“With this sanction decision, we have gotten good guidance on some of the specific issues under the anti-competitive law,” Tsai said during the investor’s appeal. “We are pleased that we were able to put this issue behind us.” The company has pledged to end the practice of “exclusive selling”.
Tsai said the fine accounted for less than 20% of Alibaba’s free cash flow in the past 12 months, while CEO Daniel Zhang added that the change in the agreements with merchants would not have a major impact on the company’s operations.
Shares in Alibaba rose more than 6% in Hong Kong on Monday, although the stock is still down more than 20% since November last year, when regulators withdrew Ant Group’s mega IPO.
The fine removes “a significant overhang” for Alibaba stocks, analysts from S&P Global Ratings wrote in a note on Monday.
“The punishment also removes the possibility of more serious consequences,” she added. Under China’s anti-monopoly law, Alibaba could have been fined as much as 10% of its revenues, far more than what was ultimately levied.
Eliminate fears for the future
Alibaba executives also tried to allay the concerns. Tsai said regulators “confirm” the company’s activities.
“Our business model as a platform is fully endorsed and confirmed by the authorities [that] this kind of model is good for the growth of the economy in the country and also helps promote innovation, ”he added. “We feel very comfortable, there is nothing wrong with our company, [and with] the fundamental business model of platform companies. ”
Tsai also said regulatory oversight marked a “healthy process” that was ultimately good for Alibaba, and allowed the company to learn how regulators feel about these companies. “Every large-scale technology company has to deal [scrutiny] – in our case, we have been through this investigation, and we are glad that we left the issue behind, ‘said Tsai.
The crackdown is not over
Still, some experts point out that Alibaba’s case continues to highlight the challenges facing business in China, while Beijing continues to explore the private technology sector.
“Alibaba’s fine is in no way a financially crushing blow, and it reflects the company’s progress in negotiating a resolution to the regulatory issues,” said Brock Silvers, general manager of Chinese private equity firm Kaiyuan Capital.
But it was an example of how “opaque policies and private political maneuvering” can suddenly wipe out shareholders’ wealth.
Regulators are now preparing to step up their fight against the Chinese giant companies, which should be quite worrying for global investors who may be increasingly exposed to Chinese risks that have not been seen for a long time and remain unquantifiable, Silvers added. add to it.
The Alibaba fine is a “warning shot for the entire major tech sector in China,” said Alex Capri, a research fellow at the Hinrich Foundation and a visiting senior fellow at the National University of Singapore.
The Chinese Communist Party will continue to exercise its will not only to reduce systemic risk in the financial sector, but also to ensure that Big Tech serves the government as a capacity builder around things like digital currency and data collection, “he said.” The aim is to develop the strengths of Big Tech while preventing companies like Alibaba from straying too far on their own. Therefore, the crackdown we are seeing against Alibaba and Big Tech is generally not over. “
– Mark Thompson contributed to this article.