(April 13): China ordered 34 internet corporations Tuesday to rectify their anti-competitive practices within the next month, signaling that Beijing’s scrutiny of its most powerful firms hasn’t ended with the conclusion of a probe into Alibaba Group Holding Ltd.
Shares in Tencent Holdings Ltd. and Meituan extended losses after the State Administration for Market Regulation issued a stern statement emphasizing it will continue to eradicate abuses of information and market dominance among other violations. Also summoned to the ad-hoc meeting on Tuesday were industry leaders including TikTok owner ByteDance Ltd., search leader Baidu Inc. and JD.com Inc.
The meeting -- organized jointly with the cyberspace and tax regulators -- came days after Beijing wrapped up a four-month probe into Alibaba by slapping a record $2.8 billion fine on the tech giant for abuse of market dominance. The penalty was less severe than many feared and helping lift a cloud of uncertainty hanging over founder Jack Ma’s internet empire. It also came after the Chinese central bank ordered an overhaul of his Ant Group fintech titan.
Alibaba’s shares have gained 7% since, but Tencent and Meituan have fallen on concerns they could be targeted next. On Tuesday, regulators warned internet companies to “heed Alibaba’s example,” reaffirming their intent to abolish forced exclusivity among other practices. Tencent was down slightly while Meituan and JD, Alibaba’s arch-rival, both slid more than 3%.
“The base line of policies cannot the crossed, the red line of laws cannot be touched,” SAMR said in the statement on Tuesday.
The 34 firms must undergo complete rectification after conducting internal checks and inspections over the next month, and make a pledge to society to obey rules on operating legally, the antitrust watchdog said in its statement. SAMR will organize follow-up inspections and companies that continue to engage in abuses like forced exclusivity -- -- a practice that “flagrantly trampled and destroyed” market order -- after the rectifications will be dealt with severely.
“This is positive because the SAMR is giving the platforms one month to review their practices, rather than dish out fines and penalties without warning,” Bloomberg Intelligence senior analyst Vey-Sern Ling said. “They are using Alibaba as an example to deter misbehavior from the rest of the industry players. If these companies toe the line, industry competition can become healthier. ”