Anbang(安邦) Insurance and HNA Group, which were disliked by the Communist Party, ended up with the worst result in the past. This time, Jack Ma’s Alibaba empire has crossed a line that the party would not allow. It is not sure whether the blade will stop at Alibaba or not. There might be possibility that Beijing’s State Administration for Market Regulation(国家市场监督管理总局) will continue to regulate further on other Internet giant companies such as Tencent. Creating an atmosphere of excessive fear can reduce the vitality and motivation of the firms, so the regulators might control the degree; however, we should bear in mind that there is nothing as important as the authority of the party.
State Administration for Market Regulation (SAMR) has reported to investigate on the antitrust over the practice called “二选一”, which means “choose one out of two (platforms)”. The practice is to force sellers who has been operating on Alibaba platforms such as T-mall and Taobao to stop a business relationship with a competitor, namely, Pinduoduo or JD.com. This is to head off the rise of the competitors and keep its dominance of e-commerce market.
SAMR has stated the word ‘etc(等)' to suggest that the charges are not limited to one. It means that other charges have already been detected or that the charges will rise further in the future investigation process. Alibaba said it would comply with the investigation.
In addition, the People's Bank of China and other financial regulators have decided to summon Alibaba's financial affiliate, Ant Group.
The People`s Bank of China said in a statement that it will soon call in Ant Group for investigation. The statement included that the regulator would supervise Ant Group in accordance with market principles and laws to implement fair competition, protect consumers' legal rights, and regulate the operation and development of financial services." China Banking and Insurance Regulatory Commission (CBIRC) and China Securities Regulatory Commission (CSRC) will participate in the investigation. In a statement posted on WeChat, Ant Group pledged to strictly abide by the authorities' regulations.
CBRIC and CSRC are the state agencies that the firms and financial companies do not want to confront; meaning that issue should be regarded very seriously.
The Communist Party proposed "strengthening anti-trust regulations and preventing reckless expansion of capital" as one of the eight major projects in the economy meeting. They also stressed that "anti-trust and unfair competition prevention are basic conditions for improving the socialist market economy system and promoting quality development."
Thriving to end monopoly
The number of commercial transactions through Alibaba is astronomical. The annual transaction history of customers is an extremely useful big data. Based on this, Ant and Alibaba established DB and sold joint loans with banks. Ant has collected commissions by providing credit information to local banks with weak CB (Credit Bureau) functions. In the case of joint loans, if Ant is responsible for about 2-5 of the loan, the local banks partnered with Ant will pay the remaining 95-98. Ant Group can play big money with a small amount of money. As such, local banks may lose their customer base and their loan margins decrease by paying commissions to Ant Group, but it is difficult to give up Ant's platform to increase customers and remain their business.
Although Alibaba has been revered as an icon of innovation, without help of Great Firewall policy, Alibaba would not be this giant figure. In other words, Alibaba, Tencent, and JD.COM were able to succeed thanks to the authorities' establishment of ecosystems that are difficult for U.S. or European competitors to reach on Chinese market.
Anyways, with the money raised, IT giants began to dominate mainland’s startup market in the last five years. Alibaba has been raising funds through various ways to the Chinese startups for further tech innovations. It was big chance for startups to accept the investment from the biggest Chinese e-commerce company. That is how the first generation of IT giants have manipulated the ecosystem of startup companies.
Well, many will say this would not be a big issue. If it is legal, then the funds to the startups will be the energy for innovation.
However, the Party was not pleased with what Alibaba was doing. IT giants like Alibaba are growing into "Big Brothers" that are increasingly hard to control. In China, "big brothers" should be the only one, Communist Party.
Other IT giant companies could be punished
along with the investigation. A fine can be an example of the penalty but the
style of the Party is traditionally beating ‘the one example’ which can show
how the Party is a strong governor. Jack Ma’s empire will likely get hurt this
time. The world biggest IPO was suspended, so it would not be surprising to see
any disposition.
As the People's Daily, the party's official newspaper, commented, "The strengthening of anti-trust in giant companies has a noble concept of easing the monopolistic structure and protecting the profits of small and medium-sized businesses (SMEs). The e-commerce ecosystem, which is dominated by a few dinosaurs, is disadvantageous to traditional (offline) retailers and small sellers.
