China imposes a record penalty on Alibaba, leaving us with some important questions: Is everything alright now between Alibaba & the government?
Last Saturday, China imposed a record 18 billion yuan ($2.75 billion) fine on Alibaba Group Holding Limited. The fine is about 4% of Alibaba’s 2019 domestic revenues. The fine was imposed by the State Administration for Market Regulation.
Why Did This Happen?
This fine comes after the market regulator found that Alibaba has abused its market dominance and violated anti-monopoly laws. Since 2015, Alibaba has forced merchants to sell exclusively on its Tmall and Taobao online shopping platforms, the market regulator added.
The regulator also said that the company used its “market position, platform rules and data, and algorithmic methods” to put in place rewards and punishments for it “choose one of two” policy.
This is not the first time the Chinese regulators have imposed a huge fine on a tech company. In 2015, Qualcomm was imposed a fine of $975 million by the National Development and Reform Commission (NRDC) after a 14-month investigation into the company. The fine was imposed after the probe found that Qualcomm had violated an antitrust law. Qualcomm did not contest NRDC’s ruling, and paid the fine.
But did the fine and the investigation impact Qualcomm’s presence in China? The answer is NO. In fact, the company grew the next years in China, with the revenue coming from Ching growing from 50% of Qualcomm’s revenue to 60%. But can we say the same thing for Alibaba?
At the end of the day, the $2.8 billion fine might be a big amount for a company that logged $72 billion in revenue for its most recent fiscal year that ended in March 2020. However, the fine shows how China wants to continue its path to control the country’s internet as well as fintech companies and this clampdown might go on for a while.
Even though the fine concludes the Chinese government’s antitrust scrutiny of Alibaba, Jack Ma’s other interests are still under pressure. Earlier in November 2020, the Shanghai stock exchange suspended the IPO of Ant Group. Until now, Alibaba hasn’t formally announced a deal for the company’s restructuring. On top of that, authorities also suspended new enrolment at Ma’s elite business school, the FT reported, citing sources.
So, the questions remain: will Jack Ma face more hurdles for his other entities in the future? And what other tech giants will be targeted by China? We have to wait and see how it goes…
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