Alibaba slapped with record $2.7B antitrust fine

Chinese e-commerce giant has been issued a record 18 billion yuan ($2.77 billion), an estimated 4% of its 2019 revenue, financial penalty for breaching anti-monopoly regulations and "abusing market dominance".

Alibaba Group has been slapped with a record 18.2 billion yuan ($2.77 billion) fine for breaching China's antitrust regulations and "abusing [its] market dominance". The Chinese e-commerce giant says it will "accept" the ruling, which marks the culmination of an investigation that began last December. 

China's State Administration for Market Regulation (SAMR) said in a statement Saturday that Alibaba had been abusing its strong market position since 2015 to prevent merchants from using other online e-commerce platforms. It said such practices impacted the free movement of goods and services, infringing on a merchant's business interests, and in breach of the country's anti-monopoly laws.

According to SAMR, the financial penalty accounted for some 4% of the e-commerce giant's 2019 revenue from its home market. The regulator's ruling followed its investigation into Alibaba that began last December over alleged anti-competitive practices, including claims it imposed a "forced exclusivity" clause requiring merchants to peddle their wares only on one e-commerce platform.  

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SAMR added that the e-commerce operator would have to establish "comprehensive rectifications", including adopting fair competition practices, safeguarding merchants on its platforms as well as consumer rights, and boosting its internal controls. Alibaba also would have to provide reports on self-regulation to the Chinese regulator for three years.

In an open letter, Alibaba said it would "accept" the penalty and work to ensure its compliance. It noted that it had "fully cooperated" with SAMR's investigation and reviewed its government's policies for online platforms. 

"We conducted a self-assessment of, and implemented improvements to, our internal systems while ensuring stable operation of our business," it said. "The penalty issued today served to alert and catalyse companies like ours. It reflects the regulators' thoughtful and normative expectations toward our industry's development. It is an important action to safeguard fair market competition and quality development of internet platform economies."

Describing these digital economies as "new economic structures", Alibaba said it had been provided opportunities to "explore and create" business models such as Taobao and Tmall that lowered the costs of starting and operating businesses as well as enhanced efficiencies and trade flow. Its online platforms also helped millions of small and midsize merchants and consumers, the company said. 

"Today, internet platform economies have entered an entirely new phase. They are an integral part of people's everyday life and affect all dimensions of the broader economy," Alibaba said. "It is not lost on us that today's society have new expectations for platform companies, as we must assume more responsibilities as part of the nation's economic and social development."

It added that it would continue to introduce measures to lower entry barriers and business costs of operating on its platforms, while ensuring these were "more open, more equitable, more efficient, and more inclusive".

Alibaba had faced increasing pressure from its government after the company's founder Jack Ma criticised China's rigid regulation and the state's dominance over the banking system. The company's fintech aim Ant Group was later called up by China's central bank to discuss its regulatory compliance, and its IPO was called off after regulators said Ant's listing on the Shanghai stock exchange no longer met regulatory and disclosure requirements.

The latest fine dished out by SAMR was more than double that of a previous record 6.1 billion yuan ($928.98 million) that was handed to chipmaker Qualcomm in 2015, according to a South China Morning Post report.

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