China has launched an antitrust investigation into Alibaba Group and will summon the tech giant's Ant Group affiliate to meet in coming days, regulators said on Thursday, in the latest blow for Jack Ma's e-commerce and fintech empire.
The probe is part of an accelerating crackdown on monopolistic behaviour in China's booming Internet space, and the latest setback for Ma, the 56-year-old former school teacher who founded Alibaba and became China's most famous entrepreneur.
It follows China's dramatic suspension last month of Ant's planned $37 billion (roughly Rs. 2,76,200 crores) initial public offering, which had been on track to be the world's largest, just two days before shares were due to begin trading in Shanghai and Hong Kong.
In a strongly worded editorial, the ruling Communist Party's People's Daily said that if "monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won't develop in a healthy, and sustainable way".
Shares in Alibaba fell nearly 9 percent in Hong Kong on Thursday morning.
Regulators have warned Alibaba about the so-called "choosing one from two" practice under which merchants are required to sign exclusive cooperation pacts preventing them from offering products on rival platforms.
The State Administration for Market Regulation (SAMR) said in a statement on Thursday that it had launched a probe into the practice.
Financial regulators will also meet with Alibaba's Ant Group fintech affiliate in the coming days, according to a separate statement by the People's Bank of China on Thursday, casting another cloud over a potential revival of the share sale.
The meeting would "guide Ant Group to implement financial supervision, fair competition and protect the legitimate rights and interests of consumers," the statement said.
Ant said it had received a notice from regulators and would "comply with all regulatory requirements".
Alibaba said it would cooperate with the investigation and that its operations remained normal.
Fred Hu, chairman of Primavera Capital Group, an Ant investor, said global markets would be watching closely to see whether the moves are "politically motivated or genuine impartial law enforcement", and whether regulators target only the private sector but not state monopolies.
"It would be a tragedy if the antitrust law should be seen as 'targeting' successful private tech companies only," he said.
Last month, Beijing issued draft rules aimed at preventing monopolistic behaviour by internet firms, marking China's first serious antitrust move against the sector.
China's Politburo this month vowed to strengthen anti-monopoly efforts next year and rein in "disorderly capital expansion".
China also warned Internet giants this month that it would not tolerate monopolistic practices and to brace for increased scrutiny, as it slapped fines and announced probes into mergers involving Alibaba and Tencent.
In China, Alibaba's main e-commerce platform competes with rivals including JD.com and Pinduoduo.
State media expressed support for the regulators.
"Fair competition is the core of the market economy" while monopoly "distorts allocation of resources, harms the interest of market players and consumers, and kills technological advancement", the People's Daily said.
China's internet sector had benefited from the government's support for innovation, but the industry must abide by rules and laws, it added.
Regulators have also become increasingly uncomfortable with parts of Ant's sprawling empire, chiefly its most lucrative credit business that contributed close to 40 percent of Ant's revenue in the first half of the year.
Days before Ant's planned listing, top financial regulators told Ma and two top executives that the company's lucrative online lending business would face tighter government scrutiny, sources told Reuters.
© Thomson Reuters 2020
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