In the wake of draft anti-monopoly rules it introduced in November, China announced today that it has launched an antitrust investigation into Alibaba. If found guilty, the firm could pay a fine that amounts to 10 percent of its sales from the previous year.
“This is an important step in strengthening antimonopoly oversight in the internet sphere,” the state-run People’s Daily wrote in an editorial about the investigation, which it described as “an important measure for our country to strengthen antitrust supervision of the internet sector”. “This will be beneficial to regulating an orderly sector and promoting the long-term healthy development of platforms.”
The investigation marks the first time that China, a one-party Communist state that rose to power in recent decades by mixing a semi-open economy with state intervention, has investigated a home-grown Internet firm. China is the world’s largest economy, and is, by far, the world’s largest manufacturing economy, which explains its lucrative but now strained relationship with the West. It’s also home to the world’s largest number of billionaires, key among them Alibaba co-founder Jack Ma, the second-wealthiest person in the country.
For those unfamiliar with Alibaba, you may be surprised to discover that it is the world’s largest retailer and e-commerce company, and that over half of the Chinese population has shopped via the service in the past year. And like the company you may have thought held that title, Amazon, it’s also making inroads into cloud computing and artificial intelligence (AI). In fact, Alibaba is the world’s fifth-largest AI company.
“[This is] clearly an escalation of coordinated efforts to rein in Jack Ma’s empire, which symbolized China’s new ‘too-big-to-fail’ entities,” researcher Dong Ximiao told Bloomberg. “Chinese authorities want to see a smaller, less dominant, and more compliant firm.”
According to reports, Ma crossed a line earlier this year when he challenged China’s byzantine e-commerce and banking laws, taboo in a country in which complaining is seen as being disrespectful, especially given the government’s previously hands-off approach to regulating his industry. The rules that China introduced in November seemed to be directed specifically at Ma, Alibaba, and another of his firms, called Ant Group.
As for China, it says that Alibaba has been pressuring merchants that sell goods on its platform to commit to not selling on its competitors’ platforms. Alibaba describes this rule as “standard market practice,” but its domestic competitors had been complaining about it for years.
Alibaba says it will cooperate with the investigation and that its operations are unaffected.