Alibaba’s antitrust review ends after 3 years of government scrutiny

“As a result of the inspection and assessment, Alibaba Group has completely stopped the monopolistic behavior of ‘picking one out of two,’” the regulator said in a statement on its website. It added that “corrective work” at Alibaba has yielded good results. The tactic of “picking one out of two,” in which online sellers are forced to choose only one e-commerce platform as their exclusive distribution channel, is defined as monopolistic behavior.

“Alibaba is a representative private enterprise in China, and this announcement is a timely boost to boost market confidence,” said Yuanpu Huang, founding partner of consulting firm EqualOcean. He added that while the domestic e-commerce market has matured, Alibaba’s ability to regain momentum will largely depend on its future investments in overseas operations, given its status as a company with significant international influence.

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China launches antitrust investigations against Alibaba over alleged monopolistic practices

Alibaba shares rose 3 percent in Hong Kong on Friday, while the company’s shares on the New York Stock Exchange rose 4.3 percent in pre-market trading to $81.

On August 28, Alibaba upgraded to a dual-stock listing on the Hong Kong Stock Exchange, allowing it to sell shares to 220 million mainland Chinese stock investors.

“It’s a relatively positive sign after the two primary listings and I think it will have a chance to be listed on the Hong Kong Stock Connect in September,” said Kenny Ng, a strategist at Everbright Securities International. “The announcement will be good for Southbound Capital’s expectations and the stock price.”

In April 2021, the regulator imposed a record fine of 18.2 billion yuan on one of the world’s largest e-commerce companies – equivalent to 4% of Alibaba’s 2019 revenue – following a months-long antitrust investigation that began in December 2020.

The antitrust investigation into Alibaba was part of a broader regulatory crackdown on Chinese big tech companies that began in late 2020 amid concerns that the country’s major internet platforms were becoming too big and powerful.

In addition to the fine, the regulator required Alibaba to make repairs and submit “self-assessment compliance reports” for three consecutive years, starting in 2021.

In a statement issued in response to SAMR’s announcement on Friday, the Hangzhou-based company pledged to “focus on innovation and uphold regulatory compliance” in the future, as well as “increase investment in science and technology, promote the healthy development of the platform economy, and create greater value for society.”

“This means that the country’s governance (of internet misconduct) has entered a regular and normalized direction, and will no longer be an uncertainty like in the past few years,” said Zhang Yi, founder and chief analyst at consulting firm iiMedia.

People walk past the Ant Group logo at its booth at the China International Fair for Trade in Services in Beijing on September 2, 2023. Photo: Reuters — People walk past the Ant Group logo at the company’s booth at the Beijing International Services Fair, September 2, 2023. Photo: Reuters

The move comes at a critical time for Alibaba after its listing status changed, and Zhang said it could help its long-awaited stock link.

“There were too many uncertainties from the investors’ perspective after the investigation,” he said. This has affected Alibaba in many ways, including the capital market, business expansion and internal management, Zhang added.

Financial penalty from market watchdog and Alibaba review, apart from last minute cancellation of mega IPO plan by the fintech subsidiary of the e-commerce giant Group of Antsweighed heavily on the group’s share price, business dynamics and even employment. Alibaba has lost almost three-quarters of its value since its peak in late 2020.

“In the next step, the State Administration for Market Regulation will guide Alibaba Group to further standardize its operations, further improve the quality of compliance and efficiency, accelerate innovation-driven development, and continuously improve service levels, providing solid guarantees for building a world-class company and enhancing international competitiveness,” SAMR said.

The official announcement is “very important for Alibaba to gain recognition from the capital heading south” following the expected stock tie-up, Zhang said.

The long-running crackdown on the tech industry wiped out trillions of dollars in market value for Chinese tech companies, paralyzed one of the most dynamic sectors of the world’s second-largest economy and accelerated the U.S.’s break with China before it began to worsen in 2022.

A specialist trader works at the post where the IPO of Chinese ride-hailing company Didi Global was traded on the New York Stock Exchange floor on June 30, 2021. Photo: Reuters — A trading specialist works at a booth where Chinese ride-hailing company Didi Global’s initial public offering took place on the New York Stock Exchange on June 30, 2021. Photo: Reuters

Many big technology companies have been caught up in the regulatory storm.

In July 2021, the Cyberspace Administration of China, the country’s internet regulator, launched an investigation into the passenger-carrying giant Didi Global for data and national security breaches, two days after its $4.4 billion initial public offering on the U.S. Stock Exchange.

Three months later, Meituan was fined 3.4 billion yuan for abusing its dominant market position. “choosing one of the two”in which online retailers are forced to choose only one platform as their exclusive distribution channel.

Meanwhile, almost four years after Ant Group became the first target of the crackdown, it has yet to revive its plans to list on the stock market.

Additional information provided by Wency Chen.