Alibaba Shares Fall Amid China Antitrust Investigation

Alibaba has faced China’s officially announced antitrust investigation. The Internet giant has been accused of anti-competitive practices that restrict merchants from trading only to their platform. Regulators will also meet with financial company Ant, a third of which is owned by Alibaba.

Shares of Alibaba (BABA) fell 7.5% ahead of trading on Thursday after China’s State Market Regulatory Authority (SAMR) issued a statement about an antitrust investigation against the tech giant. One of the main accusations is the practice of “exclusive cooperation agreements” that restrict third-party sellers on the Alibaba e-commerce platform from selling on other competitive e-commerce sites.

This move was preceded by the release of new antitrust rules aimed at ensuring a fair competition environment and supporting small businesses in China. wrote more about this in the article “China’s Internet giants will receive stricter antitrust regulation”.

In November, China’s stricter regulation of online companies resulted in the suspension of the IPO of the largest private fintech company Ant Group, approximately 33% of which is owned by Alibaba. Government regulators likely saw Ant as a threat to the banking sector, as the company has the largest microfinance services business in the country.

Ant’s dual listing on the Shanghai and Hong Kong exchanges attracted record investor interest as the IPO was to be the largest in history, surpass the previous record for Saudi Aramco, and attract about $ 34.5 billion in investment.

On Thursday, Chinese authorities said they would meet with Ant on issues such as market activities and consumer rights and interests. The People’s Bank of China said on its website that other participating regulators are the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Monetary Authority.

Alibaba, in a public statement, confirmed the market regulator’s investigation and said “business operations remain normal.”

In addition to Alibaba and Ant, other large technology companies in China – Baidu, Tencent – may also be subject to antitrust investigations.

Primavera Capital Group Chairman Fred Hugh of Hong Kong noted that global financial markets “will be very closely watching” the progress of the investigation and whether antitrust measures target only the private sector or state monopolies will also be reformed.

Experts see the risks for the future of Internet giants, but point out that Beijing at one time contributed to their growth, also saying that against the background of competition with such global companies as Amazon (AMZN) and Google (GOOG, GOOGL) “China it is even more important to keep the entrepreneurial spirit alive. “

Mark Natkin, managing director of Beijing-based consulting firm Mabridge, noted that “now that tensions with the US and other countries have escalated, Chinese policymakers have turned their attention to growing the domestic market and creating a more competitive environment at home.”

A portfolio manager at investment firm Principal Global Investors in Hong Kong said: “We have softened our optimism about China and shifted some investments from China to the rest of Asia. We are confident that the model for encouraging private entrepreneurship followed by China will remain. Of course, the market was a little disappointed with the actions of the regulator. “

The developments in China are similar to the actions of the authorities in the United States and Europe, where all major tech companies are now under antitrust investigations. Regulatory risks include companies such as Google, Facebook (FB), Amazon and Apple (AAPL), more details in the articles “The US Antitrust Committee called for reforming the rules for technology giants”, “The EU authorities are preparing new laws against large US technology companies.”

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