Alibaba Shares Added 6% Ahead of the $2.8 Billion Fine News
3 minutes for reading
The Chinese government continues putting pressure on one of the biggest IT corporations in the country, Alibaba Group. This time, regulators fined the company a record-setting $2.78 billion for violating the anti-trust law. We’ll tell you what it is exactly the company is being accused of and how its shares responded to allegations.
Alibaba pay the biggest corporate fine in the history of China
On April 10th, Wall Street Journal reported that China’s State Administration for Market Regulation fined Alibaba Group for $2.78 billion, which is 4% of the company’s revenue on the Chinese market in 2019. The fine comes as a result of the anti-trust investigation that started in December 2020.
It should be noted that according to WSJ, this sum is the biggest corporate fine in entire Chinese history. We remind you that the previous record was $975 billion paid by Qualcomm in 2015 for its bold intentions to create a monopoly on the Chinese market.
How exactly did Alibaba break the law?
A Big Tech was accused by the regulator of pressuring merchants to sell goods only on its platform rather than those of its rivals. The regulator believes that by doing this, the corporation had a competitive edge, as well as interfere with merchants’ rights and did damage to customers.
According to Daniel Zhang, the CEO of Alibaba Group, the company will revise its corporate policy and business terms and conditions. Moreover, requirements applied to firms and merchants, which want to sell their goods through the platform, will be lowered.
How do Alibaba shares respond?
Alibaba Group shares (NYSE:BABA, HK:9988) ended the last week at the New York and Hong Kong Stock Exchanges with a slight decline by 2.16% and 2.24%, down to $223.31 and 218 HKD respectively.
However, as of this writing, Alibaba shares skyrocketed at the Hong Kong Stock Exchange by 6.51% up to 232.2 HKD. We remind you that since the beginning of 2021, shares have added only 1.4%.
Chinese IT giants are scared
Financial Times said that a $2.78 billion fine resulted in panic in the Chinese tech business. Other representatives of the sector, such as Tencent Music and Meituan, are afraid that they might be next.
According to Financial Times, the Chinese authorities significantly tightened control over transactions in the IT segment, masquerading this as an interest to maintain fair competition. Reuters is saying that big companies are obliged to report on their activities regularly.
What is happening between the Chinese authorities and Alibaba?
Last November, Alibaba founder Jack Ma voice criticism against the Chinese financial authorities. Coincidentally, the very same financial authorities canceled an IPO of Ant Group, Alibaba’s affiliated company.
In December, the Chinese regulators started an anti-trust investigation against the company. The reasons for this investigation and measures of punishment were briefly described above. Yes, a $2.78 billion fine is one of them.
Summing up
It became known that as authorized by China’s State Administration for Market Regulation, the company created by Jack Ma is obliged to pay the biggest corporate fine in the history of China for $2.8 billion. The reason is a violation of the anti-trust law.
Coverage of this not too positive news led to a surge in Alibaba shares today. As of this writing, they added 6.51% at the Hong Kong Stock Exchange.
