On December 26, 2022, after nearly seven months of investigation, the State Administration for Market Regulation determined that HowNet has a dominant market position and abused this dominant position to implement monopolistic behavior, and imposed administrative penalties on it according to law: order HowNet to stop illegal activities , and imposed a fine of 5% of its sales in China in 2021 of 1.752 billion yuan, totaling 87.6 million yuan. At the same time, CNKI is required to carry out comprehensive rectification around the termination of exclusive cooperation, reduction of user burden, and strengthening of internal compliance management.
HowNet’s response was to accept it sincerely and obey.
Since the beginning of the year, many scientific research institutes and universities have announced that they will not renew their subscriptions due to the subscription fee of tens of millions of yuan in HowNet databases. These big customers are still unbearable, and the situation is even more difficult for individuals who want to protect their rights. In this sense, HowNet’s punishment is a big surprise for Chinese academic circles this year, and it was a late surprise.
Objectively speaking, for enterprises with long-term monopoly status, even according to the provisions of Article 56 of the Anti-monopoly Law, if the operator violates the provisions of this law and reaches and implements a monopoly agreement, the anti-monopoly The monopoly law enforcement agency ordered to stop illegal activities, confiscated illegal gains, and imposed a fine of not less than 1% but not more than 10% of the previous year's sales, which is still too gentle.
The penalty did not mention the information on the corresponding treatment of illegal income, so it can be inferred that HowNet basically only received penalties for the sales volume of the previous year. In contrast, in foreign countries, once the judiciary determines that a certain company is a monopoly, the penalties imposed are very high.
Objectively speaking, the long-term accumulated problems of HowNet can be decomposed into two parallel problems. First, the issue of intellectual property rights, which involves the distribution of benefits in the knowledge transmission chain between authors, journals and HowNet; second, how NetChina abused its monopoly position to raise prices and "rob" consumers.
This led to a more complicated merger problem, that is, HowNet earned improper excess profits through monopoly, but the money was not used to solve the problem of profit distribution at the front end of the knowledge transfer chain, resulting in knowledge production at the front end of the knowledge chain. The interests of the author (author) have not been reasonably compensated. Consumers at the end of the knowledge transfer chain are being "robbed" wantonly by monopoly companies, and consumers are very dissatisfied.
This led to the monopoly behavior implemented by CNKI abusing its dominant position, causing actual harm to both authors and consumers. Therefore, in this punishment incident, all parties concerned appeared to attack CNKI with one voice. It is a pity that the State Administration for Market Regulation only dealt with the second issue this time. The long-standing deep-seated problems of HowNet have not been touched, and the correction effect is limited. At best, it appeases the emotions of consumers at the end of the knowledge transmission chain Moreover, this appeasement effect depends on the extent to which HowNet implements the punishment and rectification requirements.
Then, in the long run, how to solve the deep-seated structural problems facing HowNet?
In order to solve the bullying of knowledge producers and consumers by digital platforms represented by CNKI from the root, it is necessary to simply decompose the structure of the knowledge transfer chain in order to find a solution.
Generally speaking, the structure of the knowledge transfer chain is as follows: knowledge producers, periodicals, digital platforms (such as HowNet), and knowledge consumers. As far as the current knowledge production process in China is concerned, the author can only get a symbolic contribution fee from the journal after writing the article, after submission, review, acceptance and publication (many journals even require the author to pay a large amount of page fee), while the knowledge Net buys out the knowledge copyright of periodicals exclusively at a symbolic price, and then sells knowledge content to consumers through digital platforms.
In the absence of supervision and weak bargaining power at the front and end of the knowledge chain, digital platforms can "rob" producers and consumers without any scruples based on their monopoly position.
In the era of knowledge economy, scientific research is inseparable from scientific literature for a moment, and there is a rigid demand for digital platforms. As a result, periodicals and front-end and back-end users have become sticky to digital platforms. In this sense, the arrogance of the digital platform is based on the precise analysis of the market and user needs.
The paradox is that knowledge products are originally a kind of public goods, and only when they overflow can they produce extensive meaning. This work should be provided by the state, but once it is the turn of the state to provide this matter, it is likely to be inefficient and difficult to achieve. It will cause a lack of incentive mechanism, which is why even if we know how to bully consumers, we cannot rashly suggest that it should be nationalized.
However, as an enterprise, it is inevitable that the sole purpose of pursuing profit maximization in the market is the same as not asking wolves not to eat sheep. Punishment is nothing more than letting the wolf (digital platform) form a conditioned reflex, once triggered, there will be corresponding consequences (organizational memory of the enterprise).
In order to make punishment effective, the intensity and frequency of punishment must be guaranteed, but this will stifle the vitality and innovation ability of enterprises. So how do you design a long-term solution?
There are usually two strategies for dealing with monopolistic behavior of companies, namely fines and break-up. Fines are the most common strategy, such as the punishment for HowNet. If the degree of monopoly of the enterprise is higher, and there are no enterprises in the market that can restrict it, the effect of fines will become smaller at this time. After all, these super monopoly enterprises will pass on the cost. means to eliminate the dominance of monopoly enterprises on the market. This approach can completely solve the monopoly problem, but its consequences are uncertain, and it often leads to the decline of a company from then on.
The most famous antitrust split in history is the split of AT&T, the American Telegraph and Telephone Company (formerly the Bell Telephone Company founded in 1877). In 1984, the U.S. Department of Justice prosecuted and won the case under the federal antitrust law (the Ginsburg Agreement), and the Telegraph and Telephone Company was split into AT&T and seven regional Bell companies. As the saying goes, "When a whale falls, everything grows", American Telecom has since entered the era of competition. Although this solution solved the monopoly problem, it also led to the decline of the telegraph and telephone company (as well as continuous mistakes in business decisions, etc.).
So for HowNet, which is used to domineering, is there a third way besides a single fine or split?
China's digital platform monopoly companies are still in their infancy, and it is not easy to split them up directly, otherwise it will cause the overall decline of the industry, but it can be solved through a variant of splitting, that is, the model of cultivating competitors, such as supporting Wanfang, Digital platform companies such as VIP to create a competitive environment.
Based on this consideration, in order to solve the monopolistic predatory behavior of HowNet from the root, the author believes that the two-in-one model that represents the third path can be adopted, that is, "fine + cultivate competitors". The fine is for short-term behavior, as long as If the rectification is not in place, fines will be imposed. For example, CNKI regularly checks the implementation of the terms of the termination of the exclusive cooperation agreement (this is its main means to curb competitors and obtain excess monopoly profits).
In addition, a variety of policy tools can be used to intensify the cultivation of competitors. Over time, when competitors gradually grow, competition can solve problems that we seem to have no solution today.
This two-in-one model takes into account both short-term and long-term multi-party demands and goals. In the short term, digital platform companies represented by HowNet dare not wantonly plunder the upstream and downstream producers and consumers of the knowledge chain (such as raising service prices, splitting Database price increases in disguise, exclusive monopoly of master's and doctoral dissertations, etc.). In the long run, the existence of a large number of competitors prevents it from doing anything wrong, otherwise it would be suicide for the enterprise.
(The author, Li Xia, is the dean of the Institute of History of Science and Culture of Science, Shanghai Jiaotong University. The original title is "Is there a third way from fines to splitting Chinese paper platforms?")
