China’s Central Bank Proposes Antitrust Rules for Country’s Booming Online Payments Sector

The People’s Bank of China has proposed tougher antitrust rules for companies in the non-bank payments industry, which may impact dominant players Alipay and WeChat pay. (Source: China News Service)

China’s central bank on Wednesday released a set of proposed guidelines to step up antitrust measures in the country’s booming online payments sector.

The People’s Bank of China (PBOC) could make requests to antitrust authorities to launch investigations on non-bank institutions if a company reaches half the total share in the online transactions market, according to the published draft rules. The same goes for two entities with a combined two-thirds share, or three providers with three-quarters of the market.

A non-bank institution with less than 10% market share that operates in a business with two or three dominant players can be excluded from antitrust investigations, the central bank added.

Under the proposed framework, the PBOC will also be able to flag any non-bank institutions that demonstrate monopolistic or anticompetitive behavior to the state council’s antitrust committee, which may carry out relevant actions including suspending the service, halting merger plans or breaking up the entity by its business type.

The regulations, which are open to public feedback until Feb. 19, are necessary to “strengthen the legal supervision and regulation of compliance operations of payment institutions, and maintain the healthy development of the payment services market,” China’s central bank added.

The country currently has 233 licensed players in this sector, with the market dominated by Ant Group’s Alipay and Tencent’s WeChat Pay in terms of online transactions, according to Reuters quoting a report by consultancy iResearch. Alipay has a 55.4% share of China’s mobile payments market while WeChat accounts for 38.5%, according to the same research.

Nearly 1 billion active users use the platforms on their phones to shop, pay for on-demand services and make investments.

“PBOC may be implying that they are going to leverage antitrust as an additional regulatory tool to discipline or supervise tech firms,” Angela Zhang, associate professor of law and the director of the center for Chinese law at the University of Hong Kong, told Pandaily.

“While PBOC’s draft rules are rather aggressive amid the tightening of the online payments sector, it all comes down to the State Administration of Market Regulation’s final decision and its subsequent enforcement,” Zhang said, adding that markets should not be too quick to overreact to the announcement.

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That being said, it is clear PBOC is paying very close scrutiny to WeChat Pay and Alipay,” Zhang said.

“Since this is still at a consultation stage, we’ll be interested to see how the antitrust authority would respond to these rules, and whether there will be a framework for collaboration between financial regulators and law enforcement bodies,” Zhang added.

In December, the national market regulator announced an antitrust investigation into Alibaba, a month after authorities halted sister company Ant’s $37bn initial public offering.