A maxi fine of 2,75 billion dollars becomes good news which sends the stock into orbit on the Stock Exchange. This is what happened to Alibaba, the Chinese e-commerce giant which on Saturday, with the markets closed, received a fine from the Chinese authorities for abuse of a dominant position. The fine amount of 18,23 billion yuan (2,33 billion euros) corresponds to the 4% of internal sales recorded in 2019, i.e. 456 billion yuan. It's about the highest fine ever imposed in China, even higher than that received by Qualcoom in 2015, when the US group was sanctioned with a fine of 974 million dollars.
At the center of the investigation conducted by the Chinese market control administration, the ban imposed by the giant led by Jack Ma on traders who use the platform to sell their products also on other e-commerce sites. A practice which, according to the Authority, does not respect competition, negatively influences innovation in the Internet economy and harms consumers' interests.
With a statement, Alibaba said it accepted the fine and has pledged to outline plans today to bring its operations into compliance with the law. CEO Daniel Zhang also reassured investors that the fine "it will not have negative consequences on the business group". The group has promised to lower operating costs for merchants on its platforms. “We have ongoing communication with regulators,” Zhang continued, adding that the company will “fully comply” with the requirements. “We are happy to put this story behind us. The actions decided by the regulatory authorities are aimed at ensuring fair competition,” commented co-founder and vice president Joseph Tsai.
Typically, fines of this magnitude lead to a sales storm on the stock exchange. Instead, the exact opposite happened in Hong Kong. Alibaba shares, after hitting a high of +16%, closed the session with an increase of 6,51%. Investors have therefore shown that they believe the reassurances of the group's top management. Not only that, at the base of the rise there is a feeling of "a narrow escape". The fine is indeed a lot less salty than analysts expected, given that Chinese law allows fines of up to 10% of turnover and that the ongoing clash between Ant Group, the other giant founded by Jack Ma, and the Chinese state had led many to fear much heavier repercussions.
Everbright Sun Hung Kai analyst Kenny Ng commented: "Now that the fine is set, market uncertainty about Alibaba will be reduced. Alibaba's share price had lagged behind the trend of the emerging economy for a some time. It can now be expected that the implementation of this sanction will allow Alibaba's share price to regain market attention.
