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Qihu and Tencent’s Monopoly Dispute Appeals

In this judgment, the Supreme People’s Court has defined the “related market” in the anti-monopoly law, and the Supreme Court recognizes the widely used hypothetical monopolist test (“HMT”). In HMT, “relevant market” refers to a product or group of products within a specific geographic range within which consumers cannot find sufficient alternatives, whereby if a particular company is the sole producer of the product, The company can increase profits by raising prices or lowering quality.

The Supreme Court pointed out that many Internet products (including Qihoo and Tencent products) are free for consumers, so in this type of case , The court should focus on the assumption that the quality of the HMT should be reduced, rather than the price increase that would hardly occur. The Supreme Act rulings that the relevant market is an Internet instant messaging service.

For example, in the field of travel, Didi claims to be the owner of more than 90% of the market share of the network, but this does not mean that it dominates the travel market. Because in the travel market, it not only has to compete with other network car companies, but also competes with taxis, and even competes with subways and buses.

Similarly, although Tmall has a high market share in online shopping, we simply conclude that it occupies a dominant position in the market, and thus draws its monopoly conclusion. In fact, online shopping is just a form of retail. Many times, the retail method that users choose, is subject to specific scenarios and consideration of many factors. The simplest case is that although the traditional retail industry is affected by online shopping, in many large and medium-sized cities in China, the business of 24-hour convenience stores is getting better and better. It is also true that Tmall is not only competing with JD.com, but also in competition with all retail formats.

In a way, competition between different formats is a higher level of competition,like the proponent economist Schumpeter of the concept of “creative destruction” Say, “The real competition is not from the increase in the number of stores, but from department stores, chain stores, postal stores and supermarkets.”

Even in the online shopping arena, due to fierce competition, entrepreneurs use “new ideas, new products, new processes, new organizations to replace old things”, and the fight is more typical. Just a few years ago, many people thought that the pattern of online shopping in China had been determined. It is impossible for players to come out to challenge the status of Tmall and Jingdong. However, many of them have started through WeChat socialization, quickly occupied the “sinking market”, and strived for high-income users through huge subsidies. It also verifies from the judgment of the Supreme People’s Court that “the boundary of the relevant market is far less clear than the traditional field due to the highly dynamic nature of the Internet.”

Second, the essence of “two choices” is platform allocation traffic

If the “two choices” of the 3Q war was to compete for PC-side portals and users, what is the controversial “two-choice” today?

According to a ruling on the jurisdiction of the case filed by the Supreme People’s Court on the China Judgment Document Network, the reason is that since 2013, Tmall has requested “in the exclusive agreement” and “exclusive cooperation” in Tmall. Many brands of merchants such as clothing and homes opened in the mall may not participate in the 618, double 11 and other promotional activities in the Jingdong Mall operated by the plaintiff, and may not open stores in Jingdong Mall to operate, or even open a store in a platform of Tmall Mall.

Many people call Tmall’s “exclusive agreement” behavior “abuse of market dominance”, if Tmall is really abusing market dominanceStatus, then its competitors, that is, Jingdong will certainly suffer. But the exclusive agreement is “abuse of market dominance”, and we need to put it into a broader perspective and the characteristics of the platform economy.

We call the e-commerce companies including Tmall, Jingdong and Pinduo today a platform. What are the characteristics of a good platform?

It’s not only with massive users, but also with various vendors, and interaction between users and suppliers : The more users, the more suppliers will be attracted; the richer products will attract more users. The reason why Tmall has various agreements in the agreement with the merchants is to maintain its superiority to the competitors and to gain more consumer support by weakening the product line of the competitors, that is, the breadth of the market.

The reason why merchants are willing to enter the Tmall platform is because there are a lot of users here. According to Alibaba’s recent earnings report for the second quarter of the 2020 fiscal year (natural year 2019 third quarter), Alibaba’s mobile monthly active users in China’s retail market reached 785 million in September 2019, an increase of 30 million from the end of the previous quarter of 755 million. Among them, annual active consumers grew by 19 million to 693 million.

So, where do the massive users come from? On the one hand, because of the characteristics of the platform economy, that is, seeing many merchants; on the other hand, it is the “traffic” that the platform purchases from outside., as mentioned above, it is served on other major apps. Advertising, attracting users to Tmall to participate in the activities of the Double Eleven.

