Chinese Regulation Violations
Back in December 2020, reports indicated the ecommerce technology business was under investigation from China’s State Administration for Market Regulation (SAMR) for its monopolistic practices. The primary issue that was in question was whether or not the company was allowing merchants to select only one of two platforms to sell from rather than sell from both.
Later in February 2021, multiple news outlets reported the SAMR issued new anti-monopoly rules that would target large Chinese technology giants like Alibaba, Tmall marketplaces, JD.com, Ant Group’s Alipay, and Tencent Holding’s WeChat Pay. The new rules serve as a means to clarify monopolistic practices like barring merchants from selling on multiple platforms, price fixing, restricting technologies, and using data to manipulate the market.
At the conclusion of SAMR’s investigation, it was reported this weekend the ecommerce technology company was fined for “abusing its dominant position” by limiting retailers and hindering the “free circulation” of goods. As a result, the ecommerce business is being fined $2.75 billion, which is equal to 4% of its total sales in 2019 — ¥455.7 billion (about $69.5 billion). In addition, Alibaba will have to file self-examination and compliance reports to the SAMR for the next three years.
As the business stated in a press release, “We accept the penalty with sincerity and will ensure our compliance with determination....we conducted a self-assessment of, and implemented improvements to, our internal systems while ensuring stable operation of our business. The penalty issued today served to alert and catalyze companies like ours. It reflects the regulators’ thoughtful and normative expectations toward our industry’s development. It is an important action to safeguard fair market competition and quality development of Internet platform economies.”
A conference call for the ecommerce company to respond further to the government’s fine is scheduled for today at 8 a.m. Hong Kong Time. In addition, Google Finance reports Alibaba shares have increased 6.5% on the Hong Kong Stock Exchange.
Other Issues for the Business
This fine issued by the SAMR against Alibaba is just another complication for the ecommerce technology company. Co-founder of the business and former CEO Jack Ma also founded Ant Group, a fintech affiliate of Alibaba. In October 2020, NPR reported Ma made comments during a business conference publicly scrutinizing China’s financial system. He would not appear in public again until January.
Furthermore, Startup Savant reported in November 2020 that the initial public offering (IPO) for Ant Group was suspended two days before the IPO was expected to list due to Chinese regulators publishing new rules on online microlending — a key component of the company. The IPO for the business was valued at $37 billion.
Last month, 12 Chinese technology companies were each fined for failing to disclose previous acquisitions and other deals. The fine against the ecommerce technology company is part of ongoing attempts by the Chinese government to control the power of technology giants in the country.
About the Author
McKenzie Carpenter is a graduate of Central Michigan University with a B.A.A. in Integrative Public Relations and French. McKenzie has previously worked for small businesses and nonprofit organizations.