China steps up pressure on Alibaba with anti-monopoly probe

(AP) Chinese regulators on Thursday announced an anti-monopoly investigation of e-commerce giant Alibaba Group, stepping up the ruling Communist Party’s efforts to control fast-growing tech industries.

President Xi Jinping’s government worries about the dominance of competitors such as Alibaba, the world’s biggest e-commerce company by sales volume, and Tencent Holding, operator of the popular WeChat messaging service and Asia’s most valuable tech company. Regulators appear to be especially concerned about controlling private sector companies that are expanding into online banking at a time when Beijing is trying to reduce financial risks.

The ruling party says anti-monopoly enforcement, especially in tech industries, will be a priority next year. Since early November, regulators have tightened the reins by suspending the stock market debut of an online finance platform affiliated with Alibaba and summoned industry executives to warn them against trying to suppress competition.

“The era of free growth and ultra-high growth is really over,” said Francis Lun, CEO of Geo Securities Ltd. in Hong Kong. “The government will decide what you can do.”

Thursday’s announcement said the State Administration of Market Regulation is looking into Alibaba’s policy of “choose one of two,” which requires business partners to avoid dealing with its competitors. The one-sentence statement gave no details of possible penalties or a timeline to announce a result.

Proposed rules issued in November would ban exclusive contracts, subsidies and other tactics regulators say hurt competition.

“Reports of platform monopoly problems are increasing by the day,” the ruling party newspaper People’s Daily said in a commentary about the Alibaba probe. “Anti-monopoly has become an urgent issue.”

Internet companies in the United States face similar scrutiny. Legislators and regulators are looking at whether Facebook, Google and other companies improperly hamper competition in advertising and other areas.

Alibaba, set up in 1999, operates retail, business-to-business and consumer-to-consumer platforms. It has expanded at a breakneck pace into financial services, film production and other fields.

Alibaba’s founder, Jack Ma, is China’s richest entrepreneur and one of its most prominent businesspeople worldwide with a net worth of $59 billion. He is widely admired and a ruling party member but has run into regulatory hurdles.

In November, regulators jolted the Chinese business world by suspending the stock market debut of Ant Group, a former Alibaba subsidiary that is the world’s biggest online finance platform. It would have been the top global initial public offering this year. 

Economists said regulators worried about financial risks, but businesspeople suggested Chinese leaders might have focused on Ant because Ma complained at a business conference in October that regulators failed to keep up with industry development and were blocking opportunities.

Alibaba’s CEO later praised regulators in a speech in a possible effort to repair relations.

Ma stepped down as Alibaba chairman in 2019 but still is one of its biggest shareholders and was a leader in taking Ant to market. 

Also Thursday, the market regulator announced Ant executives had been summoned to meet with regulators but gave no indication about the status of its stock offering. Ant said in a separate statement it would “study and strictly comply” with regulatory requirements but gave no details. 

Ant offers services ranging from banking to insurance and securities, connecting users to state-owned banks and other institutions.

Ant promotes itself as a tech brand, not a financial institution. The decision to halt its stock offering suggested regulators rejected that and might require Ant to share in lending-related risk and enforce its own controls.

Communist leaders are trying to reduce financial risk since a surge in debt prompted concern about a possible financial crisis and led international rating agencies to cut Beijing’s credit rating for government borrowing.

Ant competes with state-owned banks for business, squeezing their profits.

“You are threatening the survival of the state-owned banks,” said Lun. “That cannot happen, so the government has to crack down.”

The explosive growth of online commerce dramatically increased choices for Chinese shoppers, especially in towns and the countryside with few retail options.

China has the world’s biggest population of internet users at 940 million, according to government data. An unusually large share of the public use e-commerce and other online services, giving internet companies outsize influence in retailing, entertainment and other industries.

Also this month, Alibaba and a company spun off by Tencent Holding Ltd. were fined for failing to apply for official approval before proceeding with some acquisitions.

The ruling party also has tightened restrictions on collection and use of customers’ personal information.

On Tuesday, regulators met with executives of Alibaba and five other major Chinese internet companies and warned them not to abuse their dominance to drive out competitors through use of exclusive contracts, predatory pricing and other tactics, according to a statement by the State Administration of Market Regulation.

Other companies at the meeting were JD.com. Inc., Alibaba’s main competitor; an online grocer, Pinduoduo; Tencent; food delivery service Meituan and ride-hailing company Didi Chuxing, the statement said.

The crackdown follows a boom for internet industries after millions of Chinese families were ordered to stay home during efforts to contain the coronavirus and switched to shopping and working online.

Alibaba said revenue rose 30% over a year earlier in the three months ending in September to 155.1 billion yuan ($23.4 billion). 

The company said shoppers spent 498.2 billion yuan ($75.1 billion) on its platforms from Nov. 1 to 11 during the Singles Day shopping festival. The informal holiday begun in the 1990s has become the world’s biggest retail spending period.

Source: Associated Press by Joe McDonald

China steps up pressure on Alibaba with anti-monopoly probe China steps up pressure on Alibaba with anti-monopoly probe Reviewed by TechCO on 12/24/2020 Rating: 5

No comments:

ads 728x90 B
Powered by Blogger.