Regulation under administrative guidance: The case of China's forcing interoperability on digital platforms

Abstract

Whether policy-makers should mandate that various digital platforms be made interoperable with others and how to achieve it has sparked much controversy, while there is less discussion on the implementation and effectiveness of interoperability on digital platforms in specific contexts and given settings. This article examines the practice and outcome of Chinese policy-makers and regulators in promoting interoperability on digital platforms in the field of social media and mobile payment scenarios. China's practice shows that mandatory interoperability of platforms brings very limited convenience to consumers, and it hardly facilitates entry of small operators but rather facilitates expansion of other competitive platforms. The interoperability promoted by administrative forces unfairly provides a competitive advantage to state-owned enterprises and reduces the willingness of existing platforms to innovate and expand. These results corroborate international criticisms and concerns about mandatory interoperability, reflecting the very limited effect of mandatory interoperability on cracking the network blocking effect of internet platforms.