China fines Ali Baba for competing vigorously; platform governance becomes a thing; reports of a digital currency war are greatly exaggerated; NSA’s “we need visibility” thesis is contested.
From China, with love
China’s State Administration for Market Regulation has fined Ali Baba 18.228 billion yuan (about 2.79 billion U.S. dollars) for anti-competitive behavior. But they did it with love in their hearts, according to the People’s Daily report. The gigantic fine was prompted by an exclusive dealing agreement, known locally as “er xuan yi,” that prohibits merchants on Ali Baba’s market from opening stores or participating in promotional activities on competing platforms. China’s anti-monopoly law authorizes fines anywhere between 1% and 10% of annual revenue for abuses; the regulator chose 4% due to Alibaba’s “in-depth self-examination” and “proactive rectification.” “To regulate is to ensure better development, and the act of tugging at the sleeve is also an act of love,” the People’s Daily said. Tugging at the sleeve is a Communist Party phrase for self-correcting checks on minor misconduct to avoid larger missteps. What’s interesting here is how the government, looking over its shoulder at the coverage of its takedown of Jack Ma and Ali Baba, made a point that there was no change in the state’s “attitude of supporting internet platforms.”
As is often the case in competition policy, it was actually intense competitive tactics, rather than monopoly or the absence of competition, that sparked the state’s intervention. E-commerce leaders Alibaba, JD.com and Pinduoduo, food delivery platform Meituan, social media and chat provider Tencent have all been accused of unfair competition in China’s raucous platform market. While it’s true that many merchants – including major Western brands – are unhappy with the exclusive dealing policy, it’s notable that Alibaba had been losing market share for years, both to smaller challengers as well as to larger firms. Covid-19, however, made ownership of logistics and delivery capability essential, so smaller firms are now losing out. But Ali Baba’s market share has remained about the same in the last two years, while that of its two largest e-commerce competitors, JD and Pinduoduo, increased. In an American-style trial with an independent judge and a defined law, one wonders whether the regulator would have prevailed but China’s system is much less adversarial.
Much Ado About Digital Platform Governance
As the debates and discussions on platform governance have picked up pace, we are beginning to see a range of initiatives by state and non-state actors.
In the United Kingdom, a Digital Markets Unit (DMU) has been established to oversee a new regulatory regime for the largest digital firms. It is supposed to promote greater competition and innovation as well as protect consumers and businesses from unfair practices. New regulations are in the works and the UK government will consult on proposals in 2021. In the interim, the DMU has been established within the Competition and Markets Authority (CMA) on a non-statutory basis to focus on operationalising and preparing for the new regime. In late March, an interdisciplinary group of researchers who produce work on platform governance across a variety of methods and fields came together to organize the First Annual Conference of the Platform Governance Research Network. The network emerged from workshops on platform governance held online in the past year at the Humboldt Institute for Internet and Society (Germany) and the Data and Society Research Institute (USA). The conference was intended to create a space for researchers and civil society advocacy groups working on platform governance to gather regularly. It was co-hosted by 15 organisations and 25 individuals from Argentina, Brazil, Canada, Germany, India, Kenya, and the USA. The three-day virtual conference saw over 50 presentations that included empirical studies, normative conceptual and theoretical work, detailed case studies of specific regulatory frameworks, under-examined platforms as well as meta panels on research methods. The first day of the conference covered diverse areas of research including comparative policy analyses, critical approaches and theories, governing advertising and microtargeting, platform labour and governance in the gig economy, and the role of civil society and external governance stakeholders. On the second day the conference covered “platform governance with Chinese characteristics,” methods and research focused on platform transparency, the role of online communities content moderation and democracy and legal theory in platform governance. The last day of the conference was a network building session that focused on the challenges of creating a diverse global network. Participants focused on strategies or tools used by civil society advocates to influence industry and governments. The coming together of stakeholders from civil society and academia to form this network is a timely intervention. Given the importance of platform regulation in the two largest internet economies, IGP and a group of Chinese scholars are cooperating on a joint research/conference effort to compare and contrast the American and Chinese approach to platform governance. The CfP for the conference is available here.
Digital currency war will not take place
For a moment, it seemed like cryptocurrency was emerging as an element of global governance rivalry between the US and China. On April 6, the Wall Street Journal reported that China was creating a digital yuan “in a re-imagination of money that could shake a pillar of American power.” Striking a similar theme, on April 8, billionaire tech entrepreneur and Paypal CEO Peter Thiel claimed that Bitcoin was “a Chinese financial weapon” designed to undermine the U.S. dollar’s status as the world’s reserve currency.
Both of these claims disappeared into thin air when examined more carefully. China’s digital currency is not based on blockchain and has no inherent limit in supply like gold or bitcoin. It is issued by the Peoples Bank of China, the country’s central bank and is, therefore, still a fiat currency; it just uses a new – and admittedly more efficient and powerful – technology to instantiate it. These features are as likely to repel global users as attract them – it can totally eliminate anonymity, and can be cancelled by the central authority. As for Bitcoin, while it is certainly true that the Chinese government would like to challenge the US dollar’s privileged status, the idea that Bitcoin is part of their plot to do so flies in the face of facts. Bitcoin would be a wholly globalized, market-governed alternative to a national digital currency. China, like other autocracies, recognizes it as a threat. Just as India has made noises about banning Bitcoin, in 2017, the People’s Bank of China and five other ministries banned initial coin offerings, and banned the exchange of fiat money for cryptocurrency, according to Rain Xie of the Washington University School of Law. The dollar’s dominance is indeed a major source of power for the US government, and the transition to digital forms of money may open up new ways of challenging that. But we are nowhere near that point yet.
“Visibility:” another word for surveillance
Kim Zetter published an article refuting the claim that more government monitoring would have prevented the SolarWinds hack, but people in Congress and the NSA are still making that argument. While early reaction to Solarwinds included a push to increase NSA surveillance of US-based private networks, the reference to “visibility” in the article has more to do with organizational shortcomings, lack of focus, and improving the risk management of software supply chain attack vectors. By statute (the SECURE Technology Act), US federal agencies must use NIST’s Cyber Supply Chain Risk Management (C-SCRM) and other cybersecurity standards and guidelines to protect non-national security federal information and communications infrastructure. Takeaway: US agencies need to get their own house in order before it can start demanding greater surveillance powers.