Chinese Retail Giant, AliBaba In The Dock Over Market Manipulation

The World biggest online retail trading giant, Alibaba is currently under investigation accused of clandestine activities, preventing its business partners from offering some products  for sale on other online platforms.

Chinese authorities have put the retail giant in the dock over alleged monopolistic practices capable of manipulating sales of products and which dissuade rival companies from offering the same products for sale to customers on their platforms..

Officials from the State Administration for Market Regulation said they are analysing the firm’s ‘choose one of two’ practice that prevents its business partners from offering products on other tech platforms, Harry White has reported for ‘This is money’, the online financial and business  newspaper.

It follows the sudden postponement of its fintech offshoot Ant Group’s planned listing last month in what would have been the world’s biggest stock market flotation.

Ant Group – which is one-third owned by Alibaba – is also due to meet financial regulators soon to discuss issues related to fair competition, consumer rights and financial supervision. It has said it would ‘comply with all regulatory requirements.’

Both Alibaba and Ant have experienced meteoric rises since their founding, and have made Jack Ma one of China’s richest men, with an estimated net worth of $60.8billion.

Alibaba is the largest e-commerce multinational in the world, and had over 750 million Chinese consumers on its network last quarter. Aside from retail sales, it also offers cloud computing, film production, sports and logistics services.

Ant Group runs Alipay, a digital payments platform with over one billion users and made first-half profits of $3.2billion this year.

The growth of both businesses has increasingly made authorities nervous, and the Chinese Communist Party has stated that anti-monopoly enforcement, especially in tech industries, will be a priority next year.

An editorial in the state-run People’s Daily newspaper said that if a ‘monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won’t develop in a healthy, and sustainable way.’

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

Ant was due to go public on the Hong Kong and Shanghai stock exchanges in November in a listing worth a record $34.4billion before being halted at the eleventh hour.

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.

 Ant was due to go public on the Hong Kong and Shanghai stock exchanges in November in a listing worth a record $34.4billion before being halted at the eleventh hour

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 played a leading role in taking Ant to market.

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.

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 firm spun off by Tencent Holding Ltd, another Chinese internet giant, 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 the use of exclusive contracts, predatory pricing and other tactics, according to a statement by the State Administration of Market Regulation. 

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