Shares of Alibaba surged Monday after the e-commerce group controlled by billionaire Jack Ma said a record $ 2.8 billion fine over the weekend marked the end of an antitrust investigation into the company.
Executives told an analyst conference that while regulators were still investigating China’s wider tech industry about past mergers and acquisitions, they were unaware of more specific investigations into Alibaba’s operations. Hong Kong-listed shares of the company rose 7.8 percent following the comments.
“Apart from the merger assessment, we are not aware of any other [antitrust issues], Joe Tsai, executive vice president of Alibaba, said in a conversation with analysts. “We are pleased to be able to put this issue behind us,” he added.
Chinese market regulators have fined Alibaba, worth 4 percent of 2019 domestic revenues, for anti-competitive practices against merchants using their e-commerce platform.
While the amount was a record for the country’s previously light regulators, it was less than the maximum fine of 10 percent allowed by regulations.
The antitrust investigation into Alibaba was just one of the problems facing Ma, whose planned $ 37 billion bid from his payment company Ant Group was canceled at the last minute at the request of regulators in November.
Ma has made only one brief public appearance since October, when he delivered a speech at a forum in Shanghai that many believed offended Chinese regulators. Authorities have also issued regulations restricting online lending, one of Ant Group’s former growth areas.
Regulators first announced their investigation into Alibaba at the end of December, sending their shares down 13 percent over the period up to last week.
While Saturday’s fine marked the end of the probe, the group will have to adhere to a ‘comprehensive rectification’ program, as well as scrutinizing past mergers and acquisitions.
In December, Alibaba received a nominal fine for failing to obtain regulatory approvals for previous deals, ending a period when foreign-listed companies were de facto exempt from such approvals.
Alibaba and Chinese social media rival Tencent are among the largest deal makers in Asia, investing in hundreds of start-ups every year.
In its ruling on Alibaba’s anti-competitive practices, China’s state market regulation administration said the company had forced merchants to list exclusively on its retail platforms, a practice known as ‘choose one of the two’. On Monday, Alibaba said it would spend “billions of dollars” on initiatives to improve traders’ experiences.
“We don’t need exclusivity arrangements to keep our traders,” said Alibaba CEO Daniel Zhang. He said the company would cut costs for merchants operating on its platform by offering some services for free, for example.
Zhang added that the group would not appeal the decision. That was in stark contrast to Alibaba’s more assertive stance towards regulators six years ago, when it opposed the government’s criticism of counterfeit goods. On Saturday, Alibaba praised regulators with “thoughtful” expectations for the internet industry.
China’s emboldened antitrust regulators have opened a frenzy of action against tech companies and released guidelines for the industry in March.
But global investors should conclude from the antitrust push that regulators have backed Alibaba’s business model and legally coined the term “ platform economy, ” Tsai said.
“Our business model is fully affirmed by regulators as being good for the country’s economy and promoting innovation,” said Tsai, adding that the company was in line with government policy to digitize the economy.