China on Saturday said it was imposing a record $2.8 billion fine on the e-commerce titan Alibaba for monopolistic business practices, the government’s toughest action to date in its campaign to regulate the country’s internet giants more closely.
Beijing’s market watchdog began investigating Alibaba in December for potential antitrust violations, including preventing merchants from selling their goods on other shopping platforms. On Saturday, the regulator said its investigation had concluded that Alibaba had hindered competition in online retail in China, affected innovation in the internet economy and harmed consumers’ interests.
The fine on Alibaba, one of China’s most valuable private companies and the bedrock of the business empire of Jack Ma, the country’s most famous tycoon, exceeds the $975 million antitrust penalty that the Chinese government imposed on the American chip giant Qualcomm in 2015.
The Chinese authorities left little doubt Saturday about the signal they wanted to send to other 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.”
The fine is unlikely to leave a substantial dent in Alibaba’s fortunes. The State Administration for Market Regulation, the Chinese agency that imposed the penalty, said the amount represented 4 percent of Alibaba’s domestic sales in 2019. The group reported profits of more than $12 billion in the last three months of 2020 alone.
The fact that Beijing did not demand large additional concessions from Alibaba makes the decision “good news for the firm” over all, said Angela Zhang, an associate professor and director of the Center for Chinese Law at the University of Hong Kong.
Qualcomm, when it was fined six years ago, also agreed to offer Chinese customers hefty discounts on patent royalties. On Saturday, the market regulator said only that Alibaba would need to curb its anticompetitive behavior and to submit reports on its compliance for three years.
“I would think the market should react positively,” Professor Zhang said, though she cautioned that the government could always pursue additional investigations into other aspects of Alibaba’s business.
In a statement, Alibaba said it would accept the penalty “with sincerity” and would strengthen internal systems “to better serve our responsibility to society.”
“The penalty issued today served to alert and catalyze companies like ours,” Alibaba said. “It reflects the regulators’ thoughtful and normative expectations toward our industry’s development.”
Over the past decade, Alibaba’s business has sprawled beyond shopping into logistics, grocery, entertainment, social media, travel booking and much else. Like its fellow internet behemoths, Alibaba has said that the breadth of its business helps make each of its services more useful. But critics say the company’s size slants the playing field for competitors and restricts consumers’ choices.
China started ramping up scrutiny of its tech giants last year. The market regulator proposed updating the country’s antimonopoly law with a new provision for large internet platforms such as Alibaba’s. In November, officials halted the plans of Alibaba’s sister company, the finance-focused Ant Group, to go public and tightened 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.
Skepticism about the clout of large internet companies has been on the rise in the United States and Europe, too. Western regulators have repeatedly fined Goliaths such as Google in recent years for various antitrust violations. But such penalties generally have not changed the nature of the companies’ businesses enough to mitigate concerns about their power.
China started later than the West in seeking to stiffen supervision of Big Tech. But its efforts are already starting to influence the way Chinese internet giants operate, a reflection of the extent to which all private companies in China need to stay in the government’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 social app.
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