Regulators in Beijing are investigating one of the top companies in China, tech-giant Alibaba, on charges of monopolistic practices, the government said on 24 December. “Acting on information, China’s State Administration for Market Regulation (SAMR) has started (an) investigation on Alibaba Group for alleged monopoly conduct including implementing an ‘exclusive dealing agreement’,” Xinhua, the official news agency of China, announced in a single-sentence statement on 24 December.
The announcement spooked many investors who dumped shares of Alibaba’s subsidiaries and affiliates, as well as other internet firms that risk being targeted by Chinese antitrust regulators.
The tech-heavy STAR Market dropped 2.1%, while the CSI TMT Index fell 1.5%, according to news agency Reuters. Alibaba shares fell nearly 9% in Hong Kong.
Alibaba belongs to the most famous entrepreneur of China, an increasingly vocal Jack Ma. He was once a schoolteacher who became a multi-billionaire. Alibaba is possibly the world’s largest e-commerce company, with hundreds of millions of users and billions of dollars in turnover.
According to Bloomberg, Alibaba is Asia’s “most valuable corporation”. Its three main sites Taobao, Tmall and Alibaba.com host millions of merchants and businesses.
The suspension of Ant’s planned IPO in early November, which was interpreted as an indication of the troubles ahead for the company, preceded the new investigation.
The SAMR investigation will focus on the monopolistic behaviour, the so-called “choosing one from two” practice and coaxing merchants to sign exclusive cooperation pacts, which then prevents them from offering products on rival platforms.
Separately, the People’s Bank of China, the China Banking Regulatory Commission and China Securities Regulatory Commission will meet affiliate Ant Group for “supervisory and guidance” talks.
Ant Group is the developer of AliPay, an ubiquitous mobile payment system in China, which has invested in India’s Paytm. Ant Group said it would “diligently study and strictly comply with regulatory departments’ requests”.
In a statement through its official Sina Weibo account, Alibaba stated it had received notification from SAMR that an investigation has been initiated into the company under the anti-monopoly law.
“Alibaba will actively cooperate with regulators to complete the investigation,” according to the statement, adding that the company’s business operations remain unaffected.
The move is being seen as the ruling Communist Party of China’s (CPC) pushback against internet giants Alibaba and Tencent, companies which are part of the daily lives of hundreds of millions of Chinese and have rapidly expanded its size and power.
The investigations were “…requirements for improving the socialist market economy system and promoting high-quality development,” the People’s Daily, the communist party’s mouthpiece said in an editorial
If “monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won’t develop in a healthy, and sustainable way,” it said.
“This investigation does not mean that the country’s attitude towards the encouragement and support of the platform economy has changed,” the editorial added.
“The investigation is one of the first of its kind into a large Chinese internet company. These efforts were seen as part of the country’s broad push to tighten regulations in the internet sector, prevent large internet companies from abusing its market dominance and protect consumers’ interests,” another state media report on the development said.