Alibaba Group Holding Limited (NASDAQ: BABA) wrongly criticized the all-powerful Chinese Communist Party, and as a result, the e-commerce giant has faced increasing regulatory scrutiny.
What happened: China’s antitrust regulators are considering imposing a fine of more than $ 975 million on Alibaba, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
If the fine materializes, it will be the largest fine ever paid in the history of Chinese companies.
In 2015, QUALCOMM Incorporated (NASDAQ: QCOM) paid $ 975 million to end antitrust investigations on anti-competitive practices.
At the end of last year, Chinese regulators began to restrict Alibaba and its subsidiary Ant Financial.
Ant Financial was reprimanded for being a risk to the financial system and was asked to enact changes that could seriously impede its business prospects.
Alibaba had to file Ant Financial’s IPO plans.
Related link: Why this analyst says investors should buy Alibaba’s recent weakness
After adopting a bland stance towards Alibaba from the start, due to its dominant positioning in the market in China and popularity among global investors, regulators said the e-commerce giant must disassociate itself from its founder Jack Ma or face the music, said the WSJ report.
The fine will take effect if Alibaba does not follow the dictates of the local Communist Party and does not end its policy of asking local traders to maintain exclusive relations with Alibaba, the report said.
Alibaba may also be forced to divest some businesses that are not essential to its main retail operations.
What is the next: Alibaba has deep pockets and can pay any potential penalty. Some company executives believe that paying the fine will remove a burden on the company and its shares.
Alibaba’s shares, which fell at the end of last year after regulatory scrutiny, began to recover in the new year.
The wave of technology sales that started in February led to a new sale of the shares.
BABA price action: At the last check, Alibaba’s shares were up 2.8% to $ 240.85.
Related link: How to buy Alibaba (BABA) shares
Jack Ma, co-founder of Alibaba. Photo from the Benzinga file by Dustin Blitchok.
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.