China tells its tech giants to heed ‘warning’ in Alibaba’s record fine

The A-list of China’s tech industry was summoned before the country’s powerful regulators on Tuesday for a dressing down over antitrust behavior, just days after Alibaba (BABA) was hit with a record $2.8 billion fine for acting like a monopoly.

The State Administration for Market Regulation (SAMR), along with the Cyberspace Administration (CAC) and the State Taxation Administration (STA), met with executives from 34 internet companies, such as Alibaba, Tencent (TCEHY) and ByteDance, the SAMR said in a statement.

The meeting was aimed at requiring every company to heed the warning from the Alibaba case and stop anti-competitive and other illegal behaviors, the regulator said. “Internet platform companies must be in awe of and respect the rules,” it added.

Other companies attending included JD.com (JD), Pinduoduo (PDD), Baidu (BIDU), food delivery app Meituan, ride-hailing giant Didi, gaming company NetEase (NTES), streaming platform iQIYI and short-form video app Kuaishou.

The regulators required the companies to conduct their own inspections within a month, rectify any shortcomings, and make a public statement of compliance. Officials will continue to track company behavior and any found guilty of breaching the rules will be subject to “heavy punishments,” the SAMR said.

On Wednesday, the regulator published statements of compliance from 12 companies, including Bytedance, JD.com, Pinduoduo, Meituan and Baidu. The companies all pledged to fix their antitrust practices and comply with the rules.

Shares of the companies jumped in Hong Kong on Wednesday. Statements from the other companies are expected in the coming days.

HAIKOU, CHINA - SEPTEMBER 29: Jack Ma, founder of Alibaba Group, speaks during 2020 China Green Companies Summit on September 29, 2020 in Haikou, Hainan Province of China. (Photo by Liu Yang/VCG via Getty Images)

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On Saturday, the SAMR slapped a fine of 18.28 billion yuan ($2.8 billion) on Jack Ma’s Alibaba, accusing the online shopping company of implementing “exclusive dealing agreements” that prevented merchants from selling on rival platforms.

Two days later, financial regulators ordered Ant Group, Ma’s financial tech firm, to overhaul its operations and become a financial holding company supervised by the central bank. That means the Alibaba-affiliate willhave to follow rules similar to those applied to traditional Chinese banks and scale down its aspirations to become a dominant force in the tech world.

Beijing has been tightening the screws on China’s tech champions in recent months, part of a regulatory crackdown that President Xi Jinping has described as one of the country’s top priorities for 2021. Last month, Xi urged officials to step up their efforts to regulate online companies to maintain social stability.

Chinese President Xi Jinping applauds during the closing session of the National People's Congress in Beijing on Thursday, March 11, 2021. China's ceremonial legislature on Thursday endorsed the ruling Communist Party's latest move to tighten control over Hong Kong by reducing the role of its public in picking the territory's leaders. (AP Photo/Sam McNeil)

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The regulators promised on Tuesday to crack down on a range of practices, such as abusing dominant market positions, setting artificially low prices to grab a bigger market share in “community group buying,”using big data to charge consumers different prices, information leakage, and illegal tax-related activities.

In particular, the companies must “take strict precautions against” five behaviors, including the disorderly expansion of capital, monopolizing the market, stifling technology innovation by competitors, abusing internet algorithms, and closing off their digital ecosystems to others.