An old, yet interesting news from the archive

China Fines Alibaba $2.8 Billion in Landmark Antitrust Case

The penalty is the biggest move to date in China’s campaign to tighten supervision of its internet Goliaths.

By Raymond Zhong, NY Times, April 9th, 2021.

By hitting the e-commerce titan Alibaba with a record $2.8 billion antitrust fine on Saturday, Chinese officials sent a message to the country’s high-flying internet industry: We’ve got our eyes on you.

Btw, the official report released supporting the fine is more than 10k works (Chinese characters).

The penalty imposed on Alibaba, one of China’s most valuable private companies and the bedrock of the business empire of Jack Ma, its most famous tycoon, was the biggest move yet in the government’s campaign to tighten its supervision of Big Tech.

The authority is more converned this time:

The authorities left little doubt Saturday about their intention to keep reining in China’s internet behemoths. In a commentary that was published online a minute after the fine was announced, People’s Daily, the official Communist Party newspaper, called regulation “a kind of love and care.”

“Monopoly is the great enemy of the market economy,” the commentary read. “There is no contradiction between regulating under the law and supporting development. Rather, they complement each other and are mutually reinforcing.”

Antitrust in the changing

China started ramping up scrutiny of its tech giants last year. The market regulator proposed updating the antimonopoly law with new provisions for large internet platforms like Alibaba’s. In November, officials halted the plans of Alibaba’s sister company, the finance-focused Ant Group, to go public and tightened their oversight of internet finance.

In December, it opened the antimonopoly investigation into Alibaba — a startling turn for Mr. Ma, whom people in China had long held up as an icon of entrepreneurial pluck. In late October, shortly before Ant Group’s shares were expected to begin trading, Mr. Ma had spoken at a conference in Shanghai and accused Chinese financial regulators of stymieing innovation in the name of controlling risk. His remarks were not well received in the state-run news media.

Is it too late though?

China started later than the West on this front. In recent months, apart from the Alibaba investigation, the antitrust authority has also imposed smaller fines on companies for failing to report acquisition deals in advance.

Yet the government’s campaign is already starting to influence the way Chinese internet giants operate, a reflection of the extent to which all private companies in China must stay in Beijing’s good graces to survive.

For many years, Alibaba and its archrival, the gaming and social media giant Tencent, have competed ferociously in a variety of businesses, including by deterring their own users from spending time on the other company’s services. That may be starting to change. In a first for the company, Alibaba recently applied for two of its commerce platforms, Taobao Deals and Xianyu, to have a presence on WeChat, Tencent’s ubiquitous messaging app.

Tencent is an obvious potential target for future antimonopoly action by Beijing. With WeChat, the company has created and nurtured an all-in-one platform for news, entertainment, finance, shopping and more, giving it great leverage over rivals and smaller companies as an essential gatekeeper to Chinese internet users.

The fine, thin line between too less and too much

“As companies become large, and as internet services become more and more a part of people’s life, then companies need to be much more responsible, both to the users, to the government, to society,” Tencent’s president, Martin Lau, said last month on a conference call with analysts. “Now I think it’s important for us to understand even more about what the government is concerned about, what the society is concerned about, and be even more compliant.”

Chinese officials do not appear to wish to tip the scales too much against the internet companies, which have legions of loyal users and employ many young, highly educated people.

New law on the going

In November, not long after officials put Ant Group’s I.P.O. plans on ice, China’s market regulator published draft guidelines for antitrust enforcement of internet platforms. The final rules, which appeared in February, differed in a few key ways.

One provision in the draft lowered the bar for the authorities to argue, in certain cases, that a company was a monopolist. That provision did not make it into the final rules. Another clause in the draft that later disappeared would have made it easier for regulators to argue that companies that held large amounts of user data were abusing their dominance.

The authorities also do not seem to want to tighten control over internet giants in a way that would undermine China in its strategic rivalry with other global powers — one in particular.