Bloomberg
Record Alibaba Fine Programs, China’s Big Technology Can’t Fight Back
(Bloomberg) – After China Alibaba Group Holding Ltd imposed a record fine, the e-commerce giant did an unusual thing: it thanked regulators. “Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance and support of all our constituencies has been crucial to our development,” the company said in an open letter. “We are full of gratitude and respect for this.” This is a sign of how strangely China’s power struggle with the great technology has been compared to the rest of the world. Mark Zuckerberg and Tim Cook are unlikely to express such public gratitude as the U.S. government Facebook Inc. of Apple Inc. with a record fine on antitrust would not strike. Almost everything about China’s regulatory push is extraordinary. Beijing regulators have completed their special investigation in just four months compared to the years that such investigations take in the US or Europe. They have sent a clear message to the country’s largest companies and their leaders that anti-competitive behavior will have consequences. For Alibaba, the $ 2.8 billion fine was less serious than many feared, helping to lift a cloud of uncertainty hanging over founder Jack Ma’s internet empire. The fine of 18.2 billion yuan was based on just 4% of the internet giant’s domestic revenue from 2019, regulators said. Although this is the previous high of almost $ 1 billion that the American disc maker Qualcomm Inc. handed over in 2015, tripled, it is much less than the maximum 10% allowed under Chinese law. Alibaba shares rose more than 8% in Hong Kong on Monday. “We are delighted to get the matter back on track,” Joseph Tsai, co-founder and vice chairman, said on Monday in an investor call. “This regulatory action is being taken to ensure fair competition.” The fine comes with a plethora of “corrections” that Alibaba will have to impose – such as forcing the practice to force traders to choose between Alibaba or a competitive platform – many of which the company has already promised to set up. But Tsai said regulators would not impose radical changes to their e-commerce strategy. Instead, he and other executives promised to open up Alibaba’s marketplaces more, lowering costs for retailers while spending ‘billions of yuan’ to help customers handle e-commerce. According to Tai, the company is unaware of any other antitrust investigations into the company, except for an earlier discussed investigation into acquisitions and investments by Alibaba and other technology giants. “The required corrective action is likely to limit Alibaba’s revenue growth as further market share expansion will be curtailed,” said Lina Choi, senior vice president at Moody’s Investors Service. , said in a note. “Investments to retain traders and upgrade products and services will also reduce its profit margins.” Alibaba chief executive Daniel Zhang said on Saturday that his company was now ready to continue its ordeal, while People’s Daily’s mouthpiece People’s Daily of China gave the assurance that Beijing was not. The sector is trying to suffocate. The Hangzhou company “escaped possible results, such as a forced break-up or sale of assets. The fine will also not shake up his business model, “said Jet Deng, an antitrust lawyer at the Dentons law firm’s Beijing office. Beijing still plans to enter its internet and fintech giants, a broad-based campaign which has wiped out more than $ 250 billion Alibaba’s valuation since October The rapid capitulation of the e-commerce giant underscores its vulnerability to further regulatory action – far from just six years ago, when Alibaba openly awaited the waiting of one agency over counterfeiting counterfeit goods on Taobao and finally forcing the state administration for industry and trade to return On Monday, shares in Alibaba’s fellow internet giants of social media, the Tenan Holdings Ltd, to Meituan and the food leader, and JD.com Inc. “This is exactly what the market is currently thinking: Tencent and Meituan are next in line if the same standards are to be applied, but even the worst e will not be so bad, “said Zhuang Jiapeng, a fund manager at Shenzhen JM Capital. In addition to antitrust, government agencies are said to be investigating other parts of Ma’s empire, including Ant Group Co. consumer loans and Alibaba’s extensive media holdings. And the shock of the repression will continue to resonate with peers from Tencent and Baidu Inc. to Meituan, who will force them to speak more cautiously for some time about expansions and acquisitions of affairs. Bloomberg intelligence says China’s record fine on Alibaba could reverse the regulatory overhaul the company has suffered since the start of an anti-monopoly probe in late December. The fine of 18.2 billion yuan ($ 2.8 billion), to penalize the anti-competitive practice of merchant exclusivity, equates to 4% of Alibaba’s domestic sales in 2019. Yet the company must be conservative with acquisitions and its broader business practices. – Vey-Sern Ling and Tiffany Tam, analysts Click here for full research. The investigation into Alibaba was one of the first salvos in a campaign apparently designed to curb the power of China’s internet leaders, which kicked off after Ma the Chinese credit providers, regulators who do not get the internet, and the ‘ old men ‘of the global banking community reprimanded on a “pawn shop” Chinese credit providers. These comments have sparked unprecedented regulatory outrage, including Ant’s initial $ 35 billion public offering, and it remains unclear whether the watchdog or other agencies can demand further action. Regulators, for example, are said to be concerned about Alibaba’s ability to hold public talks and want the company to sell some of its media assets, including the South China Morning Post, Hong Kong’s leading English-language newspaper. Read more: China presses Alibaba to sell Media Assets, including SCMPChina’s leading financial regulators, now sees Tencent as the next target for increased oversight, Bloomberg News reported. And the central bank is said to be in talks to set up a joint venture with local technology giants to oversee the lucrative data it collects from hundreds of millions of consumers, leading to a significant increase in regulators’ efforts to seize about strengthening the country will be. Internet sector. “The high fine puts the regulator in the media’s spotlight and sends a strong signal to the technology sector that such types of exclusions will no longer be tolerated,” said Angela Zhang, author of “Chinese Antitrust Exception” and director of the Center for Chinese Law at the University of Hong Kong. “It’s a stone that kills two birds.” For now, it seems that investors are just happy that it was not worse. In its statement, the state administration for market regulation concluded that Alibaba used data and algorithms “to maintain and strengthen its own market power and gain undue competitive advantage.” According to the statement, retailers are introducing ” choose one of two ” choices and restricting competition in the local online retail market. The firm will be expected to implement ‘comprehensive corrections’, including strengthening internal controls, maintaining fair competition and protecting businesses on its platform and consumer rights, the regulator said. It will have to submit reports on self-regulation to the government for three consecutive years. The company will have to make adjustments, but can now ‘start all over again’, Zhang wrote in a memorandum to Alibaba’s employees. anti-monopoly investigation into BABA is being addressed by SAMR’s recent ruling and fines, ”Jefferies analysts said in a research note entitled A New Startpoint. “Indeed, The People’s Daily said in its comments on Saturday that the punishment was only intended to” prevent the disorderly expansion of capital. “This does not mean denying the significant role of platform economy in overall economic and social development, nor does it point to a shift in attitudes in terms of the country’s support for the platform economy, “the newspaper said.” Regulations are for better development, and ‘cleansing in’ is also a kind of love. ” (Updates with shares and comments from the fifth paragraph) For more articles like this, please visit us at Bloomberg.com Sign up now to stay ahead of the most trusted business news source. © 2021 Bloomberg LP