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Alibaba takes record billion dollar fine in China for monopoly in online commerce

Alibaba was fined by the Chinese government by 18.2 billion yuan, about $2.8 billion, for abuse of market dominance, according to China’s official news agency Xinhua on Saturday. The company is accused of demanding exclusivity from merchants who want to sell products on the platform, prohibiting them from working with competing websites.

Alibaba HQ

Alibaba takes record billion dollar fine in China for monopoly in online commerce (Image: New York Times)

The case began to be investigated in December last year by the State Administration of Market Regulation, which has been keeping an eye on the business of Jack Ma. The penalty is a record in China, and is equivalent to 4% of the company’s annual domestic sales in 2019, which totaled 455.7 billion yuan, about $70 billion, according to the official Chinese press.

According to Bloomberg, the fine is almost three times the size of the fine that Qualcomm had to pay. In 2015, the chip giant paid a $975 million penalty, equivalent to 8% of domestic sales, after a year-long investigation into alleged violations of China’s antitrust law. Under Chinese rules, antitrust fines are limited to 10% of a company’s annual sales.

“Since 2015, the Alibaba group has abused its dominant position in the market” to gain an unfair advantage through the requirement of exclusivity, the regulator said. This behavior prevents competition and innovation in the sector and violates the rights and interests of companies and consumers, they added.

Alibaba and other large Chinese technology companies face increasing pressure from the government, concerned about increasing influence on the country’s population. Users use these platforms to communicate, make purchases, pay bills, book taxis, apply for loans and a multitude of day-to-day tasks.

The e-commerce giants have benefited from the digital boom in Chinese life and the government’s ban on major US competitors from operating in the local market. Among the fastest growing companies are, in addition to Alibaba, JD.com and Tencent, in the media, telecommunications and games sector, responsible for some of the largest social networks and messaging apps in the country, such as QQ, WeChat and Qzone.

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