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China slaps Alibaba with record $2.8 billion fine for violating antimonopoly rules

China slaps Alibaba with record $2.8 billion fine for violating antimonopoly rules

Chinese regulators have fined Alibaba (NYSE: BABA) a record 18.2 billion yuan, or $2.8 billion.

The State Administration for Market Regulation (SAMR) revealed on Saturday that it imposed the fine against the world’s largest e-commerce company for violating the country’s anti-monopoly rules.

It claims that the business empire founded by billionaire Jack Ma punished merchants who sold goods in other e-commerce platforms other than Alibaba. It said that since 2015, the Hangzhou-based company has been abusing its dominant market position by forcing online merchants to “pick one from two.” The practice, known as “er xuan yi” in China, is in breach of the nation’s anti-monopoly law. 

“Alibaba accepts the penalty with sincerity and will ensure its compliance with determination. To serve its responsibility to society, Alibaba will operate in accordance with the law with utmost diligence, continue to strengthen its compliance systems and build on growth through innovation,” Alibaba said in a statement released on April 9.

The penalty represents the highest-ever fine imposed for antitrust violations in China. The amount is equivalent to about 4% of Alibaba’s domestic revenue in 2019 and nearly three times the penalty given to US chipmaker Qualcomm in 2015 for violating the country’s anti-monopoly law.

Liu Xu, a researcher at the National Strategy Institute at the Tsinghua University, said that the $2.75 billion fine is symbolic for Alibaba.

“The $2.75 billion fine bill is not as big as we think,” Xu said, according to Reuters. “A true enhancement of China’s antitrust efforts will depend on persistent determination from the central government and a more transparent, fair mechanism to help the antitrust forces to get rid of various kinds of interference during their investigations and enforcement.” 

Another blow to Jack Ma’s company

The fine is another blow to the company that has been under intense regulatory scrutiny since last year. In November, state regulators halted the initial public offering (IPO) of Alibaba’s fintech arm, Ant Group, just days before it should start trading in Shanghai and Hong Kong.

Chinese authorities started to aggressively investigate the company after Jack Ma declared during a speech in late October that the country’s regulatory restrictions were hampering innovations.

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