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China tech

Jack Ma's Alibaba and Ant targeted by China regulators

Antimonopoly probe into e-commerce group hits shares across tech sector

The State Administration for Market Regulation said it is investigating alleged Alibaba practices, such as requiring vendors to exclusively list their products on its platforms. (Nikkei montage/Getty Images/AP)

HONG KONG -- Chinese authorities launched an antimonopoly investigation against e-commerce company Alibaba Group Holding and summoned executives at its Ant Group finance affiliate for talks, in a sign that Beijing is heightening its crackdown on Jack Ma's business interests and the power of the country's tech giants.

Alibaba's shares fell sharply in response to the probe. Its Hong Kong-traded shares ended 8.1% lower at HK$228.20.

In one of the first probes of its kind into the influential conglomerate founded by Ma, the State Administration for Market Regulation said that, in response to complaints, it is investigating allegations that Alibaba has required vendors to list products exclusively on its platforms.

Alibaba was sued by smaller rival in 2017 over such alleged practices, which Alibaba denied. No judgment has been reached in the case.

Alibaba said in a statement that it had received notification from the SAMR about the new inquiry.

"Alibaba will actively collaborate with the investigation of the regulator, and currently all our businesses operate as normal," it said.

Meanwhile Ant Group, the financial services unit of Alibaba, on Thursday received notice to send top executives to a meeting with the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange in the next few days.

"Ant Group received a meeting notice from regulators. We will seriously study and strictly comply with all regulatory requirements and commit full efforts to fulfill all related work," Ant said.

After years of boundless growth and shopping sprees for new assets, China's biggest internet groups now extend into most sectors of the economy, from transportation to finance. But while they used to enjoy a free pass on many regulatory issues, they are now under unprecedented scrutiny, and the state is asserting its dominance once again.

Last month, a series of new regulations forced Ant to shelve a planned $35 billion initial public offering that was to be shared between the Shanghai Stock Exchange and Hong Kong.

The suspension was a blow to Ma, founder and significant shareholder of both Alibaba and Ant. It came soon after Ma made a speech challenging China's financial regulators.

Ant, which operates popular payment app Alipay, has already removed listings for some bank deposit products from its platform and lowered credit limits for younger customers in recent days after regulators tightened rules on online financial services.

And this month the market regulator fined Alibaba and Tencent Holdings 500,000 yuan each for failing to seek regulatory approval for past acquisitions.

Other Chinese internet platforms and e-commerce groups have also felt heat from the regulators' escalating crackdown on anticompetitive practices. Their shares slid too on Thursday, with Meituan, Tencent and each falling between 2% and 3%.

"The investigation [into Alibaba] does not indicate that China has changed its supportive and encouraging attitude toward internet platforms," People's Daily, the mouthpiece of China's ruling Communist Party, said in an editorial Thursday. It said the probe will help ensure the healthy development of the internet sector.

"The Chinese government has been signaling for a long time that it is going to look at anti-competitive and abusive practices by dominant platform business models," said Jeffrey Towson, an online lecturer on China's digital sector.

He said that smaller sellers have little choice under the "take-it-or-leave-it" requirements of big e-commerce platforms and can be hit by increasing fees, reduced data sharing and other practices at any time.

"The merchant side is where antimonopoly behavior is a problem," he said.

President Xi Jinping this month made "stepping up antimonopoly efforts and preventing the disorderly expansion of capital" a priority for the party's economic work in 2021, according to an earlier Xinhua report.

Danny Law, an analyst at Guotai Junan International Holdings in Hong Kong, said: "I think that the recent move is to remind all internet enterprises to avoid improper conduct, including forced inclusive and over-aggressive pricing...pushing internet enterprises to adjust their expansion strategies, and benefiting whole society eventually."

Ernan Cui, China Consumer Analyst at Gavekal Dragonomics, said that despite the strong policy signals on tougher crackdown on internet giants Beijing has little incentive to bring down these companies due to their significant contribution on economy.

"I think what the regulator is trying to do here is to sound the alarm so the internet companies will restrain themselves a little in expansion," she said.

Cui said the consequence of the investigation this time could be more severe than the 500,000 yuan Alibaba was fined this month.

Chinese lawmakers are revising antimonopoly laws, which could mean the maximum fine is lifted to 10% of a company's annual revenues.

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