China acting against companies seen as too powerful
Chinese authorities have fined the country’s gigantic online retailer Alibaba the equivalent of USD 2.75 billion for abusing its dominant position in the market. The company said it accepts the ruling and would “ensure its compliance”. Analysts say the fine shows the Chinese government is acting against platforms that are too big and could become too powerful. If the Alibaba fine will affect competition from Chinese big tech companies on other markets is uncertain with analysts disagreeing.
A number of other Chinese companies including Tencent, Baidu, Didi Chuxing, SoftBank and a ByteDance were recently fined for violating anti-competition rules.
Alibaba played down the effect with CEO Daniel Zhang saying the company does not expect any material impact from changes to its exclusivity arrangements with merchants. Markets reacted with relief and Alibaba shares were up 9% in Hongkong market directly after the statement.
Alibaba, described as he world’s biggest online retailer, is listed both in Hongkong and New York. It’s main activity is retail but it has grown to also comprise credit, payments and cloud computing.
AFFIRMED BUSINESS MODEL
Zhang in his statement said the company will introduce measures to lower entry barriers and business costs for merchants.
Executive vice chairman Joe Tsai had a positive approach saying that authorities after all “are affirming our business model”.
“We feel comfortable that there’s nothing wrong with our fundamental business model as a platform company.”
JACK MA CHALLENGE
Alibaba has experienced criticism and scrutiny since the company’s founder Jack Ma last autumn challenged authorities by saying their regulatory system stifles development.
Authorities now said Alibaba should make “thorough rectifications” to strengthen internal compliance and protect consumer rights with analysts expecting this to limit the company’s future revenue growth.
China recently introduced new anti-monopoly rules for the tech giants. The rules formalise draft laws released in November and aim at limiting anti-competitive behaviour. The rules specifically stop e-commerce platforms from forcing vendors to deal exclusively with them.
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