China ordered 34 internet corporations yesterday to rectify their anti-competitive practices within the next month, signaling that Beijing’s scrutiny of its most powerful firms hasn’t ended with the conclusion of a probe into Alibaba Group Holding Ltd.
Shares in Tencent Holdings Ltd. and Meituan extended losses after the State Administration for Market Regulation issued a stern statement emphasizing it will continue to eradicate abuses of information and market dominance among other violations. Also summoned to an ad-hoc meeting with the watchdog yesterday were industry leaders including TikTok owner ByteDance Ltd., search giant Baidu Inc. and JD.com Inc.
Regulators warned internet companies to “heed Alibaba’s example,” reaffirming their intent to abolish forced exclusivity among other practices. The meeting – organized jointly with the cyberspace and tax regulators – came days after Beijing wrapped up a four-month probe into Alibaba by slapping a record $2.8 billion fine on the e-commerce giant for abuse of market dominance.
The penalty was less severe than many feared and lifted a cloud of uncertainty hanging over founder Jack Ma’s internet empire. It also came after the Chinese central bank ordered an overhaul of his Ant Group Co. fintech titan.
Alibaba’s shares have gained 7% since the start of the week, but its fellow Chinese internet giants have gyrated while investors digest the rapid-fire announcements and concerns grow that Beijing’s scrutiny will extend beyond Alibaba. Yesterday, Tencent gave up early gains to finish down slightly while Meituan, video service Kuaishou Technology and JD all slid more than 3% in Hong Kong.
“The base line of policies cannot the crossed, the red line of laws cannot be touched,” the market watchdog said in the statement.
The investigation into Alibaba was one of the opening salvos in a campaign seemingly designed to curb the power of China’s internet leaders, which kicked off after Ma infamously rebuked “pawn shop” lenders, regulators who don’t get the internet, and the “old men” of the global banking community. Those comments set in motion an unprecedented regulatory offensive, including scuttling Ant’s $35 billion initial public offering.
The 34 firms summoned yesterday must now undergo complete rectification after conducting internal checks and inspections over the next month, and make a pledge to society to obey rules and laws, the antitrust watchdog said in its statement. Regulators will organize follow-up inspections and companies that continue to engage in abuses like forced exclusivity – a practice that “flagrantly trampled and destroyed” market order – will be dealt with severely. Zheping Huang, MDT/Bloomberg
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