Alibaba shrugs off R40bn antitrust fine, shares rally

Jack Ma
Jack Ma
Image: CHRIS RATCLIFFE/BLOOMBERG

Alibaba does not expect any material impact from the antitrust crackdown in China that will push it to overhaul how it deals with merchants, its CEO said on Monday, after regulators fined the e-commerce giant $2.75bn (R40bn)  for abusing market dominance.

Shares in Alibaba Group Holdings Ltd rose as much as 9% in Hong Kong trade as a key source of uncertainty for the company was removed, and on relief the fine and steps ordered were not more onerous.

Alibaba has come under intense scrutiny since billionaire founder Jack Ma’s public criticism of the Chinese regulatory system in October.

As part of “comprehensive rectifications” sought by regulators, Alibaba will make it easier for merchants to do business with it, CEO Daniel Zhang told an online conference for media and analysts.

Beijing wants Alibaba to stop requiring merchants to chose between doing business with it and rival platforms, a practice known as merchant exclusivity, which critics say helped it become China’s largest e-commerce operation.

Alibaba executives said despite Saturday’s record 18-billion yuan fine and measures ordered by regulators, they remain confident in the government's overall support of the company.

“They are affirming our business model,”  Alibaba executive vice-chair  Joe Tsai said.

“We feel comfortable that there’s nothing wrong with our fundamental business model as a platform company.”

 

 

Alibaba said it accepted the penalty and “will ensure its compliance with determination”.

Speaking with analysts on Monday, Tsai said that other than a review of the company’s M&A, which the company’s peers also face, it does not expect further investigation from the antitrust regulator.

“We are pleased we can put this matter behind us,” he said.

Tsai added the company “doesn't rely on exclusivity” to retain its merchants, adding such exclusivity arrangements in the past only covered a small number of Tmall flagship stores.

Alibaba and its peers remain under review for M&A from the market regulator, Tsai told the briefing, adding he was not aware of any other anti-monopoly-related investigations.

The fine is more than double the $975m (R1.42bn) paid in China by Qualcomm, the world’s biggest supplier of mobile phone chips, in 2015 for anticompetitive practices.

“The $2.75bn fine against Alibaba should be viewed for what it is — a meaningful but affordable price to pay to start the process of reconciliation with the Beijing regime,”   Franklin Chu, president of Sage Capital in Rye, New York, said.

“Alibaba remains an appealing and convenient way to invest in the rapidly growing Chinese economy,” he said.

“Given the power of its various core business, the stock is undervalued by most conventional measures.” — Reuters

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