It has been a common practice for internet platforms to manage external links by implementing rules about how and where external links can be placed, exerting their operational autonomy. W app, one of the most popular instant messaging apps in China, has been enforcing a variety of stringent rules and regulations to restrict external links, primarily targeting the content or the source of the links.

The official rules of W app specify that violating content, such as ‘rumors or false information that may cause harm to individuals, corporations, or other institutions’ and ‘contentdesigned for the collection of users’ personal data or information without the users’ knowledge or consent', may be blocked.

In addition to the external links restricted due to their content, W app also blocks links from certain e-commerce and social media platforms, which means links from these platforms cannot be opened in W app. Instead, users that want to open the links may only do so in a browser such as Safari or Chrome. The platforms blocked on W app mainly include:

• TB app and T app, the largest e-commerce platforms in China, both operated by Company A.

• D app, a popular short video platform, owned by Company B.

• TT app, an intelligent news aggregation platform that recommends news to      individual users, also owned by Company B.

The restrictions based on the content of a link has not caused disputes, as they are put in place mainly out of  security and compliance considerations. However, the blocking on grounds of the source of a link has raised extensive concerns over the intent behind the behavior and the effect of such blocking on the industry’s competition.

A. What is the competitive implication of blocking external links?

To understand why the blocking of external links might lead to competitive concerns, we should first figure out why an instant messaging platform, an e-commerce platform and a short video platform see each other as competitors.

a) Bilateral or multilateral nature of the platform economy

Although the service offered to the individual users by different platforms varies, it is not difficult to realize that these platforms usually compete with each other on the other side by selling “attention" gained from individual users to commercial users for the latter’s marketing promotion. Therefore, platforms are increasingly reluctant to allow their users to be diverted to other sites, because the diversion means that the users' attention flows to their competitors.

b) The role of data

Data is the basis for artificial intelligence and many online services provided by platforms. If a platform allows external links, other platforms may gain access to, collect and use users’ data of the platform, which may weaken such platform’s competitive advantages.

Large platforms have incumbency advantage to develop ecosystems due to their possession of large amounts of user data, which gives them strong motives to engage in the blocking practices, and such practices tend to thwart the development of the new entrants in the market of such dominators or the competitors in the neighboring markets where these dominators plan to enter.

B. Why antitrust enforcement is silent on the blocking practices of the platforms?

There has been a long-standing discussion about whether the blocking of external links constitutes monopolistic behavior, which has been fueling up as Company B on February 2, 2021 announced to sue Company T for restricting users to share D app content on W app and Q app.

a) Possible legal basis for Company B’s allegation

Company B accused Company T of abusing its market dominance and thereby excluding and restricting competition. However, it is not clear which specific abusive behavior Company T was accused of in the lawsuit. Among the six types of abusive behavior stipulated in Article 17 of the Anti-Monopoly Law, Company B might claim that restricting users to share D app content on W app and Q app constitutes:

• Restricting transaction without legitimate reasons

This strategy was adopted in the case of Company Q v. Company T, in which Company T was accused of product incompatibility, similar to the blocking practice. Company B may claim that the restriction implemented by Company T has an exclusionary effect, because its blocking of Company B’s D app indirectly compels users use short video services provided or supported by Company T.

• Refusing to trade with trading partners without legitimate reasons

Company B may also allege that W app constitutes an essential facility, and thus restricting users’ sharing of D app content on W app and Q app may constitute refusing to let trading partners in the production and business activities reasonably use their necessary facilities.

• Applying dissimilar conditions to equivalent transactions with different counterparties    without legitimate reasons

It is also possible for Company B to claim that, since Company T allows users to share K app (another popular short video platform) content on W app, this discrimination between D app content and K app content places D app at an undue competitive disadvantage.

b) Difficulties in identifying the blocking of external links as monopoly behavior

For Company B, at least three barriers must be crossed in order to win the case: first, to properly define the relevant market and demonstrate market dominance of Company T; second, to demonstrate that the restrictions imposed by Company T constitute abusive behavior, thereby excluding and restricting competition; third, to break through the justification defense by Company T. However, crossing the above barriers is far from easy.

