SHANGHAI / HONG KONG (Reuters): China imposed a record 18 billion yuan ($ 2.752 billion) fine on Alibaba Group Holding Ltd on Saturday after an antitrust investigation found that the e-commerce giant had abused its dominant position in the market for several years.
The fine, about 4% of Alibaba’s national revenue in 2019, comes amid crackdown on technology conglomerates and indicates that China’s antitrust application on Internet platforms has entered a new era after years of laissez-faire approach.
Alibaba’s business empire has been under intense scrutiny in China since billionaire founder Jack Ma publicly criticized the country’s regulatory system in October.
A month later, authorities canceled a $ 37 billion planned IPO by Ant Group, Alibaba’s Internet financing arm, which had become the world’s largest. The State Administration for Market Regulation (SAMR) announced its antitrust probe into the company in December.
Although the fine brings Alibaba closer to resolving its antitrust problems, Ant has yet to agree to a regulatory-driven renewal that is expected to drastically reduce its valuations and curb some of its free-flowing businesses. .
“This sanction will be seen for now as a closure of the antitrust case by the market. In fact, it is the most profiled antitrust case in China,” said Hong Hao, head of research at BOCOM International in Hong Kong.
“The market has long predicted some sort of penalty … but people need to pay attention to measures beyond antitrust investigation.”
The SAMR said it had determined that Alibaba, which is listed in New York and Hong Kong, had been “abusing market dominance” since 2015 by preventing its traders from using other online e-commerce platforms.
The practice, which the MRSA has previously defined as illegal, violates China’s antitrust law by hindering the free movement of goods and infringing on the commercial interests of traders, the regulator added.
In addition to imposing the fine, which ranks among the highest antitrust sanctions in the world, the regulator ordered Alibaba to make “comprehensive corrections” to strengthen internal compliance and protect consumer rights.
Alibaba said in a statement that it accepts the sentence and “will ensure compliance with the determination.” The company will hold a conference call Monday to discuss the penalty.
“We will address it openly and work together,” CEO Daniel Zhang said in a note to staff seen by Reuters. “Let’s improve ourselves and start all over again together as one.”
The fine is more than double the $ 975 million paid in China by Qualcomm, the world’s largest supplier of mobile phone chips, in 2015 for anti-competitive practices.
“There has been weakness in China’s major technology stocks and I think this fine will be considered a benchmark for any other sanctions that could apply to other companies,” said Louis Tse, CEO of Wealthy Securities in Hong Kong.
“CLEAR POLICY SIGN”
The strong sanction against Alibaba also reaches the backdrop of global regulators, including the United States and Europe, conducting tougher antitrust reviews from tech giants like Google and Facebook Inc. by Alphabet Inc.
With the fine to one of its most successful private companies, Beijing faces threats to curb the “platform economy” and curb giants that play a dominant role in the country’s consumer sector.
“What comes after Alibaba’s fine is the likelihood of harm to China’s other Internet giants,” said Francis Lun, CEO of GEO Securities, in Hong Kong.
“Their growth has been huge and the government has turned a blind eye and allowed them to engage in uncompetitive practices. They can no longer do that.”
China’s major technology companies have stepped up recruitment of legal and compliance experts and set aside funds for possible fines amid antitrust crackdown and data privacy by regulators, Reuters reported in February.
Chinese official media hailed the sentence imposed on Alibaba, saying it would set an example and raise awareness about antitrust practices and the need to comply with related laws.
The fine has issued a “clear policy signal,” Shi Jianzhong, a member of the State Council’s antitrust advisory committee and a professor at China’s University of Political Science and Law, told the Economic Times.
Wium Malan, an analyst at Propitious Research in Cape Town, which publishes on the Smartkarma platform, echoed the sentiment, describing the fine as a “clear statement of intent”.
For Alibaba, Malan said, the fine was “affordable”, but the market was still “waiting to see what the final impact of the Ant Group restructuring would be, which still leaves a lot of uncertainty”.
($ 1 = 6,5522 yuan)
Reports from 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