Increasing scrutiny could stall rise of ecommerce platforms, as TikTok faces US ban

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The Loadstar has launched a series of reports on the ecommerce sector, which has been driving growth in air cargo. But are there clouds on the horizon that should worry air cargo stakeholders in particular?

An explosion in the number of Chinese ecommerce outfits has been accompanied by an equally strong uptick in scrutiny coming from the halls of western governments. This week the US has told the owners of Chinese social media phenomenon TikTok to sell up – or face a nationwide ban.

The US’ lower chamber passed the legislation requiring TikTok’s owner Bytedance to divest itself of the short video app, used by 170m Americans, over the next 9-12 months. The legislation includes TikTok Shop, the ecommerce platform.

Following hot on the House’s heels, the Senate – in a rare show of cross-party consensus – voted 79-18 in favour of the legislation, which was attached to a bill pertaining to ongoing military support for Ukraine, with Biden expected to sign it into law imminently.

Republican senator Marco Rubio said: “For years we’ve allowed the Chinese Communist party to control one of the most popular apps in America that was dangerously short-sighted.

Mr Rubio, who was quoted by Reuters, went on to describe the legislation as a “good move for America,” although quite how fast it will take effect remains in the air, with Bytedance expected to query the decision in the courts.

Washington DC is by no means alone, however, in its pursuit of what is seen by many as a forceful push by Chinese online platforms into overseas markets.

Last month news broke of South Korea’s Fair Trade Commission (SKFTC) investigating the activities of one of the biggest Chinese ecommerce outfits, after having received more than 700 complaints against AliExpress in a 13-month window over its purported unfair practices.

This came fast on the heels of the EU announcing its own investigation into the company after allegations that the online shopping platform had been selling illegal pornography.

Research analyst at Transport Intelligence, Nia Hudson, said that amidst these investigations, Shein and Temu had also found themselves under the spotlight, with France and South Korea moving ahead with legislation to “curtail the influence of Chinese ecommerce companies”.

For those competing with these Chinese firms, the proposals seem to be tackling markedly different aspects of that “influence”.

“In March, France’s parliament voted to slow down low-cost ultra-fast fashion products sold by companies like Shein and Temu by gradually increasing penalties of up to €10 euros ($11) per item by 2030, it also banned advertising these products,” Ms Hudson told The Loadstar.

By contrast, Seoul’s concern pertains to its “service and support obligations,” with proposals that foreign online platforms designate a domestic agent responsible for consumer services.

This, however, does not appear to address the crux of the issue that South Korea’s SMEs are having to face up to, namely Chinese platforms’ ability to capitalise on favourable import rules for goods that are valued under $150 – contrary to rules for domestic firms.

Academics have said that, together with their access to the cheap labour found in China and “ultra-low” shipping costs, Chinese platforms have proved “lethal” to domestic businesses.

But, while the SKFTC investigation at present is only targeting AliExpress, which received 212 complaints against it in January alone, more than those made against it across the entirety of 2022, expectations are that Temu and Shein will find themselves under investigation.

Certainly, looking at the numbers one gets the sense of an aggressive play by Chinese firms, all of which may explain the rapid dip in new SME start-ups in South Korea.

A report from the country’s Small and Medium-sized Ventures Department showed that the number of new start-ups had fallen 0.5% in 2023, this compared unfavourably to the growth levels it recorded in 2022 (13.4%) and 2021 (11.6%).

And yet it would be disingenuous to claim that Chinese ecommerce was acting contrary to rules set by existing behemoths in the online sphere.

Indeed, Ms Hudson noted that while Western governments may not have the same control over companies like Amazon, ecommerce companies in the West have benefited from continued government support.

“Amazon has received at least $6.7bn in public subsidies over the past decade according to a US-based non-profit,” she continued.

“Around $600m of this was public assistance in more than a dozen countries outside of the US. Amazon Web Services is also a major beneficiary of government contracts, whilst Walmart is the beneficiary of billions of dollars per year in federal subsidies and tax breaks.”

Despite noting the similarities in approach, she said there remained far larger red flags that resulted from the Chinese government’s influence over its platforms.

Central to these are reported demands from the state that companies like Alibaba and TikTok surrender the rash of data that they have been collating from their customers as part of its push towards enhanced levels of control and surveillance.

For SMEs, legislative priorities should focus on the monopolisation by platforms like Temu, Shein, and Alibaba – not to mention Amazon – that have hindered their entry to market.

“Ultimately, if we want to hold Chinese ecommerce operators to higher standards, this is going to have to happen through continued scrutiny and more regulations, which should be applied to all large ecommerce operators fairly – ie Amazon,” added Ms Hudson.

“The EU is likely the institute that will pursue the most accountability, although we could be in for dramatic increase in tariffs and legislation from the US if Trump is re-elected.”