Chinese regulators on April 10 imposed a record fine of $2.8 billion on e-commerce giant Alibaba after an anti-monopoly investigation found that it had abused its dominant market position. According to a statement by China’s State Administration for Market Regulation, the penalty is equivalent to four per cent of Alibaba’s domestic sales in 2019. The regulators said that they assessed the fine after concluding an investigation into Alibaba that began in December.
Now, Bloomberg reported that Alibaba will likely have to change some of its practices like merchant exclusivity, that critics say helped it to become China’s largest e-commerce operation. The investigation concluded that the company, which is owned by Jack Ma, used its platform rules and technical methods like data and algorithms to maintain and strengthen its own market power and obtain an improper competitive advantage. According to the statement by China’s regulator, Alibaba’s practise of imposing a “pick one from two” choice on merchants shuts out and restricts competition in the domestic online retail market.
The statement, when loosely translated to English, read, “Since 2015, Alibaba Group has abused its dominant position in the market and has imposed “choose one out of two” requirements on merchants on the platform...to ensure the implementation of the "two-choice one" requirement, maintain and strengthen its own market power, and gain unfair competitive advantages”.
It further read, “The investigation shows that Alibaba Group’s “choice of two” behaviours eliminate and restrict competition in the online retail platform service market in China, hinder the free circulation of goods, services and resource elements, affect the innovation and development of the platform economy, and infringe on the business of the platform”.
The regulators said that the company will be required to implement “comprehensive rectifications”, including strengthening internal controls, upholding fair competition and protecting businesses on its platform and consumers’ rights. It added that the Hangzhou-based company will be required to submit a report on self-regulation to the authority for three consecutive years.
Shortly after the decision was announced, Alibaba said that it “accepts the penalty with sincerity and will ensure its compliance with determination. To serve its responsibility to society, Alibaba will operate in accordance with the law with the utmost diligence, continue to strengthen its compliance systems and build on growth through innovation”.