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China regulator hits Alibaba with record $2.8 billion fine


(ATF) China’s major markets regulator on Saturday announced it had fined Alibaba Group more than $2.8 billion for abusing its market dominance, but the e-commerce group’s shares rose in Hong Kong on Monday as its top executive brushed off long-term effects of the ruling.

In a statement, the State Administration for Market Regulation said it had levied a penalty of 18.23 billion yuan – equivalent to 4% of Alibaba’s 2019 revenue – and ordered the internet giant to “stop illegal activities.”

While hefty, the fine was far short of the 10% of annual revenues maximum stipulated by China’s antitrust law, 

Alibaba’s Hong Kong-listed shares rose as much as 9% in Monday trading. By late morning they stood at HK$231, up 6%.

TASK FORCE SET UP

The regulator said the fine was assessed after an investigation that began in December 2020 over alleged abuses in the online retail platform service market in China under the country’s Antitrust Law. 

It established a task force to conduct on-site inspections, interview personnel, obtain documents and deploy big data to analyse the company’s practices and processes.

“The facts of the case are clear, the evidence is solid, the qualitative accuracy is accurate, the handling is appropriate, the procedures are complete, and the procedures are legal,” the regulator declared in its statement. 

The investigation showed that Alibaba Group hindered competition, restricted the free flow of goods, curbed innovation and development and infringed on the business of the merchants on the platform.

“[Alibaba] harmed the legitimate rights and interests of consumers, and [its activities] constitute an abuse of market dominance,” the regulator said.

Daniel Zhang, Alibaba’s chief executive, said on Monday he did not expect any material impact after the antitrust probe. He said the company would introduce measures to lower entry barriers and business costs faced by merchants on its platforms.

As well as the fine, Alibaba was ordered to strengthen its internal control compliance and ensure fair competition.

Analysts said the worst was likely to have passed for Alibaba in terms of regulatory penalties. “Now the penalty is determined, the market’s uncertainty about Alibaba will be reduced,” said Kenny Ng, analyst at Everbright Sun Hung Kai in Hong Kong. 

It was unlikely that the ecommerce giant would breach other laws, they added. “The investigation helps Alibaba to have a better understanding of anti-monopoly policy, and it has internal controls and systems in place to comply with the laws,” said Thomas Chong, equity analyst at Jefferies Hong Kong.

IPO SUSPENDED

The antitrust investigation followed China’s dramatic suspension in November 2020 of affiliate Ant Financial’s planned $37 billion initial public offering – on track to be the world’s largest – just two days before its shares were due to begin trading in Shanghai and Hong Kong.

In December, China’s regulators summoned the tech giant’s Ant Group executives in another blow for billionaire Jack Ma’s e-commerce and fintech empire.

The probe was part of an accelerating crackdown on anticompetitive behaviour in China’s booming internet space, and the latest setback for Ma, the 56-year-old former schoolteacher who founded Alibaba and became China’s most famous entrepreneur.

In March, China’s government asked Alibaba to dispose of its media assets, The Wall Street Journal reported. While the company’s mainstay business is online retail, it has also stakes in the Weibo short-message platform and several news outlets, including Hong Kong’s South China Morning Post.

ALSO SEE:

Alibaba shares soar after Jack Ma re-emerges

Alibaba media holdings are latest pressure point for Jack Ma

What’s behind the Jack Ma and Alibaba regulatory woes?

George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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