The Chinese government’s previously announced antitrust investigation of Alibaba Group Holding Ltd. is focusing on whether the internet giant refused access to its online marketplace to vendors that also wanted to sell elsewhere, according to an official Chinese government website.
China’s State Administration for Market Regulation posted a notice on its website Thursday (Dec. 24) stating that it was looking into whether Alibaba had improperly engaged in a practice the Chinese call “er xuan yi,” Forbes reported.
The phrase literally translates as “pick one of two.”
The Wall Street Journal reported that vendors and rival marketplaces have alleged for years that Alibaba pressured vendors to choose between selling exclusively on Alibaba sites such as its Tmall marketplace or not selling on them at all.
Among companies that have complained or even sued in efforts to fight the practice are rival JD.com and Guangdong Galanz Enterprise Co., a Chinese manufacturer of microwave ovens, the WSJ reported.
The Journal quoted China Renaissance Securities analyst Charlie Chen as having said, “The government believes it is the time to have better control of market competition.”
The antitrust investigation follows a series of measures Chinese authorities have taken in recent months to increase competition — in many cases, in ways that have particularly hurt Alibaba founder Jack Ma in the aftermath of a speech in which he criticized the government’s regulatory practices.
In addition to creating headaches — and fines — for Alibaba, the new measures have challenged the business practices of Ma’s Ant Group, a rising player in China’s financial services sector.
The pressure was sufficient to scuttle what was expected to be a huge initial public offering by Ant Group.