SHANGHAI / HONG KONG (Reuters) – China imposed a record 18 billion yuan ($ 2.75 billion) fine on Alibaba Group Holding Ltd on Saturday, after an antimonopoly inquiry found that the e-commerce giant had its dominant market position for a abused for several years.
The fine, about 4% of Alibaba’s domestic revenue from 2019, comes amid a crackdown on technology conglomerates, suggesting that China’s antitrust enforcement on internet platforms has entered a new era after years of laissez-faire approach.
The Alibaba business empire has come under scrutiny in China since billionaire founder Jack Ma voiced critical criticism of the country’s regulatory system in October.
A month later, the government launched a planned $ 37 billion scholarship through Ant Group, Alibaba’s Internet finance arm, which would be the world’s largest ever. The State Administration for Market Regulation (SAMR) announced its antitrust investigation into the company in December.
While the fine brings Alibaba one step closer to solving its antitrust problems, Ant must still agree to a refurbishment that is expected to sharply lower its valuations and enchant some of its freewheeling businesses.
‘This fine will be considered by the market for the time being as a conclusion of the anti-monopoly case. This is indeed the highest anti-monopoly case in China, ”said Hong Hao, head of research at BOCOM International in Hong Kong.
“The market has been expecting a fine for some time … but people need to pay attention to the measures outside the anti-monopoly investigation.”
The SAMR said it had determined that Alibaba, which is listed in New York and Hong Kong, had abused market dominance since 2015 by withholding its merchants from using other online e-commerce platforms.
The practice, which the SAMR had previously spelled out as illegal, was in breach of China’s antimonopoly law by impeding the free distribution of goods and violating the business interests of traders, the regulator added.
In addition to the imposition of the fine, which is one of the highest antitrust fines worldwide, Alibaba has instructed to make ‘thorough corrections’ to strengthen internal compliance and protect consumer rights.
Alibaba said in a statement that it accepted the fine and “will ensure that it complies with determination”. The company is holding a conference on Monday to discuss the fine.
“We will openly address this and work through it together,” CEO Daniel Zhang said in a memo to staff seen by Reuters. “Let’s improve ourselves and start again as one together.”
The fine is more than double the $ 975 million paid in 2015 by Qualcomm, the world’s largest supplier of mobile chips, for competitive competition.
“There has been weakness in China’s large technology stocks, and I think this fine will be seen as a measure of any other fines that can be applied to the other companies,” said Louis Tse, managing director of Wealthy Securities in Hong Kong. said.
‘CLEAR POLICY SIGNAL’
The severe punishment on Alibaba also comes against the backdrop of regulators worldwide, including in the United States and Europe, which have tightened antitrust ratings from technology giants such as Alphabet Inc’s Google and Facebook Inc.
With the fine on one of its most successful private enterprises, Beijing is making threats to hold on to the ‘platform economy’ and curb the retention that plays a dominant role in the country’s consumer sector.
“What comes after Alibaba’s fine is the likelihood that there will be damage to China’s other internet giants,” said Francis Lun, CEO of GEO Securities, Hong Kong.
‘Their growth has been enormous, and the government has turned a blind eye and allowed them to carry out uncompetitive practices. They can no longer do that. ”
China’s big technology companies have stepped up the increase in legal and compliance experts and set aside funds for potential fines, amid the retaliation and protection of data privacy by regulators, Reuters reported in February.
Official Chinese media praised the punishment imposed on Alibaba, saying it would set an example and raise awareness of antimonopoly practices and the need to comply with related laws.
The fine prompted a “clear policy instrument,” Shi Jianzhong, a member of the State Council’s antitrust advisory committee and professor at the Chinese University of Political Science and Law, wrote in the state-sponsored Economic Times.
Cape Town-based analyst Wium Malan Wium Malan, who publishes on the Smartkarma platform, reiterated the sentiment, describing the fine as a ‘clear statement of intent’.
For Alibaba, Malan said, the fine is ‘affordable’, but that the market is still ‘waiting to see what the ultimate impact of the restructuring of the Ant Group would be, leaving much uncertainty’.
($ 1 = 6.5522 yuan)
Reporting by Cheng Leng, Scott Murdoch, Yilei Sun, Josh Horwitz, Zoey Zhang, Yingzhi Yang, Kane Wu and David Stanway; Written by Sumeet Chatterjee; Edited by Himani Sarkar and William Mallard