Ecommerce Platform Punished with 2.3 Billion Euros

The State Administration of Market Supervision of China has imposed a penalty of 18.2 billion Chinese yuan (2.3 billion Euros) to Alibaba Group, for implementing the "one out of two" (二选一) policy. Alibaba's net profit in 2019 was about 80.2 billion, which means that the fine accounts for 22.69% of that amount.

The “one out of two” policy is aimed at merchants who are forced to choose a single platform to sell their products. The merchants are required to sign the "exclusive cooperation" agreement which bundles them to sell products on particular platform only, in order to avoid being sanctioned. The sanctions against a merchant usually consisted of technology-based circumvention which included hiding a merchant’s store and disabling merchant's products on the ecommerce platform. This practice has been common as an unspoken rule throughout the industry.

According to the regulatory authorities, this forced exclusivity doesn’t create value for merchants and manufacturers and in the long run it hurts the consumers. Therefore, this particular measure has been taken in order to strengthen anti-monopoly measures. It does not mean that the attitude of the country to support the development of ecommerce platforms has changed, but on contrary, it promotes healthy and sustainable business environment for all ecommerce platforms, big and small.

In the official statement, Alibaba accepted the punishment and pledged to ensure full compliance in changing their ways. "The penalties issued today are a reminder to companies like ours. The decision of regulatory authorities represents the important step forward in maintaining fair market competition and orderly economic development of ecommerce industry”, the spokesperson of Alibaba said.

In addition to the fine, the company is required to undergo a comprehensive business transformation within three years.

Source: https://zhuanlan.zhihu.com/

Categories: China Market, E-commerce, Cross-border commerce