January 17, 2021
Markets PAID

Beijing Sends Alibaba an Unwelcome Christmas Present

This post was originally published on this site

Jack Ma was dealt a double blow by regulators.

Jack Ma was dealt a double blow by regulators.

Photo: fabrice coffrini/Agence France-Presse/Getty Images

The billionaire founder of Chinese e-commerce giant Alibaba is unlikely to have a merry Christmas this year.

Jack Ma
was dealt a double blow on Christmas Eve: The Chinese antitrust watchdog launched an investigation into Alibaba, while Ant Group, the company’s finance affiliate, was summoned to discuss competition and consumer rights.

Specifically, the regulators mentioned the practice of forcing merchants to sell exclusively on Alibaba’s platforms. This is a longstanding issue in China’s e-commerce industry, where Alibaba reigns supreme.
JD.com,
Alibaba’s competitor, has complained about it for years and filed lawsuits against the market leader. Abuse of digital-platform power is also a theme of antitrust suits in the U.S. and Europe against the likes of
Amazon
and Google.

It isn’t the first time the government has tried to step in. The antitrust regulator summoned 20 e-commerce platforms in November last year to urge them to stop monopolistic practices. But recent events have reinforced the impression that Beijing means business.

The government announced draft antitrust rules against digital platforms last month, after Ant Group’s $34 billion initial public offering was abruptly stopped by the regulators. The move seemed to be endorsed by the very top of China’s leadership structure. President Xi pledged to step up antimonopoly efforts to “prevent the disorderly expansion of capital” in a meeting earlier this month. Since then, the regulators have fined Alibaba and Tencent for acquisitions that were completed years earlier. Just this week, the government warned the internet giants about predatory pricing in what is known as community-group buying, a popular way to sell groceries online.

All these actions could mean more scrutiny of Alibaba and other internet giants in the future, after years of heady growth and relatively few constraints. Alibaba’s Hong Kong-listed shares fell 8.1% Thursday. That takes the stock’s year-to-date gain to just 10%, underperforming both the broader market and its smaller rivals. Shares of JD.com have more than doubled, while those of Pinduoduo have nearly quadrupled this year. Investors may be too relaxed about the ambivalent position of Alibaba’s challengers. Regulatory uncertainties may cap their upside, too.

Across the sector, investors hoping for Christmas rewards may get a lump of coal from Beijing instead.

Write to Jacky Wong at JACKY.WONG@wsj.com