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China's antitrust regulator doled out a record 18.2 billion yuan fine to e-commerce giant Alibaba on Saturday for abusing its market dominance. The figure is equivalent to $2.8 billion and 4 percent of the company's domestic annual sales. Additionally, Alibaba will have to revamp its operations and submit a "self-examination compliance report" within three years, per The Wall Street Journal.
Considering the penalty far surpasses Qualcomm's previous record $975 million fine in terms of raw money (relatively that was a bigger hit) it seems like a real blow to Alibaba, especially since its founder Jack Ma remains under heavy government scrutiny after criticizing Beijing's regulatory restrictions. But it may actually be a weight off the company's shoulders, at least for now.
"China's record fine on Alibaba may lift the regulatory uncertainty that has weighed on the company since the start of an anti-monopoly probe in late December," Bloomberg Intelligence analysts Vey Sern-Ling and Tiffany Tam said. They described the fine as a small price to pay for some clarity.
The fine alone shouldn't be too much to worry about for Alibaba, suggested Jeffrey Towson, a former professor at Peking University's Guanghua School of Management. "That is serious money, but it's not going to hinder their development," he told the Journal.
In a statement, Alibaba said it "accepts the penalty with sincerity and will ensure its compliance with determination."
That said, Bloomberg called the Alibaba investigation "one of the opening salvos in a campaign seemingly designed to curb the power of China's internet leaders and their billionaire founders" like Ma, so there may be more to come. Read more at The Wall Street Journal and Bloomberg.