The Chinese Government has handed e-commerce giant Alibaba Group a colossal fine, a big move as it attempts to crack down on companies it deems to be breaking monopoly laws.
The Alibaba Group has been fined 18.3 billion yuan ($AUD3.7 billion) for what China’s State Administration for Market Regulation described as “abusing its dominant position” and obstructing the “free circulation” of goods.
The investigation, which officially kicked off in December, found that the company had been violating China’s anti-monopoly law and enforcing its dominance by not allowing merchants to sell on other e-commerce platforms. Furthermore, Alibaba is accused of infringing on the business interests of merchants.
The substantial fine is the highest antitrust penalty ever handed down in China. It also equates to roughly 4 per cent of Alibaba’s overall 2019 revenue.
ALSO READ – The Changing Face of e-commerce in China
“Alibaba accepts the penalty with sincerity and will ensure its compliance with determination,” the company said in a statement. “To serve its responsibility to society, Alibaba will operate in accordance with the law with utmost diligence, continue to strengthen its compliance systems and build on growth through innovation.”
Following the fine and findings, Alibaba has said it will be lowering merchant fees, lessen its forced exclusivity, and look at spending more on merchant services.
“We will incur additional cost,” Alibaba chief executive Daniel Zhang said on a conference call with analysts. “We don’t view this as a one-off cost. We view this as a necessary investment to enable our merchants to have a better operation on our platform.”
Alibaba executive vice chairman Joseph C. Tsai placed a positive spotlight on the outcome and reassured that Alibaba was in no danger.
“The regulators’ communication to the public is very clear that they’re affirming our business model,” Mr. Tsai said. “We feel very comfortable that there’s nothing wrong with the fundamental business model of a platform company. These regulatory actions are undertaken to ensure fair competition in order to benefit the public.”
Meanwhile, Jack Ma, Alibaba’s billionaire founder, has been keeping quiet and out of the public eye following an October speech that saw him blast China’s regulatory system.
Keep up to date with Dynamic Business on LinkedIn, Twitter, Facebook and Instagram.
