Allegations were raised against Alibaba Ant Group as the Chinese regulators found the company adhering to monopolistic behavior. According to the Chinese regulators, the company took benefit of its power market position to exclude its rival in a morally questionable perspective. The regulators further mentioned that the recent acts of the Ant Group towards monopolistic activities also hurt consumer rights and public interest. Thus, last Saturday, the People’s Bank of China and the country’s Central Bank held a meeting with the executives of the Ant Group. The meeting was called to make them comply with anti-monopolistic scrutiny and other regulatory requirements.
Chinese regulators have ordered the company to build a rectification plan which will also include a timetable to make proper implementations on its business. The Alibaba Ant Group should focus more on credit, insurance, and wealth management services as suggested by the regulators. The company is further accused of not having a sound governance mechanism acting against the anti-monopoly rules and, often engaging in regulatory arbitrage.
Alibaba anti-monopoly investigation
There is a reason why the Chinese regulators all of a sudden summoned the Ant Group executives last weekend. Last month these Chinese regulators halted an amount of $37 billion which belonged to Ant Group stock debut in Shanghai and Hong Kong. The halt was over the regulatory changes and just after a few days, China announced an investigation of the leading financial giant Alibaba Group. And Group is an affiliate company of the Alibaba Group and the latter owns a 33% stake of the Ant Group.
It was only two months ago that the global investors were waiting for the world’s largest Initial Public Offering. But now the million dollars investment in this lucrative finance business is in jeopardy. The investigation followed by the new regulations forced on the company will put the expansion of this business in question. Apart from the investigation, the Chinese regulators have asked the company to return to its root business as a payments service. The basis of the investigation was anti-monopoly scrutiny.
What are the Chinese regulators up to?
Ant Group started as a payments service for Alibaba’s e-commerce platform Taobao. Since then the company has expanded into various financial sectors by offering insurance money and investment products. Currently, the company has hundreds of millions of active users from China who use the services of Ant Group.
But the Chinese regulators have demanded the Ant Group to establish a financial holding company and hold sufficient capital. They have also demanded that the company should get back to its original business and increase transaction transparency. They are also asked to prohibit unfair competition and comply with the regulatory requirements to run the business. There was another meeting earlier last week where Chinese regulators sat with the executives of Alibaba Group and five other major Chinese internet companies. And all of them are warned not to use exclusive contracts to drive out competitors, predatory pricing, and use of other tactics.
After the meeting on Saturday, Ant Group has made a statement that it will take all the necessary steps to enhance risk management and control. It will also comply with the regulatory requirements and set up a new team to make necessary rectifications. The statement further said that this rectification is an opportunity for the Ant Group to strengthen the foundation of the company.
Why did China turn against Alibaba Group?
Jack Ma, founder of Alibaba Group is one of the richest entrepreneurs in China. He is always appreciated by the Chinese and has followers from around the world. But recently people of China are calling him names leading to a huge loss of his stature. Last month, Jack Ma accused the Chinese banks of behaving like “pawnshops” as they are only lending to those who can put up with the collateral. It seems now that his one comment had huge repercussions and it will haunt his business for some time.
After a few days, Chinese authorities forced the Ant Group to pull off what could have become the world’s largest IPO. It didn’t only stop at this as later the Chinese regulators announced the Alibaba antitrust investigation. It seems like the Chinese government is turning against all the big entrepreneurs who helped in lifting the nation’s economy.
Annasha Dey is an NIT student, who apart from studying engineering is also a content writer. She has a great interest in photography, writing, reading novels, and travelling as well. She is a foodie who loves socializing and hanging out with her friends. She is also a trained Kathak dancer and a big fashion enthusiast. Dey also loves watching TV series, which includes F.R.I.E.N.D.S. and Big Bang Theory. To be a better writer she prefers to read more