Another “double eleven” – the most-celebrated Chinese shopping season around 11 November – is approaching this year. Last year, Alibaba’s B2C online retail platform Tmall reached a total turnover of 268.4 billion yuan (about US$40 billion) in a single day. Other platforms are not very far behind. For example, Tmall’s major competitor, JD.com, has also reached 200 billion yuan, accumulatively from 1 to 11 November. The figures show the size China’s digital economy.

Along with the annual shopping season is the continuously infamous battle between Alibaba and JD.com, with the practice of what we call “choose one from two” (“二选一” in Chinese). It is actually similar to exclusive dealing in the traditional sense – sellers are asked by one platform to shut stores on competing platforms, otherwise shoppers would no longer be directed to their products on this platform (or even relevant stores or products are suspended outright). The practice has become so common that the central authority the State Administration for Market Regulation (SAMR) has to warn people beforehand almost each shopping season. Right before the “double eleven” of 2019, a judicial decision made by the Supreme People’s Court was released, in which the court made a jurisdiction ruling on JD.com’s claim against Alibaba for abuse of market dominant position under the Anti-Monopoly Law of China (AML). Following that, two other top-tier e-commerce sites, Vipshop and Pinduoduo, announced to have applied to join this lawsuit as third parties and together denounce Alibaba’s “choose one from two” practice. It seems that the controversial practice may expect a ruling soon on substantive issues as to its legality.

However, for as long as the practice is in existence in e-commerce, the complainers are not that innocent. For example, JD.com was itself as well accused by another B2C company, Suning.com, of “choose one from two” in 2017 – a similar fight allegedly between No. 2 and No. 3 of B2C in China. As for smaller players, recently Vipshop (an e-commerce site specialising in online discount sales) was also accused by an inventory distribution platform Aikucun for exactly the same practice.

Other than the shopping platforms, “choose one from two” can also be easily found in other e-commerce areas. Food delivery platforms, for example, Meituan, are also forcing restaurants to pick between itself and its competitors, like Ele.me or previously Baidu Food Delivery. During the covid-19 isolation period earlier this year, during which online food delivery boosted in China, Meituan was again reported jointly by merchants and even industrial associations in multiple places to have adopted such unfair practices. For another illustration, the online travel agency area was also hit, and this time Alibaba had fallen victim to it as Ctrip was once the bully in this market.

Rather than a simple “right” or “wrong”, it looks more like great trees are keeping down the little ones. Therefore, this article intends to explore whether “choose one from two” is a justified practice, and if so, to what extent. Although in China it could also be analysed from the perspective of the Anti-Unfair Competition Law or the E-Commerce Law, this article will be focusing on the AML only. Against the backdrop of the rolling antitrust snowball for tech giants throughout the world, hopefully “choose one from two” could provide a valuable perspective that cuts through the myth.

Establishing Market Dominance: A Tough Bone to Chew On?

The existence of dominant positions in the relevant markets is the precondition of abusive conducts. And there should be a consensus on the definition of relevant markets before finding this dominant position. Since the dominant position could be presumed based on market share numbers, market definition often becomes the battleground that the parties are keen on. Among the hundreds of public enforcement cases since the AML’s effectiveness in 2008, there are a few dozen abuse cases. The difficulty in defining the relevant market and consequently in establishing dominance could be part of the explanation.

Moreover, among the dozens of abuse cases of public enforcement so far, none are against e-commerce platforms. Establishing a dominant position in the digital market, as comparing to the traditional markets, is even complicated by its special attributes such as network effects, bilateral and even multilateral markets, and users’ multi-homing attributes.

But we could have a glimpse of how these factors may play out in a private dispute as early as in 2014 – Qihoo v Tencent decided by the Supreme People’s Court with regard to the instant messaging service market in Mainland China, a highly volatile market that predates the mobile era. In this case, the court held that it is not necessary to clearly define the relevant market in every case of abuse of market dominance. Without a clearly defined relevant market, the market power of the enterprise concerned and the potential impacts of the suspected abuse on the market can be evaluated by direct evidence proving exclusion or elimination of competition. Moreover, though, generally, the higher the market share is, the more likely it is to indicate the existence of a dominant market position, market share is nonetheless only a rough and potentially misleading indicator of market dominance, especially in consideration of the highly dynamic competition in the internet environment.

Based on the experience of various jurisdictions, it seems to be the consensus that, in the digital market, an enterprise with a high market share does not necessarily imply a dominant market position, and the ability to maintain this market share in the relevant market is more important when assessing market power. Moreover, obvious innovation advantages may help to attract consumers and achieve a high market share over a short time. For instance, at the beginning of the development of QQ, an instant messaging software of Tencent Inc, MSN developed by Microsoft has the largest market share in the instant messaging service market in Mainland China, which is more than 50%. Soon, QQ’s market share exceeded MSN. But now, with the evolvement of mobile internet, QQ itself has been replaced in China by another messaging service also developed by Tencent – WeChat.

Although market share has been greatly weakened as an indicator to reflect the market power of an enterprise, what can establish market power is very much open to discussion. The authorities do not give clear guidance. Instead, some such practices are handled and penalised under the Anti-Unfair Competition Law to avoid the tough question of proving market dominance. Unless and until this problem can be solved, it would be difficult to scrutinise “choose one from two” under the AML.