Regulators in China have told eCommerce companies like Alibaba and JD.com to stop a monopolistic practice that makes merchants sign exclusive agreements, preventing them from selling on other platforms, according to a report by Reuters.
China’s State Administration for Market Regulation (SAMR) held a meeting with more than 20 eCommerce platforms to stop the practice, according to State news agency Xinhua, which called the practice “choosing one from two.”
The move comes ahead of China’s biggest shopping day of the year, Singles Day, which happens on Nov. 11. In the midst of an economic slowdown, competition for shoppers on the largest platform has become increasingly competitive.
“The SAMR’s relevant person in-charge pointed out that recently there have been some problems that have arisen as a result of activities among network operators,” Xinhua said. “For example, platform competition is intensifying and the problem of the ‘choosing one from two’ practice has emerged, which has attracted the concern of many parties.”
The practice breaks the country’s anti-monopoly and eCommerce laws, the news agency said.
JD.com has sued Alibaba’s Tmall over the practice, asking for compensation and an apology, and saying that Tmall took advantage of its market dominance.
“We believe strongly in open, fair and legal competition, but not everyone in the industry agrees,” JD.com said. “We believe that brands and consumers should be able to sell and shop where they want without interference and will continue to support the ability of brands to choose to sell on however many sites they want.”
Pinduoduo, another eCommerce site in the country, said “the eCommerce law has made it abundantly clear that monopolistic practices, particularly coercive exclusivity arrangements, are illegal.”
Alibaba has also been singled out in another lawsuit, this time by home appliance company Galanz. The Chinese company said it suffered after it didn’t comply with a request from Alibaba to stop selling goods on Pinduoduo.