China launches antitrust probe into tech large Alibaba By Reuters
© Reuters. FILE PHOTO: Signs of Alibaba Group and Ant Group can be seen during the World Internet Conference (WIC) in Wuzhen
By Julie Zhu, Kane Wu and Cheng Leng
HONG KONG / BEIJING (Reuters) – China has launched an antitrust investigation Alibaba (NYSE 🙂 Group and will invite the technology giant’s Ant Group subsidiary to a meeting in the coming days, regulators said Thursday. This was the latest blow to Jack Ma’s e-commerce and fintech empire.
The investigation is part of an accelerated crackdown on anti-competitive behavior in China’s booming internet space and the recent blow to Ma, the 56-year-old former school teacher who founded Alibaba and became China’s most famous entrepreneur.
It follows China’s dramatic suspension of Ant’s planned $ 37 billion initial public offering last month, which was on its way to becoming the largest in the world just two days before its shares were due to start trading in Shanghai and Hong Kong.
In a strong editorial, the People’s Daily of the ruling Communist Party said that if “monopoly is tolerated and companies are allowed to expand in a disorderly and barbaric manner, the industry will not develop in a healthy and sustainable manner.”
Alibaba’s shares fell nearly 9% in Hong Kong, their lowest level since July, while rivals Meituan and JD (NASDAQ :). Com both fell more than 2%.
Alibaba’s U.S. stock fell 13% in its largest one-day decline since it debuted on the New York Stock Exchange in 2014.
Regulators have warned Alibaba of the so-called “choose between two” practice, which requires retailers to sign exclusive cooperation pacts that prevent them from offering products on competing platforms.
The state administration for market regulation (SAMR) said on Thursday that it has opened an investigation into the practice.
According to a separate statement by the People’s Bank of China on Thursday, financial regulators will also meet with Alibaba’s Ant Group fintech arm in the coming days and throw another cloud over a possible revival in stock sales.
The meeting would “guide the Ant Group to implement financial supervision and fair competition and protect the legitimate rights and interests of consumers,” the statement said.
Ant said it had received notice from regulators and said it would “meet all regulatory requirements”. Alibaba said it would cooperate with the investigation and that its operations remained normal.
Fred Hu, chairman of Primavera Capital Group in Hong Kong, an ant investor, said global markets are watching whether the moves are “politically motivated” and whether regulators are targeting private rather than state monopolies.
“It would be a tragedy if antitrust law were only seen as a target for successful private technology companies,” he said.
ONE OF TWO
Ma has stayed out of the public eye since a forum in late October in Shanghai where he blew up China’s regulatory system and accused it of stifling innovation in a speech that stabbed officials and sparked a chain of events leading to the IPO led by Ant.
The practice of requiring a merchant to sell exclusively on a platform that Alibaba had defended in the past has long been a source of friction.
In a lawsuit last year, home appliance maker Galanz accused Alibaba of punishing him for refusing to stop selling goods on a competing platform Pinduoduo (NASDAQ :). The case has been resolved. In one ongoing case, JD.com accused Alibabas Tmall of preventing vendors from trading with it by signing exclusive contracts.
STRIVE FOR SCRUTINY
After years of largely straightforward handling of electronic commerce, Beijing has clarified its antitrust intentions.
Bills to prevent monopoly behavior by Internet companies were issued last month, and the Politburo this month promised to step up antimonopoly efforts in 2021 and curb “disorderly capital growth.”
China also warned internet giants this month not to prepare for intensified scrutiny as it imposed fines and announced investigations into mergers with Alibaba and Tencent Holdings (OTC :).
Liu Xu, a researcher at Tsinghua University’s National Strategy Institute and longtime antitrust enforcement advocate, said he expected other technology platforms to be scrutinized.
“Chinese internet companies have seen unprecedented growth in lighting regulation for years,” a regulatory source said, declining to be mentioned given the sensitivity of the matter.
“The recent regulatory action against them has made it clear that the golden age is over for many of them and that there is no company in China that can be too big to fail.”
Regulators are also uncomfortable with parts of Ant’s sprawling empire, particularly its lending business, which accounted for nearly 40% of sales in the first half. Days ahead of Ant’s planned listing, regulators told Ma and two top managers that the online lending business would be scrutinized, sources told Reuters.