The Chinese government is opening an investigation into Alibaba (AliExpress, Tmall) to see whether the e-commerce giant is abusing its dominant position. Is the Internet empire, which the government itself created, becoming too powerful?
Taking it down a notch
The Chinese competition watchdog fears that Alibaba holds a monopoly position. The government is therefore launching an investigation into the e-commerce player, while sister company Ant Group - mother of the online payment system AliPay - is also being called to account.
The trigger: founder Jack Ma, who openly criticized President Jinping. On the occasion of Ant Group's planned flotation this autumn, the media savvy Ma stated in a speech that Jinping's latest strategy is detrimental to innovation.
As a result, China blocked the IPO, until Ma got down on his knees last week and offered the government some of the shares - or whatever his country needs. However, the generous offer is said not to have been accepted (yet). Instead, China is now attacking Alibaba and Ant, through brand new anti-monopoly regulations.
Chinese oligopoly escalates
There are also deeper causes behind the conflict: it is true that in China, only three major players control the technology and retail market, with Alibaba and Tencent (WeChat) at the forefront, followed by Google alternative Baidu. Anyone who wants to achieve anything in retail or online in the country is bound to join one of them - which also explains why Western brands are joining forces en masse with Alibaba's daughter Tmall. Gucci is just the latest example.
"It is clearly an escalation of coordinated efforts to curb Jack Ma's empire, which symbolised China's new 'too-big-to-fail' entities," says Chinese researcher Dong Ximiao to Bloomberg. According to him, the Chinese authorities want smaller, less dominant and more compliant companies. After all, with hundreds of millions of users, today's tech giants have a grip on almost every aspect of daily life in China.
Own creation becomes Icarus
Yet it is surprising that China suddenly wants to curb its technology giants, as it is the very Chinese government that has created the current oligopoly in the country thanks to substantial financial support, regulation to their advantage and state investments. Legislation that excluded foreign companies, for example, was an important incentive for domestic innovation.
As such, the BAT players (Baidu, Alibaba and Tencent) are the Chinese response to the American GAFA (Google, Amazon, Facebook and Apple), and just as the West is now scared of these giants, the Chinese authorities are also scared of their own creation. Although there is a big difference, Bloomberg points out: unlike the Western authorities, the Chinese authorities do have the power to do something about it. If China decides that Jack Ma has flown too close to the sun, it will cut his wings without hesitation.