Alibaba shares in Hong Kong fell 8.13% on Thursday.
China’s State Administration for Market Regulation said through official online channels it has opened an investigation into Alibaba over monopolistic practices. The news was first reported by Bloomberg and was announced by Chinese state news agency Xinhua.
China’s market regulator on Thursday announced an antitrust investigation into Alibaba, the country’s biggest tech company, a month after authorities halted sister company Ant’s $37bn initial public offerings.
The investigation is one of the first of its kind into a large Chinese tech company and comes as authorities are subjecting Alibaba’s e-commerce and fintech activities to an unprecedented amount of scrutiny.
The market regulator said it was investigating suspected monopolistic practices, including Alibaba’s tactic of forcing merchants to sell exclusively on its platform, a practice known as “pick one of two” in China, among other issues.
Chinese authorities also said Thursday they would meet with Alibaba-affiliate Ant to supervise the financial technology firm on issues such as operating in a market-oriented way.
Those developments came on the heels of an increasing — and largely unexpected — push by Chinese authorities to rein in their biggest tech firms through regulatory action.
The move to investigate the country’s largest e-commerce company, which has been expanding into brick-and-mortar retail and cloud computing, among many other new business lines, marks the most aggressive action by regulators yet to tackle the growing heft of China’s tech companies.
Last month, regulators released the first draft of antitrust guidelines for the internet sector, sending shares in the industry tumbling. Analysts said Alibaba had the most at stake.
The rules came soon after Alibaba and Ant founder Jack Ma made a speech in Shanghai challenging regulators and attacking state-owned banks. The speech set in motion new rules for online lenders. Many believe it also spurred regulators to cancel Ant’s Shanghai and Hong Kong initial public offering, which was set to be the world’s largest.
For years, China’s tech companies have forced merchants who want to sell on their platforms to choose which side they are on or face consequences, such as restrictions on the amount of customer traffic directed to their online shopfronts.
As of “Singles Day” last month, China’s biggest annual online shopping event, Alibaba was still seeking to restrict merchants from working with other e-commerce platforms, said a lawyer representing a major e-commerce platform in an antitrust lawsuit against Alibaba. While there was no explicit ban on doing so, merchants could see their page rank plummet on Taobao or Tmall after they began selling on competing platforms, the lawyer said.
In comments last week, Eric Jing, Ant chairman, said the group was “listening carefully” to criticism from regulators and consumers as it sought ways to revive its IPO.
Some argue that the clampdown is a long time coming for China’s internet giants, which have been allowed to grow under a relatively loose regulatory environment. The Alibaba case is a “significant step” in China’s anti-monopolistic regulations on the internet industry, said an opinion piece published in the official newspaper of China’s ruling Communist Party. Assuaging worries that stricter regulations could deal a blow to the industry, the piece said the probe into Alibaba “is beneficial to restoring orders and promoting long-term, healthy development of the platform economy.”
Alibaba Short (Sell)
ENTER AT: 252.58