‘AINFORMATION, China’s State Administration for Market Regulation [SAMR] started investigating [into] Alibaba Group for alleged monopolistic conduct, including the implementation of an ‘exclusive trade agreement’. This brief note, posted by Xinhua, the state news agency, on December 24, was all that was needed to reduce China’s most powerful online titan to size. Not even the announcement three days later of an extra $ 6 billion share repurchase halted the rise in its market value. By December 28, it had fallen by 13%, or $ 91 billion. By comparison, the U.S. regulators’ detailed charge sheets against tech giants like Facebook and Google have elicited a yawn from investors in recent weeks.
The Alibaba inquiry is the first of its kind regarding Chinese e-commerce. Its timing – a month after the authorities abruptly stopped the initial $ 37 billion public offering (IPO) from Alibaba’s fintech subsidiary, Ant Group, and a few days before regulators told Ant to curb lending and wealth management activities – suggesting that it’s China’s way of chastising the flamboyant co – founder, Jack Ma, of the two companies .
It can be. Mier’s IPO was put on ice after Mr Ma compared China’s state banks to pawn shops. Chinese watchdogs often launch lightning to deter others from misbehaving, says Angela Zhang of the University of Hong Kong. But the sin also raises concerns about the online economy, which is bubbly but also increasingly concentrated. As investors analyzed the Xinhua note, the share prices of other internet giants, such as Tencent and Meituan, fell almost as sharply as those of Alibaba.
The complaint against Alibaba is about the practice of dealers or brands signing contracts to sell products exclusively on its platform. Those who do business in competitive markets run the risk of diverting internet traffic from their online stores on Alibaba’s Tmall emporium to other sellers.
Such arrangements are not new. In 2015 JD.com, a smaller e-emporium backed by Tencent, has filed a legal claim against Alibaba over a similar issue. They are also not unique to mr. Mom’s firm that launched a competitive complaint JD.com the same year. These and other complaints have since been largely ignored by regulators. Why the turn?
Chinese trustbusters have long resisted the bump of an industry that is considered world-beating and supported in Beijing. Now, as in the West, they are worried that some giant control essential services – e-commerce, logistics, payments, ride, food delivery, social media, messaging. Common practices, such as selling products below cost to attract customers, seem more worrying in an industry where the top three companies control more than 90% of the market than in a less concentrated enterprise. In November SAMR said that offering buyers different prices based on their spending power, apart from user data, may be illegal.
Another reason for China’s newfound zeal (Mr. Mom’s jibes aside) is greater confidence. SAMR was only established in 2018 by combining the offices of three regulators. It is still struggling to keep up with the rapidly changing online market; most staff are evaluating mergers and acquisitions. But it has more expertise and manpower than before – and it seems eager to harness it.
This article appears in the Business section of the print edition under the heading “Mo money, Ma problems”