China has opened an investigation into e-commerce giant Alibaba over alleged anti-competitive behaviour, regulators announced this week.
Earlier this year, Alibaba prepared a record $37bn Hong Kong-Shanghai IPO for its financial services subsidiary, Ant Group. Its online payments platform Alipay is very widely used in China and it has more recently expanded into offering a wider range of financial products, including loans, credit, and insurance; this could disrupt the landscape of China’s banking system.
However, the IPO was halted by Beijing just two days before Ant’s debut on the stock market after Ma publicly and explicitly criticised China’s regulators and state-owned banks in a speech at the Bund Summit. Regulators said that the IPO was blocked due to concerns about its micro-lending services.
Beijing has recently taken action to limit the power wielded by internet giants like Alibaba and Tencent. In November, draft rules were issued aimed at preventing anti-competitive behaviour by internet companies in Beijing’s first major strike against the sector; many interpreted this as a warning to Ma and other influential tech leaders.
Richard McGregor, an East Asia economics expert at the Lowy Institute in Sydney, told AFP that: “There is an underlying political message that no company and no individual can grow so big in China to the point where they can potentially challenge the authority of the [Chinese Communist Party].”
The State Administration for Market Regulation confirmed that the company was being investigated for “suspected monopolistic practices”.
Financial regulators will be holding “supervisory and guidance” talks with Ant Group in the coming days, according to the People’s Bank of China. This will be used as an opportunity to guide the subsidiary to “implement financial supervision, fair competition, and protect the legitimate rights and interests of consumers”.
The investigation will be focused on allegedly anticompetitive behaviour regarding a practice known as “choosing one from two”. This requires third-party sellers to sign up to exclusive pacts which prevent them from offering their products on rival platforms.
Chinese state media express support for the investigation: “[Monopoly] distorts allocation of resources, harms the interest of market players and consumers, and kills technological advancement,” the People’s Daily said.
Alibaba Group said in a statement that it will “actively cooperate with the regulators on the investigation”. Ant Group said that it will “diligently study and strictly comply with regulators departments’ requests”.
Shares in Alibaba fell nearly nine per cent on the Hong Kong stock exchange following the announcement.
Meanwhile, in the US and EU, tech giants like Facebook and Google are facing legal and policy challenges over their allegedly monopolistic behaviour. Last month, the European Commission filed charges against Amazon, accusing the company of anti-competitive behaviour regarding its use of third-party sales data, while the US Federal Trade Commission and nearly every US state have filed antitrust lawsuits against Facebook over its “bury or buy” strategy for dealing with competitors.