Alibaba Group Holding Ltd, was hit with a record $2.75 billion antitrust penalty as China tightens controls on the booming platform economy. Alibaba does not expect any material impact from the fine.

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.

A translation of the legal reason from the State Administration. The action was basically a violation of the anti-monopoly laws which are similar around the world.

In December 2020, the State Administration of Market Supervision filed an investigation into Alibaba Group Holdings Co., Ltd. (hereinafter referred to as Alibaba Group) on abuse of its dominant market position in the online retail platform service market in China in accordance with the Anti-Monopoly Law. 

  The State Administration of Market Supervision established a task force to conduct on-site inspections of Alibaba Group based on the solid preliminary work, investigate and inquire relevant personnel, consult and copy relevant documents and materials, and obtain a large amount of evidence materials; extensively carry out other competitive platforms and merchants on the platform Investigate and collect evidence; conduct in-depth verification and big data analysis of the evidence materials of this case; organize experts to repeatedly conduct in-depth case analysis and demonstration; listen to the statements of Alibaba Group many times to protect their legal rights. The facts of this case are clear, the evidence is conclusive, the qualitative accuracy is accurate, the handling is proper, the procedures are complete, and the procedures are legal. 

  After investigation, Alibaba Group has a dominant position in the domestic online retail platform service market in China. Since 2015, Alibaba Group has abused its dominant position in the market and has imposed “choose one” requirements on merchants on the platform, prohibiting merchants on the platform from opening stores or participating in promotional activities on other competitive platforms, and using market forces, platform rules and data , Algorithms and other technical means, adopt a variety of reward and punishment measures to ensure the implementation of the “two-choice one” requirement, maintain and strengthen its own market power, and gain an unfair competitive advantage. 

  The investigation shows that Alibaba Group’s “choice of two” behavior eliminates and restricts competition in the online retail platform service market in China, hinders the free circulation of commodity services and resource elements, affects the innovation and development of the platform economy, and infringes on the business of the platform. The legitimate rights and interests harm the interests of consumers, and constitute the “Anti-Monopoly Law” Article 17, Paragraph 1, Item (4) prohibiting “unreasonable reasons, restricting the counterparty of the transaction can only conduct transactions with the abuse of market dominance” behavior. 

  According to the provisions of Article 47 and Article 49 of the Anti-Monopoly Law and considering the nature, extent and duration of Alibaba Group’s illegal activities, on April 10, 2021, the State Administration for Market Regulation will issue administrative penalties in accordance with the law. It was decided to order Alibaba Group to stop illegal activities and impose a fine of 4% of its sales in China of 455.712 billion yuan in 2019, totaling 18.228 billion yuan. At the same time, in accordance with the “Administrative Punishment Law” that adheres to the principle of combining punishment and education, the “Administrative Guidance” was issued to Alibaba Group, requiring it to strictly implement the main responsibility of platform enterprises, strengthen internal control and compliance management, maintain fair competition, and protect the platform. The legal rights and interests of domestic businesses and consumers have been comprehensively rectified, and self-examination and compliance reports have been submitted to the State Administration for Market Regulation for three consecutive years.