Following the episode of Alibaba’s CEO and founder Jack Ma’s disappearance, the Chinese government has hammered down on Alibaba Group’s business domination. Slapping a $2.8 Bn fine after a probe determined that the group has abused its market position for years. The hefty fine however amounts to nearly 4% of the company’s domestic revenue for 2019. Joe Tsai, Alibaba Group’s executive vice chairman commented that regulators have taken an interest in corporations such as Alibaba as they grow in importance, quoting to investors-
We are happy to get the matter behind us, but the tendency is that regulators will be keen to look at some of the areas where you might have unfair competition
Company representatives further added that they were not aware of any more ongoing investigation regarding anti-competitive behaviour by Chinese regulators. However, it is now clear that Alibaba and its competitors will remain under review in China over their business expansion intentions.
The main issue faced by Alibaba came from that fact that the platform restricted merchants from participating or working with in any capacity on rival platforms. To that extent, the company is expected to lower barriers of entry and eliminate business costs faced by the merchants on e-commerce platforms.
Mr Tsai apologetically quoting, “With this penalty decision we’ve received good guidance on some of the specific issues under the anti-monopoly law”. However, the group is not expecting any pragmatic impact on its businesses from the regulatory constrictions imposed on the company’s day-to-day business practices.
The perceived impact of such government action has led the company’s executives to play ball with the regulators on the matter. Alibaba has conceded to Beijing and stated that discussions with the regulatory authorities have been amicable and a statement from the company accepting the fine is a sign of Beijing’s growing influence over China’s tech giants which have recently gained significant power in the country. Although, given Alibaba’s enormous capital stores, the record high fine is a mere drop in the ocean for the company. However, Alibaba is the first to be subject to such but definitely not the last.
This penalty is the latest in an extensive list of events targeting the company and its executives as its founder Jack Ma criticised regulators for stifling innovation in the country. Immediately following the speech, China Securities Regulatory Commission (CSRC) scuppered the IPO launch of Alibaba’s sister company and China’s largest e-payment vendor, Ant Group.
Beijing’s shifting attitude towards Shenzhen’s biggest is apparent by China State Administration for Market Regulation (SAMR) notifications regarding it fining twelve companies including Tencent, Baidu, and Didi Chuxing to name a few of the largest, over deals violating anti-monopoly rules. It is anybody’s guess as to which company faces Beijing’s wrath next, however tensions in Shenzhen remain high.