SHANGHAI / HONG KONG (Reuters) -China imposed a record 18 billion yuan ($ 2.75 billion) fine on Alibaba Group Holding Ltd on Saturday after an antitrust investigation found the e-commerce giant had abused its position dominant on the market for several years.
The fine, about 4% of Alibaba’s domestic 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 the public criticism of billionaire founder Jack Ma over the country’s regulatory system in October.
A month later, authorities removed a planned $ 37 billion IPO from Ant Group, Alibaba’s largest online financing group in the world. The State Administration for Market Regulation (MRSA) announced its antitrust company in December.
While the fine brings Alibaba a step closer to resolving its antitrust issues, Ant must still agree to a regulatory-based renewal that is expected to abruptly reduce its ratings and curb some of its wheel business. free.
“This sanction will be seen as a closure of the antitrust case for the time being by the market. It is indeed the most profiled antitrust case in China, “said Hong Hao, head of research at BOCOM International in Hong Kong.
“The market has been anticipating some kind of penalty for some time … but people need to pay attention to measures beyond the antitrust investigation.”
SAMR said it had determined that Alibaba, which is listed in New York and Hong Kong, had “abused market dominance” since 2015, preventing merchants from using other online e-commerce platforms.
The practice, which MRSA previously mentioned as illegal, violates China’s antitrust law, impeding the free movement of goods and violating traders’ commercial interests, the regulator added.
In addition to imposing the fine, which is among the largest antitrust sanctions in the world, the regulator ordered Alibaba to make “thorough corrections” to strengthen internal compliance and protect consumer rights.
Alibaba said in a statement that it accepts the punishment and “will ensure compliance with the determination.” The company will hold a conference call on Monday to discuss the penalty.
“We will approach it openly and work together,” CEO Daniel Zhang said in a note to staff seen by Reuters. “Let’s improve ourselves and start together again as one.”
The fine is more than double the $ 975 million paid in China by Qualcomm, the world’s largest provider of mobile phone chips, in 2015 for anti-competitive practices.
“There have been weaknesses in China’s large technology stocks and I believe this fine will be seen as a benchmark for any other sanctions that could be applied to other companies,” said Louis Tse, CEO of Wealthy Securities in Hong Kong. .
“CLEAR POLICY SIGNAL”
The heavy punishment on Alibaba also comes against the backdrop of global regulators, including in the United States and Europe, with tougher antitrust reviews from tech giants such as Google and Facebook Inc.
With a fine for one of the most successful private enterprises, Beijing faces threats to counter the “platform economy” and to control the monsters that play a dominant role in the country’s consumer sector.
“What comes after Alibaba’s fine is the likelihood that there will be damage to other internet giants in China,” said Francis Lun, CEO of GEO Securities, Hong Kong.
“Their growth has been enormous, and the government has closed its eyes and allowed them to engage in uncompetitive practices. I can’t do this anymore. ”
China’s major technology firms have stepped up their employment of legal and compliance experts and set aside funds for potential fines, amid antitrust crackdown and data confidentiality by regulators, Reuters reported in February.
Chinese official media hailed Alibaba’s punishment, saying it would set an example and raise awareness of antitrust practices and the need to adhere to related laws.
The fine sent a “clear policy signal,” Shi Jianzhong, a member of the State Council’s antitrust advisory committee and a professor at China’s state-backed Economic University of Political Science and Law, wrote.
Wium Malan, an analyst at Propitious Research in Cape Town, who 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 waited “to see what the final impact of the Ant Group restructuring will be, which still leaves a lot of uncertainty”.
($ 1 = $ 6,5522)
Reporting by Cheng Leng, Scott Murdoch, Yilei Sun, Josh Horwitz, Zoey Zhang, Yingzhi Yang, Kane Wu and David Stanway; Written by Sumeet Chatterjee; Editing by Himani Sarkar and William Mallard