China regulates online algorithms in a bid to protect people’s interests and combat addictions
On March 1, the “Internet Information Service Algorithm Recommendation Management Regulations” (hereinafter referred to as “the regulation”), jointly published by the Cyberspace Administration of China and four other government agencies, has come into force.
The regulation states that all algorithm-based recommendation services must be transparent and interpretable, and bans the creation of illegal and unethical algorithm models, as well as the use of ones that tweak trending and hot search topic lists as they are prone to lead users to addiction, potentially tricking them into over-spending. Violations of the regulation result in fines or criminal charges.
“The misuse of algorithms, such as algorithmic discrimination, big data-enabled price discrimination, and inducing addictions, has long been criticized by netizens. The “Algorithmic evil” has become the root of misinformation and societal polarization. Therefore, such behaviours must be met by zero tolerance and severe punishment,” says Hu Gang, the Deputy Secretary General of the Legal Committee of the Internet Society of China, according to an article by People’s Daily Online.
For a long time, big tech companies in China have kept their algorithms’ operations a secret by claiming them to be intellectual properties or commercial secrets, and many of them have taken advantage of their users by tweaking the algorithm in ways that benefit them.
Big data-enabled price discrimination
Miss Hu, who is a frequent user of Trip.com, a hotel and flight booking service provider, has fallen victim to big data-enabled price discrimination in 2020. According to Hu, she booked a hotel room in the Trip.com app that cost 2889 yuan. However, upon checking out of the hotel, she found out that in reality the room she stayed in only cost 1377 yuan with tax included. She filed a lawsuit and in July 2021, the Keqiao District Court in Shaoxing City ruled in favour of Hu, ordering Trip.com to refund the full amount paid, in addition to a reimbursement three times the price difference. Trip.com has also been ordered to make changes to its users’ agreement, removing terms and conditions related to the collection and use of non-essential information about their users so that they don’t price-discriminate frequent users in the future.
Similar price discrimination behaviours have been practiced by food delivery and ride-hailing platforms as well. According to a research conducted by Professor Sun Jinyun of Fudan University, it is not just frequent users that fall victims to the crime, but users with more expensive phone models could get charged more as well.
In December 2020, a Meituan user complained about delivery fees in a post that went viral. According to @漂移神父, when he tried to order food delivery on Meituan through his regular account, the delivery fee was 6 yuan. Yet when he switched to a newly registered account, the delivery fee for the same restaurant was only 2 yuan. Meituan has since responded, citing a cache error as the culprit and claiming no malpractice was involved.
Algorithms trampling on workers’ rights
In July 2020, Weibo user @曹导 posted a video of her experiencing the daily life of a food delivery worker for several days. In the video, she exposed several dilemmas faced by them, such as always running late. According to @曹导, Meituan calculates the estimated delivery time based on the shortest, most direct route, but does not factor in the time it takes to find shops that are hidden in small alleys or underground. Meituan’s algorithm also plans routes while ignoring one-way streets, which means delivery workers would need to run red lights or drive in the wrong direction to deliver on time.
The video has triggered a collective outrage from food delivery workers, and has been covered by major news outlets in China. In response, China’s State Administration for Market Regulation and six other government agencies jointly published a guideline on protecting food delivery workers’ rights. The guideline emphasizes that food delivery platforms shall not use strict algorithms to evaluate workers’ performance, and should be more lenient on delivery times.
Addiction and overspending
The newly published regulation also focuses on the protection of “special groups” – the elderly and the underaged. It coincides with China’s ongoing move of cracking down on teenagers’ internet addictions and compelling apps and websites to make elderly-friendly versions.
China’s National Press and Publication Administration, along with other government agencies, has been tackling minors’ addiction problems by making game companies adjust their in-game purchase systems and limit minors’ playtime. Underaged players are now not allowed to make monthly-accumulated purchases of more than 400 yuan or play games for more than three hours a week. They are also encouraged and mandated to use minors-friendly versions of social media apps, which have time restrictions and less functions. For instance, users under 14 have to browse Douyin, a short video streaming platform, with “teenage mode” on, which limits the permitted usage timeframe to before 10 pm and after 6 am, with a maximum of 40 minutes in-app time.
In December 2020, the Ministry of Industry and Information Technology of China (MIIT) announced its plan to make the online experience easier for elders, the disabled, and other special groups. 115 websites and 43 apps were requested to make changes according to the regulation, where all forms of advertising and click-bait leading to downloads or purchases will be prohibited in the elderly-oriented versions.
The regulation is expected to help shape algorithms and algorithm-reliant companies to adapt to a more legal and ethical way of operating.
Fang Yu, director of the Internet Law Research Center of the China Academy of Information and Communications Research, believes that “the regulation is a comprehensive and effective response to the lack of algorithm governance in this era of digital change, and a scientific construction of an accountability system for online platforms,” according to an article by People’s Daily Online.
Meanwhile, some of these changes might hurt big tech companies’ profit models.
Last week, 14 government agencies in China jointly issued a notice suggesting take-out platforms to further reduce merchant service fees in order to lower the operating costs of restaurants.
After the notice was published, Meituan, one of China’s biggest platforms for food delivery and other daily services, saw its shares drop by 14.86%, amounting to a loss of HK 200 billion yuan. Eleme, Meituan’s biggest rival owned by Alibaba, has also suffered a loss.
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