China fines database owner $12.6 million for antitrust violation

China’s antitrust watchdog fined China National Knowledge Infrastructure (CNKI) 87.6 million yuan (US$12.6 million) for monopolistic behaviour, while the nation’s biggest academic database owner awaits a cybersecurity review.

The State Administration for Market Regulation (SAMR) on Monday announced a fine equivalent to 5 per cent of CNKI’s 2021 revenue of 1.75 billion yuan, after a seven-month investigation that found the private company abused its dominant position in the local market.

The CNKI platform, where the majority of Chinese scholars and students access academic papers, has imposed unreasonable price hikes on user subscriptions, SAMR said in a statement. The firm platform also forced publishers and educational institutions to work exclusively with it since 2014, violating antitrust laws, it added.

CNKI said it will “accept sincerely and obey resolutely” the penalty, and announced 15 rectification measures including ending exclusive agreements with universities and cutting its database subscription fees by 30 per cent in the next three years.

The fine put an end to the SAMR’s antitrust investigation launched in May. A probe initiated by the Cyberspace Administration of China (CAC) in June is still ongoing, on the grounds that CNKI holds a large amount of personal information and important data covering areas that include national defence, telecommunications and finance.

The controversy of CNKI came under spotlight when the Chinese Academy of Sciences (CAS), the country’s top natural science research institution, said in April it would suspend its use of the country’s largest online academic database because of its hefty annual fees.

Prior to the CAC move, at least six Chinese universities had suspended use of CNKI because of substantial fee increases over the past decade, according to mainland media reports.

The SAMR investigation showed that the academic database fees have been increasing at an annual rate of over 10 per cent since 2014, with price hikes over 30 per cent for certain clients. Yet, its costs of acquiring academic papers merely rose by 1.5 per cent each year.

CNKI started building its massive collection of published academic papers in the late 1990s, as internet use started to take off in China. It was initiated under Tsinghua University’s commercial arm Tsinghua Tongfang as a service for local universities and research institutions with the approvals of Chinese authorities.

CNKI built its market dominance by amassing over 95 per cent of Chinese academic papers that were formally published, according to SAMR’s investigation. Its platform accounted for nearly 70 per cent of the total revenues of all Chinese academic data providers in 2021.

The penalty was the latest move by market regulators to discipline the “platform economy” in the country, following record fines imposed on domestic tech giants including Alibaba Group Holding and Meituan for “pick one from two” monopolistic practices.

Last year e-commerce giant Alibaba, the owner of this newspaper, paid a record 18.2 billion yuan fine, or 4 per cent of its 2019 domestic sales, after an antitrust investigation. Meituan, an on-demand local services provider, was fined 3.44 billion yuan, or 3 per cent of its domestic revenue in 2020.

CNKI’s cybersecurity probe, on the other hand, was the first since China put new regulations to work in February, which require an additional layer of oversight for tech platforms that seek to conduct initial public offerings in foreign markets.

Last July, the CAC initiated a review of Didi Chuxing, days after the ride-hailing giant angered Beijing with its initial public offering in New York. The firm was slapped with a fine of 8.026 billion yuan a year later. South China Morning Post