The Chinese government fined Alibaba and two other companies for failing to report past deals, closing a regulatory gray area that overseas-listed Chinese tech companies have enjoyed for more than a decade.
The Chinese market regulator said Monday it fined Alibaba, the online bookstore backed by Tencent, Chinese literature and logistics group Shenzhen Hive Box for failing to seek regulatory approval for the deals reached. from 2014.
The move is a testament to Beijing’s determination to bring China’s tech giants to heel after a decade of fairly limitless growth. Last month, regulators unveiled antitrust bill regulations that caused the collapse of Chinese tech stocks. Before that, regulators suddenly stopped Ant Group’s public offering in Shanghai, which would have been the largest in the world.
While major Chinese tech companies like Alibaba and Tencent make hundreds of acquisitions every year, they have so far not had to seek explicit approval of antitrust agreements.
“The rule has always been there, it just hasn’t been applied. This is a clear signal that companies structured as variable interest entities are no longer exempt, ”said Scott Yu of law firm Zhong Lun.
Although China’s monopoly law stipulates that all companies must first notify authorities of transactions greater than a certain size, companies using the legal structure of “variable interest entity” (VIE) do not have to. ‘now not undergone enforcement and have also avoided filing for approval.
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The VIE structure has been commonly used by technology groups such as Tencent and Alibaba to bypass restrictions on raising foreign capital and thus be listed on foreign stock exchanges. It has also been used by foreign companies to enter the Chinese market.
“Regulators have never taken a non-notification action against a VIE before. It means, “You can’t do what you want now, and you can’t hide behind the structure of VIE,” “said a Beijing-based lawyer who wished to remain anonymous.
The State Administration for Market Regulation said on Monday that although fines of Rmb 500,000 ($ 76,000) per company were “relatively low,” it hoped the sanctions would act as a “deterrent” and “send a signal to the internet antitrust building company. the law, to dispel the attitudes of certain companies – that they can wait and see and take advantage of the chance ”.
Regulators have warned in recent months of problems with the growing concentration of the online platform market and the need to act against monopolies, to an extent widely seen by analysts and lawyers as targeting Alibaba and its affiliate. payment Ant Financial.
“Antitrust complaints against the platforms are increasing day by day, and it is clear that the development of the online economy carries some risks for competition,” SAMR said Monday.