China launches antitrust probe into Alibaba

China launches antitrust probe into Alibaba

HONG KONG/BEIJING: China has launched an antitrust investigation into Alibaba Group and will summon the tech giant’s Ant Group affiliate to meet in coming days, regulators said on Thursday, in the latest blow for Jack Ma’s e-commerce and fintech empire.

The probe is part of an accelerated crackdown on anti-competitive behavior in China’s booming Internet space and the latest failure for Ma, a 56-year-old former professor who founded Alibaba and became China’s most famous entrepreneur.

Following China’s dramatic suspension last month of Ant’s planned $ 37 billion initial public offering, which was on track to become the world’s largest, just two days before the shares began trading in Shanghai and Hong Kong.

In a strong editorial, the ruling Communist Party’s popular daily said that “if the monopoly is tolerated and companies are allowed to expand in a disorderly and barbaric manner, the industry will not develop in a healthy way.” and sustainable ”.

Shares of Alibaba fell nearly 9 percent in Hong Kong, the lowest since July, while rivals Meituan and JD.com both fell more than 2 percent.

Regulators have warned Alibaba of the so-called “choice of one” practice under which traders are required to sign exclusive co-operation pacts that prevent them from offering products on rival platforms.

The State Administration for Market Regulation (MRSA) said on Thursday that it has launched an investigation into the case.

Financial regulators will also meet with Alibaba Ant Group’s fintech arm in the coming days, according to a separate statement from the People’s Bank of China on Thursday, casting another cloud on a potential revival of stock sales.

The meeting will “guide Ant Group to implement financial supervision, fair competition and protect the legitimate rights and interests of consumers,” the statement said.

ONE FROM TWO

Ma caught the public’s eye at a forum in late October in Shanghai, where China’s regulatory system exploded, accusing him of stifling innovation in a speech that stifled officials and triggered a chain of events that led to on the shelf of the IPO Ant.

The practice of asking a trader to sell exclusively on a single platform, which Alibaba has defended in the past, has long been a source of friction.

In a lawsuit last year, home appliance maker Galanz accused Alibaba of sanctioning it for refusing to sell goods on rival platform Pinduoduo. The case has been resolved. In an ongoing case, JD.com accused Alibaba Tmall of restricting sellers from trading with it by signing exclusive contracts.

BRACE FOR SCRUTINY

After years of largely practical treatment of e-commerce, Beijing has clearly expressed its antitrust intentions.

Last month, it drafted rules aimed at preventing the monopolistic behavior of Internet companies, and the Politburo promised this month to strengthen antitrust efforts in 2021 and limit “disorderly capital expansion.”

China also warned internet giants this month to prepare for increased scrutiny, as it slammed fines and announced merger polls involving Alibaba and Tencent Holdings.

Liu Xu, a researcher at Tsinghua University’s National Strategy Institute and a longtime advocate for antitrust enforcement, said he expects other technology platforms to be controlled.

“Chinese internet companies have enjoyed unprecedented growth for years, with easy regulation for years,” said a regulatory source, refusing to be named given the sensitivity of the issue.

“The latest regulatory action against them has sent a clear message that the golden age for many of them is over and there is no company in China that could be too big to fail.”

Also, the regulators became uncomfortable with certain parts of Ant’s extended empire, mainly with its credit activity which contributed almost 40% of the revenues in the first half. A few days before Ant’s planned listing, regulators told Ma and the two top executives that his online lending business would be subject to tighter controls, sources told Reuters.

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