With respect to market definition and market dominance identification, the judicial precedents involving accusations against Company T for abusing its dominant market position are unfavorable to the plaintiffs. Although the accommodative and prudent regulatory tendencies have been changing, and in theory it is possible to define a narrower relevant market encompassing only one side of the platform where the conducts in dispute occur, there is still uncertainty about market definition and dominance identification in the platform industry, as market boundaries might not be as clear as in the ‘conventional economy’, and they may change very quickly.

Even if Company T were determined as holding a dominant position, it would still be difficult to prove that Company T has abusive behavior. It is true that the restriction to share D app content may cause inconvenience to the users. However, to what extent could such inconvenience be regarded as limiting the end users’ right to choose other short video products and thereby having an exclusionary effect should be considered with prudence from the perspective of competition laws. On the other hand, whether W app should be regarded as a public utility or even an essential facility under the antitrust law is still very controversial. In judicial practices, only in rare cases, the courts have applied the doctrine of essential facility to order the defendant to open up certain infrastructure or provide certain input to the plaintiffs. Most importantly, the great success of D app in short video sector also shows that W app is not an indispensable way or an essential input for the marketing of short video products. To prove there is discrimination treatment, the greatest challenge would be to determine whether W app’s transactions with various short video app developers are on an equal footing.

There is no doubt that Company T will argue that its restriction on sharing D app content is reasonably justified. According to Company T, the blocking was due to the illegitimate practices of Company B, including obtaining W app users’ personal information in an incompliant manner.

It seems that the blocking practices may to some extent violate the provisions and spirit of the antitrust laws. Nevertheless, things are more complicated in an antitrust case.

China is still exploring proper regulatory measures to safeguard the healthy development of the platform economy apart from antitrust supervision. The interconnectivity of the platforms is one of the acute issues to be resolved, and compared to monopoly regulation, industrial supervision may be a more efficient way to regulate this issue. MIIT has long taken a positive approach to regulate internet industry connectivity. We believe that the recent development is just a beginning. With regard to the compliance trends in managing external links, some preliminary conclusions may be drawn, including:

• The platforms’ setting up the rules for managing external links is not a      problem per se. However, as managers of platform accessors, platforms,      especially those holding a dominant position in the market, have a      responsibility to ensure that competition on their platforms is fair,    unbiased and pro-users. In theory, blocking links to rivals while giving    preferential treatment to one’s own products without reasonable      justifications can be identified as abusive self-preferencing practices with      a view to leveraging market power, as shown in antitrust enforcements in other      jurisdictions.

   

• Being      required to adhere to the principle of fair competition, non-dominant      platforms also play a role in the regulation of interconnectivity. MIIT      has launched an app rectification project in July 2021 focusing on eight      types of malicious practices that can disrupt market order, such as the  discriminatory blocking of links and the interference in the products and      services operated by other entities. Moreover, regulations addressing the    issues of platform compatibility and blocking external links are also on      the way. According to the Provisions on Prohibition of Unfair    Competition on the Internet (Draft for Public Comment), operators      shall not use technical means to interfere with network products or    services legally provided by other operators. Such interference includes,    among others, to block, intercept, modify, close, uninstall network  products or services legally provided by other operators, in all cases without    reasonable justification, thereby hindering their download, installation,      operation, upgrade, forwarding, dissemination, etc. It is manifested      that both dominant and non-dominant platforms are regulated by the law      enforcement and the upcoming regulatory provisions.  

   

• It      is clear that interconnectivity and openness between platforms is an      irreversible trend, and tight regulation does not automatically lead to      healthy development. The effect of the regulation will also depend on the      rules’ clarity and completeness. At the current stage, neither regulations      nor regulatory authorities have provided clear guidance on the compliance  of managing external links except for some general principles. It is for  sure, however, that platforms will bear a heavier compliance burden to formulate    their own platform rules on the management of external links. Any restrictions should be sensibly designed with objective justifications,      and such restrictive measures should be adopted under the principle of  proportionality. It is expected that regulatory authorities or courts      could shed some light on the compliance boundaries or the best practices  of interconnectivity in the future.