It was definitely a humbling week for three of the world’s largest, high-profile ecommerce and financial technology companies. In a span of 10 days, Apple, Tencent and Alibaba were forced to redress what was heretofore alleged to have been anti-competitive business practices, in particular, practices found to be detrimental to consumer choice of payment options for purchases made in the three tech giants’ platforms. Last Friday, September 10th, Judge Yvonne Gonzalez Rogers of the Northern District of California issued an injunction in the Epic Games, Inc. v. Apple Inc. case, precluding Apple from prohibiting app developers from providing alternative payment methods to App Store users. On Monday, September 13th, the Financial Times reported that an agreement had been reached between Chinese heavyweights Tencent and Alibaba and the Ministry of Industry and Information Technology (MIIT) that would discontinue the practice by both companies of banning their respective, native payment systems on each other’s platforms. Though the outcomes were the same in both situations – more competition and more choice in payments – the processes leading to those outcomes were very different, to the extent, albeit in a strange way, the Chinese MIIT’s intervention seemed more oriented towards protecting the consumer.
The lawsuit brought by Epic Games in August 2020 was driven by profit. On its face, the antitrust claim was for anti-competitive practices: Apple wouldn’t allow Epic or any of its other app developers to utilize their own payments mechanisms. As a consequence of this business practice, Apple captured 100% of the payments processing revenue derived from its App Store purchases. Epic’s argument was reasonable and clearly possessed sufficient merit to bring the action, and the ensuing injunction against Apple. But worthy of note is the bottom-up nature of the litigation, driven by corporate disagreement of a business practice, and perpetuated and resolved through the US court system.In contrast, the end to what has been euphemistically called the “walled gardens” of zero-interoperability between Tencent and Alibaba, including payments, was a top-down action by way of government edict. The Peoples Republic of China (PRC) decided that the lack of cooperation between the two tech behemoths was anti-competitive, and intervened to enjoin the practice accordingly. Granted, the rather opaque inner workings of the PRC make their exact motives hard to determine. But on its face, the outcome of the MIIT intervention lead directly to greater consumer choice and a more competitive market.There are many dimensions to these latest developments, but the common theme is that BIG-tech will continue to garner intense scrutiny from governments. Especially the governments of the world’s two largest economies. Though redress for perceived anti-competitive business practices may come from very different processes in the US and China, the outcomes are similar: more competition and more choice in payments.