China imposed a record 18 billion yuan ($ 2.75 billion) fine on Alibaba Group Holding Ltd on Saturday after an antitrust investigation found that the e-commerce giant had abused its dominant position in the market for several years.
The fine, which equates to about 4% of Alibaba’s internal revenue in 2019, comes amid a crackdown on tech conglomerates and indicates that China’s enforcement of antitrust laws on internet platforms has entered a slump. new era after years of ‘laissez-faire’ approach.
Alibaba’s business empire has come under intense scrutiny in China since harsh public criticism by its founder, billionaire Jack Ma, of the country’s regulatory system in October.
A month later, authorities thwarted a planned $ 37 billion initial public offering by Ant Group, Alibaba’s internet finance arm, which would become the world’s largest. The State Administration for Market Regulation (SAMR) announced its antitrust investigation into the company in December.
While the fine brings Alibaba closer to solving its antitrust problems, Ant has yet to agree to a regulatory-driven reform that is expected to slash its valuations and control some of its business.
“This sanction will for now be seen by the market as a closure of the antitrust case. In fact, it is the highest-profile antitrust case in China,” said Hong Hao, head of investigation at BOCOM International in Hong Kong.
“The market has been anticipating some kind of sanction for some time … but people need to pay attention to measures beyond the antitrust investigation,” he added.
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 SAMR had previously described as illegal, violates Chinese antitrust law by hindering the free movement of goods and infringing on the business interests of traders, the regulator added.
In addition to imposing the fine, which is among the highest antitrust sanctions globally, the regulator ordered Alibaba to make “comprehensive corrections” to strengthen internal compliance and protect consumer rights.
Alibaba said in a statement that it accepts the sanction and “will ensure its compliance with determination.” The company will hold a conference call Monday to discuss the penalty.
“We will address it openly and work on it together,” Chief Executive Daniel Zhang said in a memo to staff accessed by Reuters. “We will get better and start over together as one.”