China comes down hard on Alibaba group, fines $2.78bn
Chinese regulators have hit top e-commerce giant Alibaba with a record 18.23 billion yuan ($2.78 billion) fine for violating anti-monopoly laws, it was announced on Saturday.
The fine, the largest anti-monopoly fine ever rolled out by Chinese authorities, was imposed after an investigation revealed an “exclusive dealing agreement” that violated Chinese monopoly laws. The fine is equal to 4% of Alibaba’s sales in 2019, the Xinhua news agency said in a report on Saturday.
The strongly worded statement said the company “abused” its dominant market position since 2015.
Founded by China’s most famous entrepreneur, Jack Ma, once a schoolteacher who became a multi-billionaire, Alibaba is possibly the world’s biggest e-commerce company with hundreds of millions of users and billions of dollars in turnover - according to Bloomberg, it is Asia’s “most valuable corporation”.
Its three main sites Taobao, Tmall and Alibaba.com host millions of merchants and businesses.
But in December, China’s State Administration for Market Regulation started an investigation on Alibaba Group for alleged monopoly conduct including implementing an ‘exclusive dealing agreement’,” Xinhua, China’s official news agency, had then announced.
The investigation was preceded by the suspension of Ant’s planned IPO in early November, which itself was indication of the troubles ahead of the company.
The announcement on Saturday was made at the end of the investigation. “The administration ordered Alibaba Group to stop illegal activities and pay a fine of 18.228 billion yuan (about $ 2.78 billion), which is equal to 4% of its sales in China in 2019,” the Xinhua said.
“The penalty was imposed according to China’s anti monopoly law based on the outcome of an extensive investigation and the evidence gathered from Alibaba Group and other competitive platforms and businesses,” the report added.
According to the investigation, Alibaba’s conduct of implementing an “…exclusive dealing agreement hinders competition in China’s services market involving online retail platforms, impedes the free flow of goods, services and resources, and infringes the legitimate rights and interests of merchants on the platform as well as the interests of consumers”.
Since 2015, the group has abused its dominant market position by prohibiting merchants on its platform from opening stores or participating in promotional activities on other competitive platforms, the investigation found.
It has also used market forces, platform rules, data, algorithms and other technical means to implement the “exclusive dealing agreement”, the investigation report added.
“In accordance with the principle of combining punishment with education, the administration also issued administrative guidance to the group, requiring it to conduct comprehensive rectification and submit self-inspection reports to the administration for three consecutive years,” the Xinhua report added.
“The $2.75 billion fine bill is not as big as we think - it’s almost a symbolic fine for Alibaba... The implications for the rest of China’s internet platforms are limited,” Liu Xu, researcher at the National Strategy Institute, Tsinghua University, told Reuters.
“A true enhancement of China’s anti-trust efforts will depend on persistent determination from the central government and a more transparent, fair mechanism to help the anti-trust forces to get rid of various kinds of interference during their investigations and enforcement,” Liu added.