China’s antitrust probe goes into zero on Alibaba pressure suppliers’ claims

The antitrust investigation, revealed on Thursday by the Beijing State Administration for Market Regulation, adds to the pressure on China’s largest technology giants, which have spent much of the past year receiving a concerted attempt from the Trump administration to prevent access to U.S. markets and suppliers.

The timing of the Alibaba probe, which joined a regulatory call on Thursday for Ant Group, the financial giant of Alibaba, is the latest evidence of a global change in the regulation of technology giants that until recently was they celebrated to create wealth, even as they rose. the market.

Nationally, China’s two regulatory actions on Thursday also marked the latest decline in the rapidly deteriorating political fortune of Jack Ma, founder of Albaba and billionaire of Ant. Just a few weeks earlier, Mr Ma, who was at the head of a planned public box office list in Ant, used a high-profile speech at a regulatory event to excorel senior government officials for what he called his outdated mentality. .

Since then, the initial public offering has been rejected and regulators have warned of tighter control of the technology industry.

If political concerns about Alibaba are new, the complaints raised by Beijing’s top market regulator on Thursday are not. Accusations about the practice, called “er xuan yi” – literally, “choose one in two” – have been a mainstay of China’s online retail sector for at least five years as Alibaba, the operator of the dominant platforms. of e-commerce Tmall, seemed to lead the rise of rival JD.com Inc.

and, more recently, fast-growing Pinduoduo Inc.

According to Alibaba’s competitors and some traders, the company has punished certain brands that sell products to both Alibaba and its rival platforms. These moves include preventing them from participating in high-traffic promotions on Alibaba’s services or lowering listings in search results, said Ben Cavendar, managing director of China Market Research Group in Shanghai.

Alibaba said on Thursday it would cooperate with regulators, but did not make specific comments on the allegations of “er xuan yi.” Last year, a former senior executive at the company described the practice in a personal post on social media as an industry standard.

In 2015, JD.com filed a complaint with the market regulator, saying Alibaba had forced vendors to choose between Tmall and other platforms. According to JD.com’s complaint at the time, Alibaba threatened to limit traffic and resources to brands coming to both Alibaba and JD.com platforms during an annual shopping festival.

It is unclear what happened to JD.com’s initial complaint and neither company responded to requests for comment Thursday on the complaint. But two years later, JD.com sued Alibaba for the alleged practice.

According to a legal document in the case, JD.com said Alibaba’s Tmall had asked for commitments from traders not to open stores on the JD.com platform. Beijing-based JD.com said at the time that Alibaba had been involved in similar practices since 2013 and asked the court for 1 billion yuan, equivalent to $ 153 million, in compensation.

The case is still being processed and neither company responded to requests for comment. JD.com chief financial officer, in a 2017 earnings call with analysts, acknowledged the dispute and said more than 100 brands had withdrawn from the JD.com platform due to “the practice of certain competencies “, without detailing it.

Traders have also complained. In October 2019, Guangdong Galanz Enterprise Co., a large microwave oven manufacturer based in southern China, sued Tmall after Galanz’s online traffic collapsed and its page appeared to disappear from the results of Tmall’s search after a trip by company officials to Alibaba’s rival, Pinduoduo, in May. 2019, according to reports from Chinese state media at the time.

In June, Galanz withdrew the lawsuit and, according to state media, signed a cooperation agreement with Alibaba two weeks later.

Alibaba, Pinduoduo and Galanz did not respond to requests for comment.

Founded in 1999 in the eastern Chinese city of Hangzhou, Alibaba, which grossed $ 71 billion a year in the year ending March 31, earns most of its money by selling advertising, charging commissions and providing services to retailers who sell products at their sites. Like Amazon.com Inc.,

with which it has been compared, Alibaba has also expanded into cloud computing, entertainment and logistics services.

In recent years, some of the highest-profile targets of Chinese antitrust cases were foreign companies such as U.S. chip maker Qualcomm. Inc.,

who agreed in 2015 to pay a fine of about $ 1 billion. The following year, Beijing imposed a fine of about $ 100 million on Swiss-Swedish packaging giant Tetra Pak International SA.

Now, with self-produced internet players like Alibaba and Tencent Holdings Ltd.

among the country’s largest and most influential companies, regulators are pointing out that they are increasingly focusing on their business practices.

“The government believes it is time to better control market competition” in the technology sector, said Charlie Chen, an analyst at research firm China Renaissance Securities.

The Chinese market regulator did not respond to any requests for comment.

Over the years, China has been home to some of the world’s largest technology companies, which flourished for years at home with a relatively light regulatory touch, and Western rivals remained out of the market.

Within China, Alibaba and Tencent developed online payment services that have become virtually ubiquitous in the country, while the short video app from WeChat and Bytedance Ltd. of Tencent, Douyin, established dominant market positions on social media.

As these companies grew — and accumulated masses of data on consumer habits — the authorities became increasingly concerned about their influence, which in turn intensified the desire to curb consumerism. sector.

Regulatory counterparts in Europe and the United States are already facing the challenge of overseeing large technology companies. But unlike these jurisdictions, attempts by Chinese regulators to curb their tech giants are likely to come without the usual public hearings in the West.

“The Chinese system for investigating and forcing abusive, dominant positions is not highly transparent and is not clearly subject to judicial review,” said Scott Kennedy of the Center for Strategic and International Studies in Washington, DC.

—Xiao Xiao contributed to this article.