“With this penalty decision, we have received good guidance on some specific issues under anti-competition law,” Tsai said in an investor appeal. “We are pleased that we are able to put this issue behind us.” The company has promised to end the practice of “exclusive transactions”.
Tsai said the penalty was less than 20% of Alibaba’s free cash flow in the past 12 months, while CEO Daniel Zhang added that changing deals with traders would not have a big impact on the company’s business.
Shares of Alibaba rallied more than 6% in Hong Kong on Monday, although the stock is still down more than 20% since November last year, when regulators withdrew the mega IPO Ant Group.
The fine eliminates “a significant overrun” for Alibaba shares, analysts at S&P Global Ratings wrote on Monday.
“Punishment also eliminates the possibility of more serious consequences,” they added. Under China’s antitrust law, Alibaba could have been fined up to 10 percent of its revenue, far more than what was eventually levied.
Suppressing fears about the future
Alibaba executives it also sought to alleviate its concerns. Tsai said regulators are “asserting” the company’s operations.
“Our business model as a platform is fully supported and affirmed by the authorities [that] this type of model is good for the country’s economic growth and also helps to promote innovation, “he added. “We feel very comfortable, there is nothing wrong with our business, [and with] the fundamental business model of platform companies. ”
Tsai also said that regulatory control marked a “healthy process” that was ultimately good for Alibaba and allowed the company to know how regulators think about these companies. “Every large-scale technology company will face off [scrutiny] – In our case, we have experienced this control and we are glad that we have the problem behind us “, said Tsai.
Crackdown is not over
Even so, some experts point out that the Alibaba case still highlights the challenges facing Chinese business, as Beijing continues to investigate the private technology sector.
“Alibaba’s fine is not a financial blow and reflects the company’s progress in negotiating a solution to its regulatory problems,” said Brock Silvers, CEO of Chinese private equity firm Kaiyuan Capital.
But it was an example of how “opaque politics and private political maneuvers” can suddenly erase the wealth of shareholders.
“Regulators are now preparing to step up their fight against China’s corporate titans, which should be quite worrying for global investors who may be increasingly exposed to China’s long-unseen risks and remain unquantifiable. “Silvers added.
The Alibaba fine is a “warning blow to the entire high-tech sector in China,” said Alex Capri, a researcher at the Hinrich Foundation and a senior visiting member at the National University of Singapore.
“The Chinese Communist Party will continue to exercise its will, not only to reduce systemic risk in the financial sector, but to ensure that Big Tech serves the government as a capacity developer around things like digital currency and data collection, “he said.” The goal is to exploit the strengths of Big Tech, while preventing companies like Alibaba from moving away on their own. Therefore, the repression we see at Alibaba and Big Tech in general is not over. “
– Mark Thompson contributed to this article.