Alibaba falls foul of its unfair practices

Alibaba has achieved a great deal as an internet giant. But it has taken it for granted that it could use its market dominance to prohibit its rivals from developing in a fair manner. But the other shoe dropped when the State Administration for Market Regulation levied 18.23 billion yuan ($2.8 billion) fine on Alibaba Group Holding Ltd for unfair competition through abusing its market dominant position.

Investigations by market regulators show that Alibaba has forced merchants to make a choice between the online market places of its own and those of its competitors.

By denying merchants the opportunity to use its online market places unless they do so exclusively, Alibaba believed that it could expand its market share and prohibit the development of its competitors.

However, China’s anti-monopoly law stipulates that a company cannot prohibit merchants from doing business with its competitors without justifiable reason.

What Alibaba did violated the anti-monopoly law. In reality, what it was doing hindered free and fair competition of the online market, hurt the lawful rights of merchants and, as a result, caused damage to the interests of consumers.

The fine of 18.23 billion yuan ($2.8 billion) is a huge sum, but it represents only 4 percent of the company’s total domestic sales in 2019, which was 455.712 billion yuan. The anti-monopoly law stipulates that a fine between 1 and 10 percent of a company’s annual sales can be imposed on a company that has abused its market dominance.

Monopoly chokes the healthy development of a market economy causing it to stagnate. The abuse of market dominance will affect innovation in the platform-based internet economy and block the free flow of the essential factors of production.

The Chinese government strongly supports the development of the platform-based internet economy, but it does not mean it will not regulate this sector. In other words, free competition does not mean the big fish can eat the small fry and the market economy is not a jungle where the strong can use their strength to exclude their competitors.

China’s market regulators have handled a series of cases involving unfair competition and monopoly in recent years. The case of Alibaba is only one of them.

What a company, be it an internet enterprise or one in any other sector, needs to do is to always innovate and do a better job itself. Only those companies which always aim to outperform their competitors can succeed in a fair market environment. That is the lesson other companies need to learn from the case of Alibaba.