China's State Administration for Market Regulation has imposed the largest corporate fine in the country's history on Alibaba, which is 18.22 billion yuan ($2.78 billion), for violating antitrust laws, according to the regulator's website.
The fine that Alibaba must pay has become a record for the country. It is three times the size of the past largest corporate fine in Chinese history. Previously, the largest payout was from chipmaker Qualcomm in 2015, which totaled $975 million. In addition, Alibaba's penalty is equal to 4% of all sales of the company in China in 2019.
Chinese authorities launched an antitrust investigation against Alibaba back in late December. Regulators were reviewing the company's requirement for partners not to work with its competitors. According to the investigation, Alibaba abused its position in the market and forced consumers to use its services without the right to choose.
The regulator's claims were also related to the fact that Alibaba obliged sellers to trade only on one platform, not on several at once. This practice hit the sellers' business and violated the rights and interests of consumers, the Chinese regulator said. According to the authorities, the rule of letting its partners choose only one platform has allowed Alibaba to gain an unfair competitive advantage.
In addition to the fine, the regulator demanded that the company strengthen internal control and control over compliance with regulatory requirements, maintain fair competition, and report to the regulator for three years ahead.
Alibaba said the punishment reflects the regulator's expectations of the industry and will be an incentive for the company. The company noted that thanks to China's economic development and support for innovation, Alibaba has created platforms such as Taobao and Tmall. Without government regulation and customer oversight, Alibaba would not have achieved this kind of growth.
In recent months, the Chinese authorities have resorted to stricter policies against tech giants. President Xi Jinping said that this is one of the country's priorities for 2021.
Alibaba was founded by Jack Ma in 1999. Since then, it has become one of the world's largest retailers, and Ma has become the richest businessman in China, with his fortune exceeding $60 billion.
In October 2020, Ma criticized China's traditional banking system. In November, Ma and his business started experiencing hard times. Back then, Ant Group (a division of Alibaba) was supposed to go public in Hong Kong and Shanghai, which would be the largest IPO in history: the company could raise up to $34.4 billion.
However, Ma's speech set off the chain of events that led to the suspension of Ant Group's IPO. Two days before the placement of shares, Ant Group announced that it had received a message from regulators in China about its suspension. Eventually, Jack Ma lost the lead in the ranking of the wealthiest Chinese people, dropping to third place.