Alibaba Group Holding Limited (NASDAQ: BABY) rubbed the almighty Chinese Communist Party the wrong way and as a result, the e-commerce giant faced an increasing regulatory investigation.
What happened: China antitrust regulators are considering imposing a fine of more than $ 975 million on Alibaba, the Wall Street Journal reported Thursday, citing people familiar with the matter.
If the fine is realized, it is the highest fine paid in Chinese corporate history.
In 2015, QUALCOMM Incorporated (NASDAQ: QCOM) paid $ 975 million to complete competition investigations into anti-competitive practices.
Late last year, Chinese regulators began arresting Alibaba and its Ant Financial subsidiary.
Ant Financial was reprimanded for being a risk to the financial system, and was asked to introduce changes that could seriously hamper its business prospects.
Alibaba had to draw up IP plans for Ant Financial.
Related link: Why this analyst says investors should buy Alibaba’s recent weakness
Having taken a soft stance towards Alibaba early on, given China’s dominant market position and popularity among global investors, regulators have now said founder Jack Ma’s e-commerce giant should loosen up or face the music, reads the WSJ report.
The fine will come into play if Alibaba does not comply with the dictatorship of the local communist party and does not end the policy of asking local traders to maintain exclusive relations with Alibaba, the report said.
Alibaba may also be forced to sell some of its non-core businesses from its core trading operations.
What’s next: Alibaba has deep pockets and can afford to pay off any potential fine. Some executives believe that the fine of the company and its shares is paid off by the fine.
Alibaba’s share, which retreated after the regulatory inquiry late last year, began to recover in the new year.
The technical sell-off launched in February led to renewed sales in the stock.
BABY prize action: In the latest survey, Alibaba shares rose 2.8% to $ 240.85.
Related link: How to buy Alibaba (BABA) stock
Jack Ma, co-founder of Alibaba. Benzinga File Photo by Dustin Blitchok.
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