China’s State Administration for Market Regulation (SAMR) has launched an investigation into e-commerce powerhouse Alibaba (HKEX: 9988; NYSE: BABA) over alleged monopolistic practices, as Beijing is tightening oversight of the country’s influential technology companies, state-owned news agency Xinhua reported on Thursday.
Alibaba confirmed the news in a public statement, saying that it will “actively cooperate with the regulators on the investigation.” Business operations remain normal, the company added. The firm allegedly pressured merchants to choose its service, rather than let them work with multiple platforms. Alibaba competes with companies such as JD.com and Pinduoduo in the market.
Meanwhile, Chinese authorities—the People’s Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, and State Administration of Foreign Exchange—said that they would meet with Ant Group, Alibaba’s financial arm, to discuss how the company can operate in a market-oriented way that considers consumer rights and interests. Ant Group also released a public statement, indicating that it “will seriously study and strictly comply with all regulatory requirements and commit full efforts to fulfill all related work.”
Alibaba’s stock plunged 8.13% to HKD 228.2 on Thursday morning in Hong Kong and 3.42% to USD 247.42 in extended-hours US trading. Shares of its spinoff Ali Health (HKEX: 0241) sank by 10.92% to HKD 23.65, while Alibaba Pictures Groups (HKEX: 1060) fell 2.08% to HKD 0.94.
The sudden action from the nation’s regulators is the latest in the new campaign targeting Chinese tech giants, which enjoy a dominant position in many sectors. In November, the authorities issued a 22-page draft of new anti-monopoly rules, which many read as a veiled warning to Jack Ma and fellow entrepreneurs.
Alibaba is bearing the brunt of the attacks. After Ma challenged regulators and the traditional financial system in a speech in Shanghai in October, officials suspended the IPO of Alibaba’s fintech arm Ant Group, in what was expected to be the world’s biggest listing in Hong Kong and Shanghai. In early December, Ma was advised by the government to stay in the country, Bloomberg reported this week, citing a person familiar with the matter.
Bracing for more regulation
Earlier in December, SAMR fined Alibaba, Tencent-backed online literature company China Literature (HKEX: 0772), and SF Express-owned smart locker Hive Box, RMB 500,000 (USD 76,463) each for not reporting deals, which all took place years ago.
This week, financial online service providers, including JD Digits, Tencent, Baidu, Lufax, and Trip.com, all stopped selling deposit-taking products shortly after Ant Group removed similar interest-bearing time deposit products in an effort to comply with the country’s increasingly strict scrutiny on the sector. Ant Group’s Huabei, one of the company’s consumer-lending services, also lowered credit limits for some younger borrowers “to promote more rational spending habits.”
