BEIJING: China has launched an antitrust investigation into e-commerce giant Alibaba Group and will summon its Ant Group affiliate to meet in the coming days in the latest blow for Jack Ma’s empire.
The probe is part of an accelerating crackdown on anti-competitive behaviour in China’s booming internet space, and the latest setback for Jack Ma, who founded Alibaba and became China’s most famous entrepreneur.
It follows China’s dramatic suspension last month of Ant’s planned $37 billion initial public offering, which was on track to be the world’s largest, just two days before its shares were due to begin trading in Shanghai and Hong Kong.
The ruling Communist Party issued a strongly worded editorial in the People’s Daily saying if “monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won’t develop in a healthy, and sustainable way.”
Shares in Alibaba fell nearly 9% in Hong Kong, their lowest since July, while rivals Meituan and JD.com both fell more than 2%. Alibaba’s US stock tumbled 13% in its largest one-day drop since its debut on the New York Stock Exchange in 2014.
Regulators have warned Alibaba about the so-called “choosing one from two” practice under which merchants are required to sign exclusive cooperation pacts preventing them from offering products on rival platforms.
The State Administration for Market Regulation (SAMR) said that it had launched a probe into the practice. Financial regulators will also meet with Alibaba’s Ant Group fintech arm in the coming days.
The meeting would “guide Ant Group to implement financial supervision, fair competition and protect the legitimate rights and interests of consumers,” the statement said.
Ant said it had received a notice from regulators and would “comply with all regulatory requirements.” Alibaba said it would cooperate with the investigation and that its operations remained normal.
Jack Ma has kept out of the public eye since a late October forum in Shanghai where he blasted China’s regulatory system, accusing it of stifling innovation in a speech that stung officials and set off a chain of events that led to the shelving of Ant’s IPO.
The practice of requiring a merchant to sell exclusively on one platform, which Alibaba had defended in the past, has long been a source of friction.
In a lawsuit last year, home appliance manufacturer Galanz accused Alibaba of penalising it for refusing to stop selling goods on rival platform Pinduoduo. The case was resolved. In an ongoing case, JD.com accused Alibaba’s Tmall of restricting vendors from trading with it by signing exclusive deals.
After years of largely hands-off treatment of e-commerce, Beijing has made its antitrust intentions clear. Last month, it issued draft rules aimed at preventing monopolistic behaviour by internet firms, and has now vowed to strengthen anti-monopoly efforts in 2021 and rein in “disorderly capital expansion.”
China also warned internet giants this month to brace for increased scrutiny, as it slapped fines and announced probes into mergers involving Alibaba and Tencent Holdings.
Regulators have also become uncomfortable with parts of Ant’s sprawling empire, chiefly its credit business that contributed close to 40% of first-half revenue. Days before Ant’s planned listing, regulators told Jack Ma and two top executives that its online lending business would face tighter scrutiny, sources told Reuters.