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China hits Alibaba with record $2.8 billion fine for behaving like a monopoly

China has ordered Alibaba to pay a record fine of 18.2 billion yuan ($2.8 billion) after antitrust regulators concluded that the online shopping giant had been behaving like a monopoly. Chinese state media reported Saturday that the State Administration for Market Regulation had imposed the penalty following an antitrust investigation into Alibaba’s (BABA) “exclusive dealing agreements” that prevented merchants from selling products on rival e-commerce platforms — a practice known as “choosing one from two.”

The fine is equivalent to 4% of Alibaba’s sales in China in 2019, state news agency Xinhua reported, and dwarfs the previous record penalty of $975 million handed out to American chipmaker Qualcomm (QCOM) in 2015. Beijing has been tightening the screws on China’s national tech champions in recent months, part of a regulatory crackdown that President Xi Jinping has described as one of the country’s top priorities for 2021. Last month, Xi urged officials to step up their efforts to regulate online companies to maintain social stability. Co-founded by legendary entrepreneur Jack Ma, Alibaba is one of China’s most prominent and successful private businesses. By making such a high-profile example, Chinese regulators are sending a clear message about their intent to rein in the country’s most powerful companies.

Ma has kept a very low profile since Ant Group, Alibaba’s financial affiliate, was forced to shelve what would have been the world’s biggest IPO last November after he criticized Chinese regulators. Since then, Ma has made only one brief public appearance in a video in January, and Ant Group — which owns the hugely popular digital payments app Alipay — has been ordered to overhaul its business. In an open letter published on Saturday, Alibaba said the company had cooperated with the investigation and accepted the penalty “with sincerity and will ensure our compliance with determination.”

“Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance and support from all of our constituencies have been crucial to our development. For this, we are full of gratitude and respect,” it added. “It is not lost on us that today’s society has new expectations for platform companies, as we must assume more responsibilities as part of the nation’s economic and social development.” Beijing has long been concerned that the influence tech firms have over the financial sector makes that industry vulnerable — Ant, for example, now commands more than half of the mobile payments market in China — and officials have been looking for ways to rein them in.

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