China has issued Alibaba with fines of more than $2.8 billion after regulators found the e-commerce giant was acting with monopolistic behaviour.
It’s the largest ever fine handed out by a competition regulator in business history.
China’s antitrust regulators handed Alibaba a fine of 18.2 billion yuan ($2.8 billion) after they determined Alibaba signed a number of exclusive agreements with retailers that inhibited smaller businesses from competing.
China’s State Administration for Market Regulation launched an investigation into Alibaba’s business practices, and determined that the e-commerce giant had indeed behaved like a monopoly.
Investigators found that Alibaba signed a number of “exclusive dealing agreements” that saw vendors only able to sell their products via Alibaba, a widely known practice called “choosing one from two.”
Market regulators said that Alibaba was guilty of “abusing its dominant position” and inhibited the “free circulation” of goods from smaller retailers that were effectively left unable to operate.
The fine handed down to Alibaba is equivalent to around 4% of the platform’s total sales in China through 2019, which is significantly higher than the $975 million fine issued to Qualcomm in 2015.
Just a few months ago in February, China’s regulators handed out a number of guidelines that aimed to quash anti-competitive practices and exclusive agreements that encourage anti-competitive practices.
In the following weeks, more than a dozen companies were fined hundreds of thousands for failing to disclose details of deals and agreements they had struck in the past.
A statement from Alibaba reads that the company “accepts the penalty with sincerity and will ensure its compliance with determination.”
The company said it would continue to “operate in accordance with the law with utmost diligence.”
“Alibaba would not have achieved our growth without sound government regulation and service, and critical oversight, tolerance and support from all of our constituencies and have been crucial to our development. For this, we are full of gratitude and respect.”
“It is not lost on us that today’s society has new expectations for platform companies, as we must assume more responsibilities as part of the nation’s economic and social development,” the company concluded.
China’s government has previously expressed concerns about large technology companies within China that are now expanding into health and financial services. The Communist Party has stated its intention to enforce anti-monopolistic practices throughout 2021.
Alibaba’s co-founder, and one of China’s most famous entrepreneurs, Jack Ma has had an extremely low profile since the botched IPO of Alibaba’s financial arm, the Ant Group in November, 2020.
That company in question, Ant, is a platform that commands more than 50% of China’s mobile payments.
According to reports, after Ma publicly criticised China’s state regulators, “Chinese regulators are sending a clear message about their intent to rein in the country’s most powerful companies.”