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China fines Alibaba record $2.75 billion for anti-monopoly violations

Stock MarketsApr 10, 2021 12:17PM ET
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© Reuters. FILE PHOTO: FILE PHOTO: The logo of Alibaba Group is seen at its office in Beijing

By David Stanway and Scott Murdoch

SHANGHAI/HONG KONG (Reuters) -China slapped a record 18 billion yuan ($2.75 billion) fine on Alibaba (NYSE:BABA) Group Holding Ltd on Saturday, after an anti-monopoly probe found the e-commerce giant had abused its dominant market position for several years.

The fine, about 4% of Alibaba's 2019 domestic revenues, comes amid a crackdown on technology conglomerates and indicates China's antitrust enforcement on internet platforms has entered a new era after years of laissez-faire approach.

The Alibaba business empire has come under intense scrutiny in China since billionaire founder Jack Ma's stinging public criticism of the country's regulatory system in October.

A month later, authorities scuttled a planned $37 billion IPO by Ant Group, Alibaba's internet finance arm, which was set to be the world's biggest ever. The State Administration for Market Regulation (SAMR) announced its antitrust probe into the company in December.

While the fine brings Alibaba a step closer to resolving its antitrust woes, Ant still needs to agree to a regulatory-driven revamp that is expected to sharply cut its valuations and rein in some of its freewheeling businesses.

"This penalty will be viewed as a closure to the anti-monopoly case for now by the market. It's indeed the highest profile anti-monopoly case in China," said Hong Hao, head of research BOCOM International in Hong Kong.

"The market has been anticipating some sort of penalty for some time ... but people need to pay attention to the measures beyond the anti-monopoly 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 merchants from using other online e-commerce platforms.

The practice, which the SAMR has previously spelt out as illegal, violates China's antimonopoly law by hindering the free circulation of goods and infringing on the business interests of merchants, the regulator added.

Besides imposing the fine, which ranks among the highest ever antitrust penalties globally, the regulator ordered Alibaba to make "thorough rectifications" to strengthen internal compliance and protect consumer rights.

Alibaba said in a statement that it accepts the penalty and "will ensure its compliance with determination". The company will hold a conference call on Monday to discuss the penalty.

"We will tackle it openly and work through it together," CEO Daniel Zhang said in a memo to staff seen by Reuters. "Let's improve ourselves and start again together as one."

The fine is more than double the $975 million paid in China by Qualcomm (NASDAQ:QCOM), the world's biggest supplier of mobile phone chips, in 2015 for anticompetitive practices.

"There has been weakness in China's big tech stocks and I think this fine will be seen as a benchmark for any other penalties which could be applied to the other companies," said Louis Tse, managing director at Wealthy Securities in Hong Kong.

'CLEAR POLICY SIGNAL'

The hefty penalty on Alibaba also comes against the backdrop of regulators globally, including in the United States and Europe, carrying out tougher antitrust reviews of tech giants such as Alphabet (NASDAQ:GOOGL) Inc's Google and Facebook Inc (NASDAQ:FB).

With the fine on one of its most successful private enterprises, Beijing is making good on threats to clamp down on the "platform economy" and rein in the behemoths 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 China's other internet giants," said Francis Lun, CEO of GEO Securities, Hong Kong.

"Their growth has been enormous, and the government has turned a blind eye and allowed them to carry out uncompetitive practices. They can no longer do that."

China's big technology firms have been stepping up hiring of legal and compliance experts and setting aside funds for potential fines, amid the antitrust and data privacy crackdown by regulators, Reuters reported in February.

Chinese official media hailed the penalty imposed on Alibaba, saying it would set an example and bolster awareness about antimonopolistic practices and the need to adhere to related laws.

The fine has released a "clear policy signal", Shi Jianzhong, antitrust consultant committee member of the State Council and professor of China University of Political Science and Law, wrote in the state-backed Economic Times.

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 that the market was still "waiting to see what the ultimate impact would be from the Ant Group restructuring, which still leaves a lot of uncertainty".

($1 = 6.5522 yuan)

