” A CTING ON INFORMATION, China’s State Administration for Market Regulation [SAMR] has begun examination [into] Alibaba Group for supposed monopoly conduct consisting of implementing an ‘special dealing contract’.” This brief note, published by Xinhua, the state news firm, on December 24 th, was all it required to cut China’s mightiest online titan down to size. Not even the statement 3 days later of an additional $6bn in share buy-backs apprehended the slide in its market price. By December 28 th it had fallen by 13%, or $91 bn. By comparison, American regulators’ detailed charge-sheets versus tech giants such as Facebook and Google in current weeks generated a yawn from investors.
The Alibaba investigation is the very first of its kind into Chinese e-commerce. Its timing– a month after authorities suddenly stopped the $37 bn initial public offering ( IPO) of Alibaba’s fintech affiliate, Ant Group, and days prior to regulators informed Ant to reduce financing and wealth-management activities– hints it is China’s method of chastening the 2 companies’ flamboyant co-founder, Jack Ma.
That could be. Ant’s IPO was put on ice after Mr Ma likened China’s state banks to pawn stores. Chinese watchdogs frequently introduce lightning crackdowns to deter others from misbehaving, says Angela Zhang of the University of Hong Kong. The probe also signifies issues over the online economy, which is effervescent however likewise ever more concentrated. As investors parsed the Xinhua note, share prices of other web giants, such as Tencent and Meituan, fell nearly as steeply as Alibaba’s.
The complaint versus Alibaba centres on the practice of having merchants or brands sign agreements to sell items solely on its platform. Those that do business on rival markets risk having actually internet traffic diverted from their online shopfronts on Alibaba’s Tmall emporium to other sellers.
Such plans aren’t new. In 2015 J D com, a smaller sized e-emporium backed by Tencent, submitted a legal claim versus Alibaba over a similar issue. Nor are they special to Mr Ma’s company, which launched a completing grievance versus JD com the same year. These and other problems because have been largely ignored by regulators. Why the about-turn?
Chinese trustbusters long withstood hobbling an industry seen as world-beating, and backed in Beijing. Now, as in the West, they fret that a couple of giants control vital services– e-commerce, logistics, payments, ride-hailing, food shipment, social networks, messaging. Common practices, such as selling items below expense to lure clients, look more troubling in an industry where the top 3 firms control over 90%of the marketplace than they would in a less concentrated one. In November SAMR said offering shoppers various prices based upon their spending power, divined from user data, might be unlawful.
Another factor for China’s newly found zeal (Mr Ma’s jibes aside) is greater trustbusting capability. SAMR was formed just in 2018, by combining the offices of three regulators. It still has a hard time to stay up to date with the fast-changing online market; most staff are hectic assessing mergers and acquisitions. But it has more knowledge and workforce than it utilized to– and looks eager to deploy them.
This post appeared in the Business section of the print edition under the headline “Mo money, Ma problems”