China seeks to tighten rules on unfair internet competition, sending tech shares lower - CNBC

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GUANGZHOU, China — China's market regulator issued draft rules on Tuesday aimed at stopping unfair competition on the internet, as Beijing continues its broad crack down on the country's technology sector.

The rules published by the State Administration for Market Regulation (SAMR) cover a wide range of areas from prohibitions on the way companies can use data to stamping out fake product reviews.

Chinese listed technology stocks in Hong Kong fell sharply on that news. Gaming giant Tencent was 3.5% lower in late morning trade, while e-commerce giant Alibaba fell 2.5%.

SAMR's latest rules continue Beijing's regulatory assault on China's technology giants.

Here are some of the other key rules outlined:

• Operators should not provide false data, such as the number of clicks on a piece of content;
• Operators should not conceal negative reviews and only promote positive reviews;
• Internet platforms should not use data, algorithms and other technical means to influence user choices, or other methods to carry out so-called traffic hijacking. This is where a company looks to redirect a user to their own website or service while they're browsing another;
• Operators should not use data and algorithms to collect and analyze competitors' trading information.

SAMR said it could hire third-party institutions to audit data if an operator falls foul of the rules.

The regulator is seeking public opinion on the new rules until Sept. 15. They have not yet come into effect.

However, SAMR's draft rules highlight the market regulator's push to tighten the laws around antitrust and competition. Earlier this year, the authority promulgated antitrust guidelines for the so-called platform economy.

The regulator has also been taking action against China's technology giants.

Alibaba was slapped with a $2.8 billion fine in April as a result of an anti-monopoly probe, and SAMR is currently investigating food delivery firm Meituan for "suspected monopolistic practices."

And last month, the SAMR blocked Tencent's plan to merge video game streaming sites Huya and DouYu on antitrust concerns.

— CNBC's Iris Wang contributed to this story.

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