Chinese Regulators Charge Alibaba With a $2.8 Billion Fine

Alibaba’s Alleged Anticompetitive Behavior

Chinese ecommerce giant Alibaba (BABA) was hit with an 18.23 billion yuan ($2.8 billion) fine from Chinese regulators because of anti-competitive behaviors.

China’s State Administration for Market Regulation launched an inquiry in December focusing on Alibaba’s practice of requiring merchants to list products on one of its two platforms rather than on both. Chinese regulators said the practice hurts competition online and harms consumers.

As part of the ruling, Alibaba must file compliance reports with regulators for the next three years and pay a hefty fine. The fine represents about 4% of Alibaba’s 2019 revenue.

Alibaba’s Stock Rallies Despite Fine

Despite the regulatory action, shares of Alibaba rallied yesterday. One analyst said the conclusion of the inquiry “lifts a major overhang” on the stock. It also enables investors to focus on the fundamentals of the company.

Alibaba’s Executive Vice Chairman Joseph Tsai said the ecommerce giant isn’t aware of any more investigations by Chinese regulators into its business practices. He did say the company may face inquiries from regulators concerning mergers and acquisitions and strategic investments. “We are pleased that we are able to put this matter behind us,” Tsai said. Several of China’s technology companies have experienced enormous growth in recent years while facing little oversight from regulators. Now regulations for Chinese tech giants are becoming more strict.

Alibaba Looks Ahead

In terms of what’s next, Alibaba will change its exclusivity rule with merchants—but the company doesn’t expect it to have a substantial impact on its financials.

Alibaba recently shared that it is adding tools to make it easier and cheaper for businesses and merchants to sell on its platform. Alibaba is also continuing its expansion into smaller cities and rural areas of China. Despite the huge fine Alibaba is facing, investors seem optimistic about the company’s outlook.

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