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Alibaba Faces $2.8 Billion Fine From Chinese Regulators

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China announced on Saturday that it had fined e-commerce titan Alibaba a record $ 2.8 billion for monopoly business practices. This was the government’s toughest move to date in its campaign to tighten regulation of the country’s internet giants.

Beijing’s market watchdog began investigating Alibaba for possible antitrust violations in December, including preventing vendors from selling their goods on other shopping platforms. On Saturday, the regulator said its investigation found that Alibaba was hindering competition in online retail in China, affecting innovation in the internet economy and harming consumer interests.

The fine on Alibaba, one of China’s most valuable private companies and the foundation of the business empire of Jack Ma, the country’s most famous tycoon, exceeds the $ 975 million antitrust fine imposed by the Chinese government on American chip giant Qualcomm in 2015.

The Chinese authorities left little doubt on Saturday about the signal they wanted to send to other internet giants. In a comment posted online a minute after the fine was announced, People’s Daily, the Communist Party’s official newspaper, described regulation as “a kind of love and care.”

“Monopoly is the great enemy of the market economy,” the comment said. “There is no contradiction between legal regulation and support for development. Rather, they complement and reinforce each other. “

The fine is unlikely to materially affect Alibaba’s assets. The state market regulator, the Chinese agency that imposed the fine, said the amount represented 4 percent of Alibaba’s domestic sales in 2019. The group reported profits of more than $ 12 billion in the last three months of 2020 alone.

Overall, the fact that Beijing has not asked Alibaba to make any major additional concessions makes the decision “good news for the firm,” said Angela Zhang, associate professor and director of the Center for Chinese Law at Hong Kong University.

When Qualcomm was fined six years ago, it also agreed to offer Chinese customers significant discounts on patent fees. On Saturday, the market regulator said only that Alibaba would have to curb its anti-competitive behavior and submit reports of its compliance for three years.

“I would think the market should respond positively,” said Professor Zhang, although she warned the government could conduct additional research on other aspects of Alibaba’s business at any time.

In a statement, Alibaba said it would “sincerely” accept the punishment and strengthen internal systems “to better serve our responsibility to society”.

“The penalty imposed today was to alert and catalyze businesses like ours,” Alibaba said. “It reflects the thoughtful and normative expectations of regulators for the development of our industry.”

Over the past decade, Alibaba’s business has expanded beyond shopping to include logistics, grocery, entertainment, social media, travel booking, and more. Like its peers on the Internet, Alibaba has said that the breadth of its business helps make each of its services more useful. However, critics say the size of the company worsens the playing field for competitors and limits consumer choice.

China started taking a closer look at its tech giants last year. The market regulator proposed updating the country’s antimonopoly law with a new provision for large internet platforms like Alibaba’s. In November, officials put an end to plans by Alibaba’s sister company, finance-focused Ant Group, to go public and tighten control over internet finance.

In December, it opened the antimonopoly investigation against Alibaba – an astonishing twist for Mr. Ma, whom the people of China had long held up as an icon of entrepreneurial plucking.

In the USA and Europe too, skepticism about the power of large Internet companies has increased. Western regulators have repeatedly fined Goliaths like Google over the past few years for various antitrust violations. But such penalties have not changed the nature of businesses in general enough to allay concerns about their power.

China began tightening oversight of big tech later than the West. But his efforts are already beginning to affect the way Chinese internet giants operate. This reflects the extent to which all private companies in China must remain in the good grace of the government in order to survive.

For many years, Alibaba and its arch-rival, gaming and social media giant Tencent, have competed fiercely in a variety of companies, including by preventing their own users from spending time on the other company’s services. That could gradually change. In a first for the company, Alibaba recently applied for two of its trading platforms, Taobao Deals and Xianyu, to be present on WeChat, Tencent’s ubiquitous social app.

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Robert Dunfee