On August 30, 2024, China’s State Administration for Market Regulation (SAMR) announced on its website that it had supervised Alibaba Group to complete the three-year rectification.
Back in December 2020, the SAMR initiated an investigation of Alibaba Group regarding its abuse of dominant market position in terms of network retailing platform service within China. In April 2021, the SAMR published its administrative punishment decision, which recognized that Alibaba Group had constituted the abuse of market dominant position provided in Article 17.1.4 of the 2008 Anti-Monopoly Law “restricting the trade counterparty to only trade with the operator in a market dominant position without justification” and ordered Alibaba Group to: 1) cease the violation; 2) impose a fine of RMB 18.2 billion, which amounts to 4% of its sales amount (RMB 455.7 billion) within China in 2019.
In accordance with the published decision, the SAMR first recognized that the relevant goods market and the geographic market shall be defined respectively as the network retailing platform service market and within China, whereas Alibaba Group had a dominant position in the network retailing platform service market within China, on the grounds that 1) its market share exceeded 50%; 2) the relevant market was highly concentrated; 3) it had comparatively strong market controls; 4) it possessed strong financial resources and advanced technological conditions; 5) other operators were highly dependent on the Alibaba in their transactions; 6) the relevant market was hard to access; and 7) Alibaba had obvious advantage in the relevant market.
The SAMR further recognized that since 2015, in order to restrict the development of other competing platforms and maintain and consolidate its own market position, Alibaba had abused its dominant position in the market for online retail platform services in China by engaging in the act of “choosing between two” and restricting the operators on its platform to only conduct transactions with itself by prohibiting the operators on the platform from setting up stores on other competing platforms and participating in the promotional activities of other competing platforms, and has safeguarded the implementation of the act with a variety of incentives and penalties.
As a result, the SAMR considered that such acts had 1) excluded or restricted competition in the market for network retailing platform services in China; 2) harmed the interests of operators within the platform; 3) impeding the optimal allocation of resources and restricted the innovative development of the platform economy; and 4) damaged the interests of consumers; and therefore imposed the punishment mentioned above.
Apart from the said administrative punishment decision, the SAMR also issued administrative guidance for Alibaba to “comprehensively rectify the situation, operate in compliance with the law, and establish a sound long-term mechanism for fair participation in market competition.” The said guidance contained 16 suggestions in five aspects, which were 1) fully regulating its competing acts; 2) strictly implementing the main responsibility of platform enterprise; 3) improving the enterprise’s internal regulation control system; 4) protecting the rights and interests of operators and consumers within the platform; and 5) positively maintaining the fair competition and promoting innovation and development. The guidance also requested Alibaba to send a self-inspection compliance report prior to December 31 of each year to the SAMR for three years since the receipt of the guidance. Now, the three-year rectification has completed.
Comment
The main provision involved in this case was Article 17.1.4 of the 2008 Anti-Monopoly Law, which became Article 22.1.4 of the currently effective 2022 Anti-Monopoly Law, and it provides that “an operator with a dominant market position is prohibited from engaging in the following acts of abuse of a market dominant position: … (4) without justifiable reasons, restricting the counterparty to transactions only with him or only with the operator designated by him; …”.
Further, in accordance with the 2019 Interim Provisions on Prohibiting Abuse of Dominant Market Positions (note: it is now replaced by the 2023 Provisions on Prohibiting Abuse of Dominant Market Positions), the restriction of transaction refers to “(1) limiting the counterparty to deal only with him or her; (2) a counterparty to a qualifying transaction may only enter into transactions with its designated operator; (3) restricting the counterparty to transactions with specific operators.”
In this case, the SAMR recognized in its administrative punishment decision that Alibaba had acted, such as prohibiting operators within the platform from opening stores on other competing platforms, as well as participating in promotional activities on other competing platforms. In addition, it also adopted various rewarding and punishing measures to safeguard the implementation of the “two-for-one” requirement, which was reflected in the 2023 Provisions on Prohibiting Abuse of Dominant Market Positions as “engaging in the above restricted trading acts can be directly restricted or disguised by adopting punitive or incentive measures.”
Nevertheless, Alibaba has completed its three-year rectification requested by the SAMR, and it has “fully ceased the two-for-one monopolistic acts, strictly regulated its operation. … The regulation and rectification have obtained good effect, etc.” according to the SAMR’s announcement. It is analyzed in a report from Sina Finance that such a move may be deemed a positive signal that the supervision department is encouraging and supporting the development of the platform economy. On the other hand, Alibaba also expressed to a news reporter that it is a new start for its development and it will “continue to be based on innovation, adhere to the compliant operation, increase investment in science and technology, promote the healthy development of the platform economy, and create more value for society.”