Alibaba Group Holding Ltd – ADR (NYSE: BABA) shares extended their bearish performance after it emerged that the Chinese government is investigating the company for monopolistic practices.
Chinese watchdog called State Administration for Market Regulation released a statement on Thursday announcing the launch of an investigation into the company for allegedly pushing a monopolistic agenda. The Chinese regulator claims that the company has been forcing merchants to choose between its platform and that of a rival company. Alibaba is the largest online retailer not only in China but across Asia and one of the largest e-commerce giants in the world.
The antitrust allegations against Alibaba suggest that the company is using unfair means to lock in merchants and prevent them from doing business with rivals. Merchants should be able to work with different companies at the same time if they chose to do so. However, a move such as the one alleged by SAMR suggests that the company would be putting the competition at a disadvantage.
Alibaba’s shares tanked by more than 8% in Hong Kong on Thursday after the announcement about the probe. The stock plunge highlights negative investor response to the news and it also adds to the company’s woes considering that the stock price has been bearish for the better part of December. Alibaba confirmed that it was under investigation but it is still conducting its operations as normal.
Chinese regulators are cracking the whip just like their U.S counterparts
Chinese regulatory authorities have become more aggressive against internet companies in the country but this is a trend that is also happening in the west. Internet giants such as Apple Inc (NASDAQ: AAPL) and Alphabet Inc Class C (NASDAQ: GOOG) previously received heavy scrutiny and backlash for antitrust practices.
Chinese regulators are aggressively pushing companies such as Alibaba to maintain healthy competition and to follow rules put in place to protect consumer rights. Numerous other regulators are also involved in the fight against anti-monopolistic practices. They include the State Administration of Foreign Exchange, China Securities Regulatory Commission, and the China Banking and Insurance Regulatory Commission. These regulators and the Chinese government hope that their oversight will steer the economy in the right direction.