Anti-Trust Regulations are Welcome, but not Coated in the Language of Politics

As the COVID-19 pandemic continues to wreak havoc on the world, more and more consumers are shunning the potential dangers of brick-and-mortar stores in favor of their online alternatives. Major e-commerce platforms, along with their counterparts peddling everything from inter-personal communication to insurance products, have become the primary beneficiaries of the pandemic era. Yet, as their market values hit one record high after another, the global world of "big tech" is also facing unprecedented scrutiny as governments around the world finally begin to grasp and rein in their influence.

Hot after the heels of the US and EU regulators slapping fines on the likes of Amazon and Google for supposed illegal collection and usage of personal data from their hundreds of millions of users as well as attempts to lock potential competitors out of their core markets, their Chinese counterparts are now facing the same sort of government scrutiny in their home country. In early November, Chinese regulators pulled the plug on the highly anticipated IPO of Ant Financial, the world's most valuable fintech firm, after second thoughts about how the firm's loan-booking mechanism can destabilize the country's financial system.

The move against Anti Financial quickly seems to have set a precedent on how the country's regulators can move against its online giants. Ant Financial's IPO delay dampened the enthusiasm of investors toward IPOs of its competitors, including JD Digits, and opened the doors for regulators to examine Alibaba, the one-time parent of Anti Financial, for supposed monopolistic behaviors in keeping competitors at bay. The reasoning behind the Alibaba scrutiny, that of the firm using market dominance to prevent its vendors using other e-commerce sites, broadly aligns with the rationale given by US and EU regulators against their own big tech.

Yet, as are many things in China, the flurry of scrutiny against the likes of Alibaba and Ant Financial has occurred against a background of outright political interference and murky suddenness that has no parallel in the US and the EU. Analysts have quickly linked the Chinese regulator's moves with a speech given by Jack Ma, the founder of both firms, in which he criticized the ossification of the largely state-dominated Chinese banking sector and suggested that the lending model offered by Ant Financial can revolutionize and overhaul how money flows to average citizens. To many, Ma's words sounded like a direct challenge to the primacy of the state's control over the financial sector.

It did not help the state's image to have the move against tech firms come so suddenly and without any sort of prior warning. Ant Financial had to half the IPO plans after it was oversubscribed many times over, forcing the company to hastily refund the deposits investors put down for its shares. Had regulators given even the slightest sign that the IPO would go awry even months before it was planned to happen, such last-minute hastiness would not have happened. Similarly, the almost out-of-nowhere announcement that Alibaba is being investigated led to the firm's shares tanking by more than 8% in one day, which would not have happened if the market already factored in risks of regulatory scrutiny in its valuation.

This is not to say that regulatory scrutiny, even if hasty and intransparent, is not welcome. Using regulations to suppress the dominance of the largest online conglomerates can level the playing field in a country where tech entrepreneurship has become a major source of innovation and new job creation. As the Chinese government continues to emphasize entrepreneurship as a source of economic growth, ensuring that many newly created companies can survive in a market dominated by a few big firms can go a long way to encourage more young people to start their own businesses.

But ensuring that big tech does not become too big and dominant need not be done in an overtly political way. While regulations, written in the law and enforced by courts, can be a source of predictability even when the laws are sometimes enforced rather arbitrarily, they still offer much more stability than beating down big tech based on political whims. In a country where the inner workings of politics are too often shrouded in a world of darkness, the risk of angering politicians and bureaucrats through personal spite is both too possible and too commonplace for any company to realistically mitigate all the risks.

As 2021 starts with the emergence of a new strain of deadlier coronavirus and mass vaccination still not ready for most of the world's population, tech firms will become even more important to the daily lives of many people around the world. For them to operate smoothly and provide their increasingly essential services and products to more people, tech firms need clear regulatory regimes to govern what they can and cannot do. While governments play catch up to the increasing influence of big tech, they should not be quick to strike down tech dominance through murky political language. Too many normal people depend on them now more than ever for the tech firms to be perpetually in fear of saying the wrong things about the wrong politicians.