The financial report also showed that during the reporting period, Alibaba’s revenue was 119.02 billion yuan, of which core e-commerce business income was 101.22 billion yuan, accounting for 85% of total revenue. From the perspective of branch business, Alibaba’s core e-commerce business is still the only profitable segment. In addition to core e-commerce, Alibaba Cloud, Ali Entertainment and Innovative Business are still losing money.

Why is Alibaba not abandoning many business segments even if it has been losing money? On the contrary, is it still buying and buying? One important reason is that they are theyNot only to develop their own business, but also to take the role of the core e-commerce business – that is, Tmall – drainage. I suspect that a large number of users are from drainage, including but not limited to Gold, Youku or other apps.

Alibaba’s second quarterly report for fiscal year 2020

In other words, Toma’s traffic support for users, a large part of it is the flow that needs to spend huge sums of money to buy. Therefore, how to distribute traffic becomes the core of its operations, and “exclusive agreement” is a way for the platform to distribute traffic.

Of course, Tmall will not be stupid enough to sign a similar agreement with all businesses. In fact, only a handful of businesses can enjoy this treatment. As a platform with hundreds of millions of SKUs, it is impossible and will not sign such an agreement with each merchant, and after signing an agreement with the platform, these enterprises will inevitably obtain support for the platform including traffic.

In other words, the controversial “exclusive agreement” is likely to be a package of agreements including traffic support. Although I didn’t see the content of the agreement, I can guess that the platform provides merchants with traffic support beyond the average merchant and attracts them to settle in, while the merchants promise to compete less than a certain period of time. The opponent settled in. In order to get better traffic for the settled merchants, we saw Tmall advertising in major apps, and Alibaba is also doing various mergers and acquisitions for the core e-commerce business.

In China’s Internet companies, Alibaba does not produce traffic, it is just a porter or a buyer of traffic, and Tencent is generating traffic. There was a play in the world. “A (social) time of a losing family is mainly spent on WeChat, but mainly in Taobao(Tmall) spends (shopping). “Since I am chatting with me, why not shop at me, and take the money to earn this part? Based on this reason, Tencent has also entered retail through equity investment in recent years. It is the largest shareholder of JD.com, and the second largest shareholder and the second largest shareholder of Vipshop. Users can not only enter shopping from the apps of these companies, but also pay on WeChat. Entering the Jiugong grid.

Having said that, I have to mention the various businesses marked with “third-party services” in Jiugongge. There is no love for no reason in the world. Not all companies can get a place in Jiugongge because the location is so scarce. So that only the company invested by Tencent can get the core position of WeChat payment and get the huge amount of traffic support from Tencent.

If Tencent uses its traffic to support the e-commerce platform, then Ali is using traffic to support the merchants who stay on its platform. If the two are slightly different, it is that a lot of traffic from Ali is passed. Tencent traffic is endogenous.

This is also the case, we can understand why Tmall has to sign agreements with some businesses, in fact, this is the the price of the flow: Tmall as the owner of the flow, naturally have such rights. As the most precious scarce resource of Internet companies, traffic cannot be evenly distributed to all merchants, and it will definitely appear in a unique way.

All Internet companies distribute traffic in some form, but in a different form: search engines such as Google and Baidu are ranked first in terms of advertising space, and Tencent is distributed in equity. Traffic, while Tmall is a one-on-one “exclusive agreement.”

WeChat Pay Jiugongge

If you understand that WeChat traffic is sitting in a nine-square grid, it is probably understood that Tmall’s traffic is divided into one-to-one agreements.

Three, a long-standing exclusive agreement

In fact, the exclusive agreement is not new to the e-commerce platform. The Internet has long existed extensively and has long been regarded as an integral part of the business rules of the market economy.

If you have bought or sold a house, or are buying or selling a house, you will find that many real estate agents display the house as an “exclusive agent.” What is an exclusive agent? As the name implies, the owner commissions an intermediary company to help sell or rent a house within a certain period of time. Once an exclusive agent is signed, the owner can no longer sign agency agreements with other agencies, nor can they sell the house privately.

Generally speaking, the owners sell houses in a general agency mode, that is, the owners put them on the open market, and a number of intermediary companies help the owners to sell the homes on a first-come, first-served basis. As a landlord, I understand that only when the house is listed in more mediations will there be more potential buyers to contact.

Why do you choose an exclusive agent? The reason is that different intermediaries have different target customers, and more intermediaries contact means that the main room spends more time interacting with various intermediaries and different customers, and communicating with customers is costly, including but not limited to Time costs. This is also true, Many owners often sign exclusive agency agreements in order to save their time and cost.

