The Chinese government slapped a fine of $2.8 billion on e-commerce giant Alibaba for violating anti-monopoly laws, but it is good news for the company that has been struggling with regulatory scrutiny for months.
Alibaba’s share price jumped 6.5 percent in Hong Kong on Monday, the first trading day after Chinese regulators announced the fine on Saturday, accusing the company of abusing its dominance in e-commerce and forcing merchants to sell exclusively on Alibaba’s platforms.
The antitrust penalty, which accounted for 4 percent of Alibaba’s 2019 revenues, was a record for China. But it was nonetheless a relief for Alibaba and its investors, who were bracing for much worse outcomes for Jack Ma and the tech empire he founded.
The fate of Ma and Alibaba have been under intense speculation since Beijing scuttled the $34 billion initial public offering of his financial services company, Ant Group, in November. The once-flamboyant billionaire has since made only one online public appearance.
Ma, who owns 4.8 percent of the company, lost some $10 billion in personal wealth since November, according to the Bloomberg Billionaire Index. He gained nearly $2 billion in stock value on Monday.
“Despite the record fine amount, we think this should lift a major overhang on BABA and shift the market’s focus back to fundamentals,” Morgan Stanley wrote in a note after the fine was announced, according to CNBC.
The case against Alibaba has reflected the influence the Communist leadership holds over China’s private sector, despite the huge wealth and power Chinese tech entrepreneurs have amassed during the country’s economic boom. Experts have previously called the crackdown “a reversal of potential political protection” of high-flying tech entrepreneurs like Jack Ma.
While anti-monopoly cases could involve years of legal battles in countries like the United States, such investigations take months in China, and often conclude with tech companies swiftly admitting to their guilt and pledging full obedience.
On Saturday, Communist Party mouthpiece People’s Daily called the penalty on Alibaba an action of care that will benefit the entire tech industry. In response, Alibaba praised the fine and promised to comply.
“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,” the company said in an open letter on Saturday. “For this, we are full of gratitude and respect.”
During a Monday conference call, Alibaba executives said the company would lower the costs for merchants on its platforms, and had set aside “billions of yuan” to support the initiative. “We’re happy to get this matter behind us,” said the group’s vice chairman, Joe Tsai.
Alibaba may not be out of the woods just yet. Two hours after trading in Hong Kong closed on Monday, Chinese regulators said it was pushing Ant Group to stop its anti-competition practices and reduce financial risks, reiterating their previous request for the company to restructure its businesses, which could hurt Ant's lucrative credit services.
As the company starts to pay off its bill, public attention is also shifting to other tech giants. On the microblogging site Weibo, internet users were speculating on the next targets. Meituan, the dominant food delivery platform, and Tencent, owner of the ubiquitous messaging app WeChat, got the most mentions.
The two companies’ stock prices dropped 5 and 1.1 percent in Hong Kong respectively.
“There will be less news about Alibaba in the coming days,” said Fred Wong, a fund manager with eFusion Capital in Hong Kong. “The market is expecting to see fines on other companies.”
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