Infractions: Regulator slams record $2.8bn fine on Alibaba in anti-monopoly investigation

*Chinese regulatory authorities say Alibaba’s practice of imposing a ‘pick one from two’ choice on merchants ‘shuts out and restricts competition’ in the domestic online retail market

*The high fine puts the regulator in the media spotlight, and sends a strong signal to the tech sector that such types of exclusionary conduct will no longer be tolerated ─Angela Zhang, Director of Centre for Chinese Law at University of Hong Kong

Isola Moses | ConsumerConnect

E-commerce leader Alibaba Group Holding Limited, in China, has accepted punishment to pay record $2.8billion (18.2billion Yuan) fine for the company’s monopolistic tendencies regulators considered detrimental to both the competitors and consumers.

With the company’s pledge to improve its operations in the online retail market ecosystem, ConsumerConnect gathered that China’s State Administration for Market Regulation after probe slapped a record the fine on Alibaba Group after an anti-monopoly probe found it abused its market dominance, as Beijing clamps down on its Internet giants.

The 18.2 billion Yuan penalty is triple the previous high of almost $1 billion that United States (US) chipmaker Qualcomm Incorporated paid in 2015, and was based on 4% of Alibaba’s 2019 domestic revenue, according to China’s antitrust watchdog in a statement April 10, 2021.

The online business enterprise will also have to initiate “comprehensive rectifications,” from protecting merchants and consumers to strengthening internal controls, the regulatory agency said.

The fine, which is reportedly about 12% of Alibaba’s fiscal 2020 net income, helps remove some of the uncertainty that’s hung over China’s second-largest corporation.

It was learnt that Beijing remains intent on reining in its Internet and Fintech giants, as it is reportedly scrutinising other parts of billionaire Founder Jack Ma’s empire.

These include Ant Group Co.’s consumer-lending businesses and Alibaba’s extensive media holdings, according to report.

In relation to the infractions, Alibaba used its online platform rules and technical methods such as data and algorithms “to maintain and strengthen its own market power and obtain improper competitive advantage,” stated the industry regulator in the investigation report.

The Alibaba Group will likely have to change a raft of practices, like merchant exclusivity, which critics say helped it become China’s largest e-commerce operator.

In her remarks on the development, Angela Zhang, author of “Chinese Antitrust Exceptionalism” and Director of Centre for Chinese Law at the University of Hong Kong, said: “The high fine puts the regulator in the media spotlight and sends a strong signal to the tech sector that such types of exclusionary conduct will no longer be tolerated.

“It’s a stone that kills two birds.”

Alibaba’s practice of imposing a “pick one from two” choice on merchants “shuts out and restricts competition” in the domestic online retail market, the regulator’s statement said.

The government action, therefore, sends a clear warning to the tech sector in the country, as the government scrutinises the influence that companies such as Alibaba and social media giant Tencent Holdings Llimited wield over spheres from consumer data to mergers and acquisitions, report stated.

The investigation into Alibaba is said to be one of the opening salvos in a campaign seemingly designed to curb the power of China’s Internet giants and their billionaire founders.

Alibaba Group has come under mounting pressure from authorities since Ma spoke out against China’s regulatory approach to the finance sector October 2020.

The tech giants’ leaders’ comments were reported to have set in motion an unprecedented regulatory offensive, including scuttling Ant Group Co.’s $35 billion initial public offering (IPO).

Bloomberg Intelligence analysts Vey-Sern Ling and Tiffany Tam also described the fine slammed on Alibaba “as a small price to pay to do away with that uncertainty.

“China’s record fine on Alibaba may lift the regulatory overhang that has weighed on the company since the start of an anti-monopoly probe in late December.”

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