Alibaba Hit With Antitrust Probe By Chinese Government

Alibaba Hit With Antitrust Probe By Chinese Government

Photo courtesy: Hinglish Notes via Flickr

Shares of Alibaba Group Holding Ltd (BABA) were trading lower Thursday morning amid confirmation the Chinese government is investigating the company for anti-monopolistic behavior, Bloomberg was first to report.

What Happened: China's State Administration for Market Regulation confirmed it started looking into Aliba's operations. Specifically, Alibaba dictates that merchants must work either exclusively on its platform or on a rival -- but not on both.

Coinciding with the antitrust probe, Chinese officials are also meeting with Alibaba's payment affiliate Ant to supervise issues related to how the company operates in a market-oriented way, according to CNBC.

Why It's Important: Both Alibaba and Ant are directly linked to Chinese billionaire Jack Ma who is credited with co-founding both companies.

Ma appears to have irked the Chinese central government when he said China "lacks the risk of a healthy financial system," according to CNN. He also alluded to the absence of innovation in China.

"To innovate without risks is to kill innovation," he said. "There's no innovation without risks in the world."

In early November, Ma was forced to put the planned IPO of Ant on hold. The Chinese billionaire was summed for questioning as part of what was described as "regulatory interviews."

More recently, Ma attempted to ease Beijing's concerns by offering the government parts of its Ant business.

What's Next: Alibaba confirmed an investigation is ongoing and said "business operations remain normal." Ant also confirmed receipt of a notice.

Alibaba's stock was down 10% to $256.18 per share at publication time.

© 2020 Benzinga does not provide investment advice. All rights reserved.

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Atif Ozcelik 4 weeks ago Member's comment

Thanks for the information but what should us think into the future; any guidance which would help us predict what is to happen in the near future?

Terrence Howard 4 weeks ago Member's comment

Was wondering the same.