China fines Alibaba record $2.75 billion for anti-monopoly violations
 

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Comments (19)
Zen Cat
LittleZenCat Apr 11, 2021 3:08AM ET
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Holy smokes, that bot has taken over the investing. com comment section. The admins really need to ban their IP or take other measures
Feren Nika
Feren Nika Apr 11, 2021 1:28AM ET
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good from china action to hit alibaba. i hope china can he to a new power economy in world
Feren Nika
Feren Nika Apr 11, 2021 1:27AM ET
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look a all chat, look people a guaranteed profit. look a cheating in market. market so bubble. this white criminal manipulation price. he look he angel can make profit fastest from bubble market.
President Xi Jinping
President Xi Jinping Apr 10, 2021 4:42PM ET
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Investin g.com has become a propaganda machine for bots.
Christopher Davis
Christopher Davis Apr 10, 2021 12:15PM ET
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This stock will double within three weeks now, as this ball and chain that has been suppressing this beast is removed! Watch Out!
Kaveh Sun
Kaveh Sun Apr 10, 2021 11:02AM ET
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They still teaching Jack Ma lessions.
Ridha B younes
Ridha B younes Apr 10, 2021 11:02AM ET
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unregistered voters not again
Ridha B younes
Ridha B younes Apr 10, 2021 11:02AM ET
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oh I thought I was writing to the spammers sorry sir
ILFAT ZIGANSHIN
ILFAT ZIGANSHIN Apr 10, 2021 11:00AM ET
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Why?
Kaveh Sun
Kaveh Sun Apr 10, 2021 11:00AM ET
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Jack ma said badthing about their banks.
Ridha B younes
Ridha B younes Apr 10, 2021 6:26AM ET
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something Mr President in 1930 said about fear . Ma was hounted by that fear from giving away his money to governments but giving it anyway then goes and gossip about giving it , I let you figure out who the president is and fear can creep up in money health and many many life aspects . excuse my English-language. stay above fear no pride either
Ridha B younes
Ridha B younes Apr 10, 2021 6:10AM ET
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Baba don't preach
Ridha B younes
Ridha B younes Apr 10, 2021 6:10AM ET
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life kicks you the most valuable thing you care about. no matter what it can be isn't it funny. BAABA don't preach.
Zen Cat
LittleZenCat Apr 10, 2021 4:51AM ET
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These advertising bots really need to be taken care of....
Jennifer Melton
Jennifer Melton Apr 10, 2021 3:24AM ET
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4% of revenue. Peanuts for a step closer to resolve the biggest problem of Alibaba
Ambrose Ho
Ambrose Ho Apr 10, 2021 3:09AM ET
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conclusion: lets buy BABA on Monday opening, Big lots
Ridha B younes
Ridha B younes Apr 10, 2021 1:41AM ET
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the fine is a statement it can be reduced but the statement stays strong money is the last thing they're after but the fair trade distribution of opportunities .
Ridha B younes
Ridha B younes Apr 10, 2021 1:41AM ET
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Ma only understand money statement take his money and see how far he can stay away but gossip behind back.
Tyler Phillils
Tyler Phillils Apr 10, 2021 1:41AM ET
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“Fair trade distribution of opportunities” is self contradictory. Chinese law is arbitruary, capricious and bears no resemblence to any meaning of fair or justice. Businesses are much better off moving their assets out of China and out of the reach of it’s mobster government.
Jennifer Melton
Jennifer Melton Apr 10, 2021 1:41AM ET
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ahah 3 billion it's not really just a statement, plus it's always all about money at the end
Ridha B younes
Ridha B younes Apr 10, 2021 1:41AM ET
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in general not this time know the man psychology and punish accordingly he knows it he feels it now
Ridha B younes
Ridha B younes Apr 10, 2021 1:41AM ET
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honor 1st
TL Chan
TL Chan Apr 10, 2021 12:15AM ET
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The problem of the world is we don't have a system that only allow the genuine humanity ideology people to be in the classes of the most richest , the most powerful, the most tech power and the country's leading talents and hero. Not even the system or constitution of US!
Tyler Phillils
Tyler Phillils Apr 10, 2021 12:15AM ET
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The problem with the human race is that people actually think like you. What complete nonsense!
Elvis Durant
Elvis Durant Apr 10, 2021 12:15AM ET
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TL Chan is right on that.
TL Chan
TL Chan Apr 10, 2021 12:04AM ET
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All US embassies should be shielded from all sorts of CCPafia black tech weapon attack. They have been using it, and in some cases the country has to call back their staff. With the help from Google, Cisco, Apple, Microsoft, guess more US citizens inland or overseas would continue to suffer these all sorts of attack with no stop. When those rich tirrany talked about population explosion crisis as early as 1930's the world is seeded with inhumanity at core, covered up by democracy, fake humanity.and socialism talks!
TL Chan
TL Chan Apr 09, 2021 11:40PM ET
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CCPafia is bigger than Mafia, instead of Mr Sorrento put you into a meat grinder, CCPafia use high tech stolen from the West, like long distance microwave gun to steam your body, many many more black tech to deploy, just waiting for them taking over the world.
William Parry Dillen
William Parry Dillen Apr 09, 2021 10:37PM ET
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Amatuers compared to US politicians.
Chris Canis
Chris Canis Apr 09, 2021 10:19PM ET
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CCP way of telling Jack , he talks too much anti- communism. Jack can hide but they can still stick it to him.
Connecticut Yankee
A_Jaundiced_Eye Apr 09, 2021 10:00PM ET
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Let's see...$2.75 billion divided by approximately 400 members of the party Politburo works out to about $7.3 million apiece.  Not a bad shakedown, boys !!  The Mafia are slouches compared to you guys at the CCP !!
Bhuv Ar
Bhuv Ar Apr 09, 2021 10:00PM ET
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And all that money just for Xi's faction in CCP, Jiang Faction wont see any of it
 
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