From Coco Liu

After China against Alibaba Group Holding Ltd. After imposing a record antitrust fine, the e-commerce giant did something unusual: it thanked regulators.

“Alibaba would not have achieved our growth without solid government regulation and good service, and the critical supervision, tolerance and support of all of our constituents have been critical to our development,” the company said in an open letter. “We are full of gratitude and respect for that.”

It’s a sign of how strangely China’s crackdown on big tech power compares to the rest of the world. Mark Zuckerberg and Tim Cook probably wouldn’t express such public gratitude if the US government imposed record antitrust fines on Facebook Inc. or Apple Inc.

Almost everything about China’s regulatory push is extraordinary. Beijing regulators completed their groundbreaking investigation in just four months, compared to the years it took such investigations in the US or Europe. You have sent a clear message to the largest corporations in the country and their executives that anti-competitive behavior will have ramifications.

For Alibaba, the $ 2.8 billion fine was less than feared by many and is helping to clear a cloud of uncertainty over founder Jack Ma’s internet empire. The 18.2 billion yuan penalty was based on just 4% of the internet giant’s 2019 domestic sales, regulators said. That is three times the previous high of almost 1 billion US dollars, which the US chip manufacturer Qualcomm Inc. handed over in 2015, but far less than the maximum 10% permitted under Chinese law. Alibaba’s shares rose 5.5% on Monday morning in Hong Kong.

“We are pleased to have this behind us,” said Joseph Tsai, co-founder and vice chairman, on a call to investors on Monday. “These regulatory measures are taken to ensure fair competition.”

The fine came with a number of “fixes” that Alibaba must make – such as restricting the practice of forcing merchants to choose between Alibaba or a competing platform – many of which had already promised to set it up. But Tsai said regulators weren’t going to radically change their e-commerce strategy.

“They confirm our business model,” he said. “This type of model is good for growing the country’s economy and promoting innovation.”

He said the company was unaware of any further antitrust investigations against the company, other than a previously discussed investigation into the acquisitions and investments of Alibaba and other technology giants.

Alibaba wishes $ 2.8 billion could wipe away its sins: Tim Culpan

Alibaba chief Daniel Zhang said on Saturday that his company was now ready to come out of its ordeal, while China’s mouthpiece for the Communist Party assured the People’s Daily that Beijing was not trying to stifle the sector.

The Hangzhou-based company “has escaped potential consequences such as a forced separation or asset sale. The penalty won’t shake his business model either, ”said Jet Deng, an antitrust attorney with the Beijing office of Dentons law firm.

Beijing remains determined to keep its internet and fintech giants in check, a large-scale campaign that has removed more than $ 250 billion from Alibaba’s valuation since October. The e-commerce giant’s swift surrender underscores its vulnerability to further government action – a long way from six years ago when Alibaba openly opposed the censorship of an agency over counterfeit goods on Taobao, ultimately forcing the state’s industry and trade administration to resign his allegations.

Alibaba thanks Chinese regulators for imposing a record $ 2.8 billion fine
In addition to antitrust law, government agencies are expected to scrutinize other parts of Ma’s Imperium, including Ant Group Co.’s consumer credit business and Alibaba’s extensive media holdings. And the shock of the raid spreads to colleagues at Tencent Holdings Ltd. and Baidu Inc. through Meituan continue to resonate, forcing them to be much more cautious about business expansions and acquisitions for some time.

What Bloomberg Intelligence Says

China’s record fine on Alibaba could lift the regulatory overhang that has weighed on the company since an anti-monopoly investigation began in late December. The 18.2 billion yuan ($ 2.8 billion) fine to punish the anticompetitive practices of merchant exclusivity equates to 4% of Alibaba’s 2019 domestic sales. Still, the company may need to be conservative on acquisitions and its broader business practices.

The investigation against Alibaba was one of the opening volleys of a campaign apparently aimed at curbing the power of Chinese internet leaders, which began after Ma notoriously reprimanded Chinese lenders, internet regulators and the “pawnbrokers”. old men ”of the global banking community. Those comments sparked an unprecedented regulatory offensive, including wiping out Ant’s $ 35 billion IPO.

It remains unclear whether the watchdog or other authorities could call for further action. For example, regulators are said to be concerned about Alibaba’s ability to influence public discourse and want the company to sell some of its media stocks, including the South China Morning Post, Hong Kong’s leading English-language newspaper.

China’s leading financial regulators now see Tencent as the next target for increased supervision, reported Bloomberg News. And the central bank is said to be in talks about forming a joint venture with local tech giants to oversee the lucrative data they collect from hundreds of millions of consumers, which would be a significant escalation in regulators’ attempts to tighten their control over the country Internet sector.

“The heavy fine puts the regulator in the media spotlight and sends a strong signal to the technology sector that such exclusionary behavior will no longer be tolerated,” said Angela Zhang, author of Chinese Antitrust Exceptionalism and director of the Center for Chinese Law at the Hong Kong University. “It is a stone that kills two birds.”

Right now, investors just seem glad it didn’t get any worse. In its statement, the state market regulator concluded that Alibaba had used data and algorithms “to maintain and strengthen its own market power and gain unreasonable competitive advantages.” Its practice of imposing a “one-of-two choice” on merchants “closes and restricts competition” in the domestic online retail market, the statement said.

The company needs to make “major fixes,” including strengthening internal controls, maintaining fair competition, and protecting businesses on its platform and consumer rights, the regulator said. She must submit self-regulatory reports to the agency for three consecutive years.

The company needs to make adjustments, but can now “start over,” Zhang wrote in a memo to Alibaba employees on Saturday.

“We believe that the recent decision and penalties from SAMR will address market concerns about the BABA antimonopoly investigation,” wrote Jefferies analysts in a research note entitled “A New Starting Point.”

Indeed, in its Saturday comment, The People’s Daily said the punishment was merely intended to “prevent the disorderly expansion of capital.”

“This does not mean denying the important role of the platform economy in macroeconomic and social development and does not signal a change in attitudes with regard to the country’s support for the platform economy,” the newspaper said. “Regulations serve for better development, and ‘reining in’ is also a kind of love.”