Chinese regulators on April 10 imposed a18.23 billion yuan ($2.8 billion) fine in an anti-monopoly investigation ofAlibaba Group Holding Ltd.

The State Administration for MarketRegulation, which launched the probe into the e-commerce giant in December,charged Alibaba with abusing its market dominance.

The watchdog said its investigationconcluded that Alibaba had hindered online retail in China, affected innovationin the platform-based internet economy, hurt the lawful rights of merchants anddamaged consumers' interests.

The fine was equivalent to four percent ofAlibaba's domestic sales in 2019, according to the statement. The company'searnings report showed it registered profits of about $12 billion in the lastthree months of 2020.

Alibaba's$2.78b fine shows emphasis on fairness

The record $2.78 billion antitrust fine onAlibaba Group Holding Ltd sets a milestone for China's antitrust efforts, whichthe country is using to maintain fair market order for healthy development ofthe internet economy, experts said.

Sun Nanxiang, a researcher at the ChineseAcademy of Social Sciences' Institute of International Law, said that antitrustmeasures are a worldwide trend and the ultimate purpose is to leverage legaltools to restore fair and effective competition in the market.

For years, United States' tech giants likeGoogle, Apple and Amazon have been facing continuous scrutiny and fines fromgovernment authorities globally for monopolistic behaviors. European Unionregulators hit Google with a record 4.34 billion euro ($5.16 billion) antitrustfine in 2018 for using its Android mobile operating system to squeeze outrivals.

"Anti-monopoly supervision over thosetech giants didn't cause them to lose core competence, but helped them tostimulate innovation and entrepreneurship and, at the same time, restore marketconfidence," Sun said.

"Alibaba accepts the penalty withsincerity and will ensure its compliance with determination," Alibaba saidin a statement soon after the decision was announced.

"To serve its responsibility tosociety, Alibaba will operate in accordance with the law with utmost diligence,continue to strengthen its compliance systems and build on growth throughinnovation."

Regulators highlighted what they called thecompany's malpractice in forcing collaborating merchants to choose betweenAlibaba's online marketplaces and those of its competitors' for selling theirproducts, which stifled fair market order. Alibaba had 779 million annualactive users in 2020.

The announcement is the latest developmentin the government's increased oversight of internet companies since last year,which has aimed to curb monopolies and avoid the "disorderly expansion ofcapital".

Commentary on the fine in People's Dailysaid that to regulate is to ensure better development, and "the act oftugging at the sleeve is also an act of love", which means thatself-correcting checks on minor misconduct is meant to avoid larger missteps.

"Regulating the fast-expandinginternet sector doesn't contradict bolstering its benign development. They areinstead complementary and mutually reinforcing, which holds true even on aglobal scale," it said.

"The penalty serves to guide thecompany's development, purify the industry's environment and forcefullysafeguard market order for fair competition," it added.

Alibaba:Antitrust penalty won't bring 'material negative impact'

Alibaba Group Holding Ltd said on April 12the latest antitrust penalty is unlikely to exert "material negativeimpact" on its business, and pledged to invest more on better servicingboth merchants and customers.

"We don't expect material negativeimpacts (against) this change of arrangement," said Daniel Zhang, chairmanand CEO of Alibaba in a conference call to investors on April 12. "Wedon't rely on exclusivity to retain our merchants."

Zhang said previously, only a number offlagship stores operated directly by brands were under that exclusivity model.Given the ubiquity of multiplatform strategies by merchants, he said they arefree to work with Alibaba under the flagship format, or under distributionsystem with other peer platforms, or collaborate with distributors.

Instead, the company will furtherstrengthen customer experience and provide new tools to merchants with lowercosts, by waiving service fees and improving technologies. Category expansion,new brands introduction and new category incubation remain key to businessgrowth.

The move will incur additional costs, whichZhang said are "not one-off costs but a necessary investment" toenable merchants to operate better.

The management team said they feel"comfortable" that there is nothing wrong with the company'sfundamental business model, and reassured investors that the model is"fully endorsed and affirmed by the authorities" to shore up thecountry's economic growth and helps promote innovation.

"The good thing is we have gonethrough this process with the regulators, we've gotten to know their thinkingwell," said Executive Vice-Chairman Joe Tsai. "We have veryestablished plans correcting some of the practices…and we have established verygood internal control and compliance systems to continue to comply with thelaw."

Executives said data privacy and datasharing are areas where the regulators show the most concern, but this wouldapply to all large-scale internet companies not only in China but around theworld.

"We have reserved billions of renminbi(Chinese currency) in additional annual spending to support initiatives in thefuture year," said Chief Financial Officer Maggie Wu in the call.

Wu said the fine will be reflected in theMarch quarter of the 2021 fiscal year. Alibaba's Hong Kong-listed shares soared5.5 percent as trading commenced at 9:30 am on April 12.

AntGroup to set up financial holding firm in response to probe

Ant Group, which offered mobile payment andconsumer credit services, will apply to set up a financial holding company toensure its financial-related businesses are fully regulated following anantitrust probe.

The company handling the transactions ofAlibaba Group's e-commerce platforms shall return its payment business to theorigin of "serving consumers and small and micro businesses",according to a notice published on the Hong Kong stock exchange by Alibaba,which owns a 33 percent stake in Ant.

Ant would also set up a personal creditreporting company and apply for a personal credit reporting license.

The company said it would carry outpersonal credit reporting in compliance with relevant laws and regulations,strengthen personal information protection and effectively prevent the abuse ofdata.

Two flagship credit lending services,Jiebei and Huabei, will be folded into its consumer finance company, which issubject to stricter regulation.

In a statement published on April 10, fourgovernment agencies including the People's Bank of China -- the central bank --ordered Ant to cut off "improper connections" between its paymentplatform and its financial products, among a bevy of government measures to barthe "disorderly expansion of capital" and rein in financial risks.

Chinese authorities plan to turn Ant Groupinto a financial holding company whose financial activities are put understricter regulatory supervision in a move related to a monthlong antitrustprobe.

A "comprehensive and actionable"revamp plan of Ant was released on Monday, providing a business overhaulin five aspects where the company should work to "correct its behavior ofunfair competition", according to a joint statement by four governmentagencies including the People's Bank of China, the central bank.

The company should end its monopoly oninformation collection, improve corporate governance, and manage liquidityrisks of important fund products and actively reduce the balance of its moneymarket fund Yu'EBao.