Jack Ma-led Alibaba Group is being investigated under the anti-monopoly law, a measure seen as an effort by ruling Communist Party to control fast-growing tech industries.
“China's State Administration for Market Regulation (SAMR) has started investigation on Alibaba Group for alleged monopoly conduct including implementing an ‘exclusive dealing agreement',” according to Xinhua.
The announcement shook several investors who dumped shares of Alibaba's subsidiaries and affiliates, as well as other Internet firms that are at risk of being targeted by Chinese antitrust regulators. Alibaba shares fell nearly 9 per cent in Hong Kong.
Owned by China's charismatic entrepreneur Jack Ma, a schoolteacher who became a multi-billionaire, Alibaba is arguably the world's biggest e-commerce company with hundreds of millions of users and billions of dollars in turnover. According to Bloomberg, it is Asia's “most valuable corporation”.
Its three main sites Taobao, Tmall and Alibaba.com host millions of merchants and businesses.
The SAMR probe will zero in on the monopolistic behaviour, the so-called “choosing one from two” practice and coaxing merchants to sign exclusive cooperation pacts, which then prevents them from offering products on rival platforms.
Separately, the People's Bank of China, China Securities Regulatory Commission and the China Banking Regulatory Commission will also meet affiliate Ant Group for “supervisory and guidance” talks.
Ant Group is the developer of AliPay, a popular mobile payment system in China, which has also invested in India's Paytm.
Ant Group said it would “diligently study and strictly comply with regulatory departments' requests”.
In a statement through its official Sina Weibo account, Alibaba stated it had received notification from SAMR that an investigation has been started into the company under the anti-monopoly law.
“Alibaba will actively cooperate with regulators to complete the investigation,” according to the statement, adding that the company's business operations remain unaffected.
The move is being seen as the ruling Communist Party of China's (CPC) pushback against internet giants Alibaba and Tencent, companies which are part of the daily lives of hundreds of millions of Chinese and have rapidly expanded its size and power.
The investigations were “…requirements for improving the socialist market economy system and promoting high-quality development,” the People's Daily, the communist party's mouthpiece said in an editorial.
If “monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won't develop in a healthy, and sustainable way,” it said.
“This investigation does not mean that the country's attitude towards the encouragement and support of the platform economy has changed,” the editorial added.