Enforcing Anti-Monopoly Law Against Big Tech in China: A Case Study of Alibaba’s $2.8bn Fine from SAMR

By: Lerong Lu & Alice Lingsheng Zhang  (Oxford Business Law Blog)

Over the past few years, the Chinese authorities have been increasingly concerned about the enormous economic power and influence of the country’s big tech companies, especially those operating in the e-commerce and financial service sectors. On 10 April 2021, the State Administration for Market Regulation (SAMR), which is the Chinese competition watchdog, imposed a record fine of 18.23 billion yuan ($2.8 billion) on the e-commerce giant Alibaba which had abused its market dominance. Alibaba was said to exploit its leading market position, platform policies and data, and algorithmic methods in order to force merchants to sell exclusively on Alibaba Group’s online shopping platforms including Taobao and Tmall. The closing price of NYSE-listed Alibaba was $223.31 on 9 April 2021, down 13% from $256.18 on 23 December 2020 when the anti-monopoly investigation was formally launched. Although the current Anti-Monopoly Law of the People’s Republic of China (PRC) came into effect in 2008, it had never been used to punish leading tech companies and platform economies in the country prior to the Alibaba’s case. Therefore, the anti-monopoly probe is the first of its kind in China, which echoes the global trend of scrutinising the anti-competition activities of big tech corporations like what has happened in the EU and the US. The Alibaba’s fine is equivalent to 4% of the Group’s annual revenue in 2019. In addition, Alibaba was asked by the SAMR to file self-examination and compliance reports to the regulator for the forthcoming three years.

The SAMR initiated the investigation into Alibaba’s monopolistic commercial practices in December 2020, as the regulator claimed that the company, since 2015, had forced the sellers to choose one of two e-commerce platforms in China (the practice is widely known as ‘choose one from two’). As is well known, China has the world’s largest e-commerce sector, which amounted to 34.81 trillion yuan ($5.32tn) in 2019. The sector has been dominated by three key players: Alibaba, JD.com, and Pinduoduo. Alibaba’s monopolistic policy of ‘choose one from two’ is deemed as the Chinese version of exclusive dealing, which has been a common practice requiring sellers to opt for a particular online platform to sell goods, otherwise sellers would be punished by Alibaba who is able to set restrictions over the customer number and traffic of online shops as penalty for violating such policy. Clearly, ‘choose one from two’ has detrimental impacts on the industry which could lead to a situation where the winner, like Alibaba, takes it all. It has been a powerful weapon for leading shopping portals to maintain their competitive edge, increase the sales revenue, and ultimately, to raise their share price. Previously, if merchants had chosen to sell goods on platforms within Alibaba’s ecosystem, they would not be allowed to access the service of other e-commerce companies like JD.com and Pinduoduo. The SAMR’s statement suggested that Alibaba’s business practice has stifled competition in the e-commerce market and infringed on retailors’ online businesses as well as the legitimate rights and interests of consumers in China and elsewhere. In short, at the expense of the interests of competitors and consumers, Alibaba has been able to cement its leading market position to obtain unfair competitive advantages…

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