Of course, an intermediary that can become an exclusive agency agreement is either an industry leader or a company that is trusted by the owners. As an exclusive agent, they also need to pay the owner some money like “selling margin”, promised that if the house can not be sold at the reserve price during the agency period, the owner can confiscate the “guarantee” (If returned, return to the intermediary). The existence of margin will encourage intermediary companies to sell their homes.

For real estate agents, it is also beneficial, that is, when the housing market is in short supply, it can haveStable listings, and this is the key to a successful transaction. Compared with the amount of the deposit, the commission income from the successful transaction of the real estate transaction is more substantial. To some extent, the exclusive agent is a transaction with risk-locked but unlimited income. This is also the case. In the peak season of real estate transactions, when the house is in short supply, real estate agents particularly like the exclusive agency model, while some owners who are unwilling to deal with the viewing customers or real estate agents compare It tends to adopt this mode of worry-free and labor-saving.

The exclusive agent for home sales is not much different from “two choices”. The essence is that the middleman (e-commerce platform or real estate agency) ) requires the supplier (a supplier of houses or other goods) to sell products at one of its institutions.

Some people think that because the e-commerce platform has a large market share, it is abusing market dominance, and there is no similar situation in real estate sales.

But in the real estate agency sector, there is also a company that has a large share of the market. For example, in Beijing and other places, the chain’s sales are far ahead of other companies. According to statistics, in 2018, the chain has a market volume of 76,086 sets, 50.14% of the market share tops the list, followed by the second place is only There is a market share of 13.32%. Although the chain market share is so high, so far no one thinks that the chain’s “exclusive agent” is the abuse of market dominance, which is unfair competition. What is the reason? That is not only the chain agent has an exclusive agent, other companies can also have an exclusive agent.

Search for “exclusive agent” results

Of course, in the offline world, it’s not just housing sales.Home agents, many goods have their own “exclusive agents.” Searching on the web with the “exclusive agent” as a keyword will find a lot of relevant content. Exclusive agent (solo agent or exclusive agent) is means that the agent has a franchise for the designated goods within the area and time limit stipulated in the agreement That is, the principal may not sell on its own or through other agents within the prescribed scope. In fact, many of our well-known brands in our daily lives operate in the form of “exclusive agents”. From clothing, watches to cars, exclusive agents are involved in almost all areas.

Since all industries in the offline industry can operate in the form of “exclusive agency”, why can’t the e-commerce platform operate in an “exclusive agreement”? The reason why many people have a negative attitude toward the “exclusive agreement” is actually the denial of many efforts in the operation of the e-commerce platform, or many people take it for granted that the traffic is falling from the sky without cost.

Four conclusions that are not conclusions

You can now make a preliminary conclusion on “two choices.”

I believe that the “two choices” that appear in the “exclusive agreement” is not a restriction on competition. On the contrary, it is a higher form of competition, and its essence is the platform’s distribution agreement for traffic. . Traffic is hard to come by, and the price is extremely expensive. The “exclusive agreement” is a package agreement between the platform and the merchant, including “cost, advertising location and traffic”. In the online business world, there are a wide range of “two choices” or “N ones” in various industries. Of course, this exclusive agent may trigger the “abuse of the market” advantage in certain circumstances, but so far we have not seen only a few words from the media reports, no more real hammer.

There has been a lot of literature showing that in the vast majority of cases – that is, what we see in the business world, exclusive trading agreements do not create a market lock-in effect, nor will they cause commodity prices to rise, not to cause Consumer welfare losses, why is Jingdong still willing to file a lawsuit in the name of “two choices one”?

The reason is that litigation is an optimal option: if the lawsuit wins, then the other party’s compensation can be obtained, and those who are subject to the “exclusive agreement”The troubled merchant can settle in its platform; if the lawsuit loses, it does not matter, because it is impossible to obtain this part of the business. But in the process of the spread of public opinion, the opponent has been given the reputation of “unfair competition” and “monopoly”. More importantly, the vast majority of viewers will based on plain psychological sympathy for the “weak.”

However, with Vipshop and the fight to join JD’s lawsuit against Tmall, the public’s sympathy for the “weak” will change slightly. The reason is that Jingdong and Tmall are not the same order of magnitude competition, but now they become a group after the change of nature, because these three companies have a common shareholder – Tencent.

Ali and Tencent are equal opponents, and “two choices” is no longer a “weapon of the weak.”

This article is from WeChat public account: fill volumes (ID: wwdg1116) , author: Fu Wei Gang