Why Alibaba might be Fined $1 Billion by China

Alan Joseph Alan Joseph
Mar 16, 2021 5 min read
Why Alibaba might be Fined       $1 Billion by China

Alibaba Group was founded on 28 June 1999. It is known as Alibaba Group Holding Limited and also as Alibaba.com. It is a multi-national company which is based in Zhejiang, China. Alibaba group specializes in e-commerce, technology, retail, and the internet.

Alibaba is one of the worldโ€™s largest e-commerce and retail companies. It was also rated as the fifth largest Artificial Intelligence company in the world in 2020. Jack Ma is the founder of the company. The company has around 117,000 employees as of 31 March 2020.

The companyโ€™s name was derived from the character Alibaba from the middle-eastern story, One thousand and one nights. The name signifies that the company is Universal.

The company is considered one of the 10 most valuable corporations. Alibaba group is named as the worldโ€™s 31st largest public limited company according to the Forbes 2000 2020 list. ย As of 2020, the company has the sixth-highest global brand valuation. The company owns and operates different organizations in different business sectors across the globe.

Alibaba group has been facing certain legal actions from the Chinese government. The company is being criticized and the company is asked to pay around $1 billion as a fine to the regulators. Letโ€™s look at the reason behind it.

Reasons Why Alibaba might be Fined?
What Jack Ma said about Alibaba being fined?
Consequences of the Fine
FAQ

Reasons Why Alibaba might be Fined?

Alibaba Group has already faced legal actions in the past. Alibaba Group had forced their e-commerce sellers to pick any one platform. They have stopped their merchants to list themselves on other platforms which are against the rule of the Chinese Government.

Alibaba is said to have alleged the anti-competitive practices by the 2008 antimonopoly law. It is said that the company had acquired its competitors without getting approvals from the government. The company had declared themselves that the acquired companies were not their competitors.

In addition to this Alibaba groupโ€™s founder, Jack Maโ€™s business empire is being investigated by the Chinese Government as he had spoken against the Chinese regulatory system in October 2020.


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What Jack Ma said about Alibaba being fined?

Jack Ma said that good inventions will be able to exist with regulations but they wouldnโ€™t exist with old-fashioned regulations. He gave an example saying that one cannot manage an airport the same way they manage a train station. He told that in the same way, we wonโ€™t be able to manage our future the way we manage the past. This was a statement made for the regulations laid down by the Chinese Government.

He also spoke about the financial system of China saying that they should develop and depend more on credit system development. He said that they should move away from the pawnshop mentality within the financial industry.

Annual revenue of Alibaba Group
Annual revenue of Alibaba Group

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Consequences of the Fine

Chinaโ€™s state administration has asked Alibaba group to pay an amount of $1.3 billion. The fine was implied for breaking the 2008 anti-monopoly law. This is the maximum fine collected under the law.

The Alibaba Group was fined for investing an amount of $692 million in Intime during the year 2014 and for bidding an amount of $2.6 billion in 2017 for privatizing Intime.

This will be the highest fine ever paid by a corporate in the history of China. Alibaba group has also been asked to cancel its association with the companyโ€™s founder Jack Ma. The regulators have told that if they fail to disassociate with their founder the company will have to face actions.

They will have to pay the fine only if they donโ€™t follow the rules of the Chinese government. Also do not end the policy where they force the merchants to sell only on their platform. The company is also been asked to withdraw its investments from some businesses. The regulators want the company to remove non-core businesses from its core retail operations.

Ant Financials which is a subsidiary of Alibaba group has been claimed as a risk for the Chinese Financial system. The company was asked to undergo certain changes which are said to affect their business model.

Alibaba Group had to temporarily stop the IPO plans of Ant financials due to the allegations. The authorities of Beijing stopped the IPO issue of Ant financials which was supposed to be for $37 billion.

FAQ

How much does Jack Ma earn per second?

Jack Ma earns $0.32 per second and $1,141.55 per hour.

What percent of Alibaba does Jack Ma own?

Jack Ma owns 8% of Alibaba group.

Who is the richest person in China?

Jack Ma is the richest person in China with a net worth of 48.2 billion as of July, 2020.

Conclusion

Mr. Ye Han, a partner at Beijing-based law firm Merits & Tree told that the message was clear. The companies are supposed to seek approvals from the government for such deals in the country. He is a person who has a specialization in anti-trust, mergers, and acquisitions.

Alibaba Group has said that they would actively corporate with the regulators regarding the case and their business operations would remain normal during that time.

The regulators took strict actions against the company after the founder Jack Maโ€™s speech during the Bund Summit in October. He spoke about the countries strict regulations and the over dominance over the banking industry. This has led the Chinese regulators to take strict actions against the company.

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