Red Alert: Lessons from Misguided Platform Regulation in China

Sean Heather
Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce

Published

December 02, 2025

Countries around the world are considering competition platform regulations like the EU's Digital Markets Act (DMA): laws targeting leading American companies for regulation with the hope that by doing so it will boost competition, spur greater investment, and generate startups within industries most reliant on these often so-called "gatekeeper" companies. The approach is grounded in the belief that gatekeeper companies have become "essential" to various marketplaces and, therefore, regulation is necessary to control them to maximize competition.

But is this true?

The DMA has drawn plenty of criticism, yet other countries around the world continue to contemplate doing something similar. Often overlooked in this conversation is China. China adopted its version of the DMA a year ahead of Europe. Its law restricts its own privately held companies like Alibaba and Tencent from various practices such as self-preferencing. China hoped that by controlling these companies, it could help other smaller companies that rely on these platforms to better compete, innovate, and grow.

Now, new, first-of-its-kind research empirically measured China's DMA experiment. The results show that DMA-style regulation failed to deliver its hoped outcomes. The study, Antitrust Platform Regulation and Entrepreneurship: Evidence from China, found that, rather than fostering competition and entrepreneurship, the regulations stifled innovation and discouraged investment across multiple affected industries.

Among the key findings, China's economy saw the following:

Decline in Venture Capital Investment. The number of investments in affected industries reliant on gatekeepers dropped by 22.66% as investors became wary of regulatory uncertainty.
Fewer Startups. The number of new startups decreased by 17.37%, as "new market entrants tend to avoid becoming copycats of platform giants following the policy's enactment."
Shift Away from Platform-Related Business Models. New entrants consciously avoided business models similar to those of the regulated platform giants, reducing competition depriving consumers of the benefits of the platform model.
No Evidence of Positive Spillovers. The study found no evidence that the regulations encouraged investment in alternative industries or regions.

A Cautionary Tale

These findings highlight the problem with DMA-style regulation. Not only were the intended benefits from DMA-style regulation nonexistent, but across the 41 industries most impacted by Chinese "gatekeepers" investment in those industries fell, and startups declined.

As countries around the world debate the merits of DMA-style regulation, evidence from China shows that government's ability to know best how to maximize competition in the marketplace remains elusive.