China on Saturday imposed a record fine on Alibaba Group Holding Ltd worth $ 2.75bn (just over £ 2bn). Regulators in China said the e-commerce giant was violating anti-monopoly rules and abusing its dominant market position for years.
The Xinhua news agency reported that China’s State Administration for Market Regulation (SAMR), had assessed the penalty after concluding an investigation into Alibaba that started in December.
SAMR said on Saturday that ahead of the investigation, it concluded that Alibaba had been “abusing market dominance” since 2015 by stopping some sellers using other online e-commerce platforms.
Xinhua said that the size of the fine was fixed after regulators decided to fine Alibaba to the value of 4% of its 2019 sales.
In addition to the imposition of the fine, which is among the highest retaliatory penalties globally, the regulator ordered Alibaba to make profound reforms to strengthen internal compliance and protect consumer rights.
Alibaba said in a statement that it accepts the fine and “will ensure its compliance with the determination”. The company will convene a conference on Monday to discuss the fine.
“We will tackle it openly and work through it together,” CEO Daniel Zhang said in a memo to staff seen by Reuters. “Let’s improve ourselves and start again together as one.”
The business empire of Alibaba founder Jack Ma has been particularly placed under severe scrutiny following strong criticism of China’s regulatory system in late October. A month later, officials scanned a planned $ 37 billion IPO by Ant Group, Alibaba’s Internet finance arm, the largest set in the world.
“This penalty will be viewed as a closure to the anti-monopoly case for now by the market. It’s indeed the highest-profile anti-monopoly case in China,” said Hong Hao, head of research BOCOM International in Hong Kong.
“It’s indeed the highest profile anti-monopoly case in China. The market has been anticipating some sort of penalty for some time… but people need to pay attention to the measures beyond the anti-monopoly investigation, such as the divestment of media assets.”
The heavy fines on Alibaba also come against the backdrop of regulators globally, including the United States and Europe, which are strict opposing reviews of tech giants such as Alphabet Inc.’s Google and Facebook Inc.
With a penalty imposed on one of its most successful private enterprises, China is making good on threats to shut down on “platform economy” and rein in eunuchs that play a major role in Beijing’s consumer sector.
Chinese official media praised the fine imposed on Alibaba, stating it would set an example and awareness of anti-monopolistic practices and adherence to related laws.
“The fine bill is a milestone and road sign with great importance,” Shi Jianzhong, antitrust consultant committee member of the State Council and professor at China University of Political Science and Law, wrote in state-backed Economic Times.
“It indicates that the antitrust law enforcement on internet platforms has entered a new era, and released clear policy signal.”
Other tech giants of the country are also coming under mounting pressure from regulators concerned with their growing influence.
Last month, 12 companies were penalized for deals that violated anti-monopoly rules. Companies included Tencent, Baidu, Didi Chuxing, SoftBank, and a ByteDance-backed firm.
JACK MA’S DISAPPEARANCE
Alibaba founder and Chinese billionaire Jack Ma was reported to be “missing” for the first time in November last year after not appearing as a judge in the final episode of his talent show, Africa’s Business Heroes.
The sudden disappearance revealed many theories, but those with knowledge of his whereabouts said that Jack was not missing. Rather, he was ‘laying low’ after a Chinese regulatory crackdown on his vast business empire. Some also said that Ma was asked to maintain a ‘low profile’.
On 24 October in Shanghai, Ant Group was ready to launch the world’s biggest initial public offering on the stock exchange.
During the October 24 event he had condemned the regulators for “stifling innovation” and compared global banking norms to an “old man’s club”. Ma also criticised Beijing for lacking a concrete financial ecosystem and said Chinese banks are like “pawn shops”. His criticism of the Chinese authorities cost him big at the time. Since then, Chinese officials have turned the heat against him.
Soon Ma and his close associates were called to a meeting with the regulators, and the flow of the Ant group was stopped in its tracks.
Shares of Ma’s companies declined, erasing about $ 76bn (£ 54bn) from its value. After that meeting, Jack Ma was nowhere to be seen.
Eventually, on 20 January 2021, Ma reappeared in the form of a short video address for a charity event. Ma was subsequently spotted the following month playing golf on the Chinese tropical island of Hainan.
“Apparently he just kept a very low profile, which was really the best thing he could do,” says Christina Boutrup, a China analyst who has interviewed Ma in the past.