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China continues clamp down on Alibaba with $2.8bn fine

The company said it accept the penalty with “sincerity”

China has fined Alibaba around 18.2 billion yuan ($2.8 bn) as it continues to clamp down on the e-commerce giant around monopolistic behaviours towards its rivals.

The country’s state administration for market regulation explained Alibaba was punished because it penalised merchants who sell their products on Alibaba’s platform and also on other e-commerce platforms in the country.

Alibaba will now be required to revamp its platform operations and submit a “self-examination compliance report” by 2024.

How has Alibaba responded?

  • The company said it accepts the penalty with “sincerity” and will ensure its compliance with determination.

  • It also expressed its gratitude for the trust and patience that our merchants, consumers, partners and shareholders have given the company.

  • “Today is an important day in Alibaba’s journey of growth. It is a new starting point for us, one where we tackle problems head-on and commit to innovating. Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance and support from all of our constituencies have been crucial to our development. For this, we are full of gratitude and respect.

  • "We started Alibaba because we believe in treating customers first and creating sustainable long-term value for society. These are our reasons for being, to which we are fully committed, and from which we will never waver,” Alibaba said in a letter.

Why is this happening to Alibaba?

  • China is keen to break up Alibaba’s media properties after expressing surprise at how much reach Alibaba has gained through its media business.

  • Alibaba is currently the largest digital ad seller in China, with its ad revenues accounting for more than 32% of the market in 2019. Together, tech giants Baidu, Alibaba and Tencent (BAT) occupy more than 60% of the total digital advertising market in China.

  • Alibaba founder Jack Ma’s comments about Chinese president Xi Jinping’s efforts to regulate Ant Group, Alibaba’s financial arm, as it offers consumer-focused financial services, which has reams of data on user spending, borrowing and lending habits and histories.

  • This saw Ant’s $37 billion dual IPO pulled by China in early 2021 as it wanted the company to return to its original core business of payments and focus on correcting issues in the areas of personal lending, wealth management and insurance.

  • It also launched an antitrust investigation into Alibaba at the end of 2020 and created new anti-monopoly guidelines that were released in February 2021 which targets Internet platforms, tightening existing restrictions faced by the country’s tech giants.

  • The regulator said the latest guidelines would “stop monopolistic behaviours in the platform economy and protect fair competition in the market.”