the draft antitrust law, which includes a significant proposed increase in maximum fines for companies judged to have acted anti-competitively.

SUPPORT CDT

CDT on Twitter

Google Ads 1

CDT EBOOKS

Giving Assistant

Amazon Smile

Google Ads 2

Anti-censorship Tools

Life Without Walls

Click on the image to download Firefly for circumvention

Open popup
X

Welcome back!

CDT is a non-profit media site, and we need your support. Your contribution will help us provide more translations, breaking news, and other content you love.