Since December of last year, Alibaba, one of the most influential tech giants in China and the world, has under heavy scrutiny and investigation for violating China’s anti-monopoly regulations.
China’s State Administration for Market Regulation (SAMR) described the company’s conduct as having “eliminated and restricted competition in the online retail platform service market” as well as having “infringed on the business of the merchants on the platform.”
As a result of the company’s market dominance abuse, the company has been hit with an 18.23 billion yuan ($2.8 billion) fine.
In response, Alibaba said it would accept the fine and “ensure its compliance with determination.”
“The penalty issued today served to alert and catalyze 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,” Alibaba said in a press release.
“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,” the company also said.
In addition to the fine, which amounts to about 4% of the company’s 2019 revenue, regulators said Alibaba will have to file self-examination and compliance reports to the SAMR for three years.
Alibaba’s monopolistic influence
Alibaba founded by Jack Ma has amassed a dominant market influence over daily life in China as well as millions of users across the globe. The growing influence and power Alibaba has particularly in China has raised concern among Chinese authorities and thus called for a probe into its activities.
A large part of the probe was centered on the so-called “choosing one from two” practice. This practice is used by Alibaba and other tech giants to force sellers to sign exclusive cooperation pacts, which prevents them from selling their products on rival platforms. This, according to critics is a major contributor to Alibaba’s growing dominance.
The CEO of the company, Daniel Zhang said the company will introduce new measures to lower barriers to entry and costs for businesses and merchants on the platform. Despite the fine, Alibaba shares in Hong Kong increased by 8%.