China’s big tech ‘rectification’ continues after Alibaba record fine
A record fine, public penitence from a tech giant and a ‘who’s who’ of digital firms warned to “rectify” their ambitions within a month – state regulators are showing no one is bigger than Beijing in Xi Jinping’s China.
E-commerce titan Alibaba absorbed the massive US$2.78 billion (RM11.5 billion) penalty from China’s market watchdog last Saturday, after a months-long investigation found it had been abusing its dominant market position.
Analysts say the chastening was part of Beijing’s plan to force a diet on tech giants – from Alibaba to Tencent to Baidu – who have grown fat on the data and personal finances of the Chinese public.
After being hit with China’s biggest ever corporate fine – the equivalent of 4% of annual sales – Alibaba said it would “fully comply” and drop an exclusivity clause to allow merchants to also sell their goods on rival ecommerce platforms.
Vice-chair Joe Tsai thanked the State Administration for Market Regulation for “good guidance on some of the specific issues under the anti-monopoly law.”
Alibaba, which started as an ecommerce platform, spun out fintech colossus Ant Group, China’s biggest online payments firm – leaving China’s regulators struggling to keep up with a marketplace making and meeting new digital lifestyles.
It hit choppy waters after cofounder Jack Ma publicly criticised Chinese regulators in October over their warnings about the expansion of Ant.
In response, regulators pulled Ant’s planned record-busting US$35 billion IPO and ordered a restructure of the company, decoupling the “inappropriate links” to other financial products.
It is now being forced to transform into a financial holding company under the oversight of the central bank, welding it to banking rules.
Ant must pivot to values “serving the real economy and the masses,“state mouthpiece the Global Times said, citing the regulators.
The restructure “is designed to level the playing field between Ant and other fintech,“said Angela Zhang, a law academic at the University of Hong Kong.
“Ant’s major competitive
advantage lies in the troves of data it obtained through Alipay,“she said, citing the ubiquitous online payments platform.
The restructure will challenge Ant’s ability to creep deeper into lending, insurance and investment, she added.
The message to companies reaching too high, too fast is clear, says Nicolas Bahmanyar, a Beijingbased data and tech consultant.
“If in a group some activities are not totally legal, expect the whole group to be impacted,“he said.
“For international companies this is really something to take in consideration: all your eggs are in the same basket when it comes to dealing with the regulator.”
Alibaba may have dodged a bullet with a swift fine it can afford to pay, instead of a prolonged, sapping probe “that puts off investors and profitability in the long term,“says Larry Ong, analyst at SinoInsider consultancy firm.
But the monopolies regulator was only just getting started.
On Tuesday it said 34 tech companies – including giants Baidu, Tencent and ByteDance, the owner of TikTok – had been summoned and urged to “heed the warning” provided by Alibaba’s legal woes.
The firms have been given one month to undergo “complete rectification” – a rigorous selfassessment to ensure they are not in breach of monopoly laws, a statement by the State Administration for Market Regulation said.
They must also ensure they are not doing anything that “harms the interests of operators and consumers,“the statement added, urging the companies to give “priority to national interests”.
Those interests tightly reflect the core concerns of China’s all-powerful leader Xi, say analysts.
“Beijing is looking to rein in the monopolistic power, financial clout, and de facto societal control of ‘toobig-to-fail’ private technology companies to stop them from foisting immense financial and political risks on to the regime,“Ong said.
The regulatory squeeze on fintech has left analysts speculating about who could be next in line for a slapdown.
Tech giant Tencent, food delivery leader Meituan and China’s largest retailer JD.com were also among those summoned on Tuesday for a ticking off. – AFP