Chinese giant Alibaba downplays impact of billion dollar fine – 12/04/2021 – Market

Chinese e-commerce giant Alibaba on Monday played down the consequences of the colossal $ 2.78 billion fine imposed for abusing its dominant position as its shares rose on the Hong Kong Stock Exchange.

Symbol of China’s success in the digital economy, Alibaba has been the subject of an investigation by authorities since December for “alleged monopoly practices”.

On Saturday (10), the regulator determined that the group founded by charismatic billionaire Jack Ma had committed an offense and fined him millions of dollars.

Alibaba has been accused of requiring exclusivity from merchants who want to sell their products on their platforms, to the detriment of competing e-commerce sites.

In response, the group is committed to reducing its operating costs for merchants on its platforms.

“We sincerely accept this sanction and will comply with it,” Group executive vice president Joe Tsai said on a conference call.

“We have had good advice (from regulators) on some specific issues of antitrust law (…) We are happy to be able to move forward,” Tsai said.

The fine of 18.2 billion yuan ($ 2.78 billion) represents 4% of Alibaba’s revenue in 2019, which was 455.7 billion yuan ($ 69.47 billion).

The fine “will not have negative consequences” on the activity of Alibaba, assured its CEO, Daniel Zhang, to investors.

Apparently, the statement reassured investors and caused the stock price to rise 9% on the Hong Kong Stock Exchange on Monday.

However, the steps Alibaba will need to take to comply with regulators’ instructions “are likely to limit the growth” of its revenues and weigh on its profits, US rating agency Moody’s said in a note.

Jack Ma officially retired from Alibaba in 2019, but remains a major shareholder and has been in the sights of the authorities for several months.

In November 2020, Chinese regulators blocked a $ 34 billion IPO (Ant Public Offer) of Ant Group, Alibaba’s electronic payment subsidiary.

Concerned about its influence, the regulator forced Alibaba to divest media assets, the Wall Street Journal reported last month.

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