Alibaba Fined $2.8 Billion For Abusing Market Dominance


Photo courtesy Reuters

Earlier this month, Chinese regulators fined the tech giant Alibaba a record 18.23 billion yuan ($2.8 billion). Alibaba is an online retail platform that sells items ranging from electronics and beauty products to clothing and machineries. The Chinese government opened an anti-monopoly investigation into Alibaba in December and found the company guilty of monopolistic behaviors. Alibaba was found forcing merchants to choose an online retail platform instead of being able to sell on multiple platforms. The company punished merchants who sold goods on both Alibaba and rival companies. This practice, nicknamed the “choose one” policy, gave Alibaba an unfair advantage in the market and prevented sellers from utilizing other platforms. As a result, Alibaba’s internal operations and practices were questioned. 

In addition to the enormous fine, Alibaba will be required to file compliance reports to China’s State Administration for Market Regulations (SAMR) over the next three years and revamp its operations. Chinese regulators stated that Alibaba’s business practices “limited competition, affected innovation, infringed on the rights of merchants and harmed the interests of consumers.” By pressuring merchants into choosing its own platform, Alibaba was essentially stealing potential users away from other companies and creating a massive customer base that will only use Alibaba. 

In response, Alibaba has agreed to pay the fine and will comply with the regulations set by the Chinese government. The company has begun to remodel its internal operations and stated, “Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance, and support from all of our constituencies have been crucial to our development. For this, we are full of gratitude and respect…” Recognizing the absolute power the Chinese government has over its company, Alibaba is obligated to comply with regulators.

Alibaba is not the first company to be scrutinized by the Chinese government. Last year, officials stopped the digital payment platform, Ant Group’s, initial public offering (IPO) after claiming that the company’s offering no longer met the offering requirements. Set to what would have been the world’s biggest IPO, Ant Group was forced to overhaul its business. China’s Banking and Insurance Regulation Commission drafted new rules for the online finance business, implementing a tighter control on lending. 

With Chinese regulators becoming more attentive to these tech giants, companies will likely become more careful in their business decisions and strategies. Officials have already questioned companies like Tencent and punished Baidu for monopolistic behaviors. However, Alibaba released an open letter stating the company will fully cooperate with further investigations and will ensure that its future business practices promote fair market competition. While the fine issued for Alibaba seemed significant, it did not have any serious effect on the company itself. The penalty was intended to warn companies like Alibaba so that in the future, they will not be able to get away with monopolistic behaviors.