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Antitrust Probe on Alibaba

What happened: China’s antitrust watchdog, the State Administration of Market Regulation, announced a one-of-first-of-it’s-kind antitrust probe into the country’s biggest tech giant, Alibaba.

Why: This move comes because of Alibaba’s tactic of choosing which clients to promote on its online commerce platforms.

Choosing one of two: Alibaba forces business and merchants to list their products only on its online stores, Taobao and Tmall.

  • There’s no explicit penalty if they list it on rival platforms. But owners who do so see a significant drop in sales and traffic. Some even see their product removed.
  • SCMP, an Alibaba-owned publication says: “Legally, it is not well defined whether a platform such as Alibaba has the right to determine which clients it serves”

Similar cases: Chinese authorities have fined local partners of food delivery platforms Meituan and Ele.me for forcing restaurants to choose between the two apps.

It’s not the first complaint: JD.com, China’s second-largest e-store, sued Alibaba’s Tmall in 2017 for abusing its market dominance for monopolistic behaviour. Later some more Tmall-rivals like Pinduoduo and Vipshop joined in. The court is yet to make a ruling, says SCMP

The government: China’s communist party-owned People’s Daily said in an editorial: “Antitrust has become an urgent issue concerning [China’s] overall situation”

Outcome: “In a worst-case scenario, Alibaba could be a fined up to 10 per cent of its previous year’s sales,” says Scott Yu, an antitrust expert.

  • Paul Haswell says that there could be restrictions on Alibaba’s business practices or, very unlikely, breaking up of the company.

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