Alibaba faces a confrontation in China. Its role is to sink.

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Chinese regulators

Alibaba Group Holding

(Tigger: Baba) and other major technology companies announced last month that they would be scrutinizing their business practices.

On Thursday, China’s top market regulator, Alibaba, said it was exploring the use of exclusive arrangements with merchants on its e-commerce platform to prevent sales through such competitors.

J.D.Com

(J.D.).

Investors reacted strongly to the news, pushing Alibaba up 17.5% in US trade. This is the largest percentage decrease since it went public in 2014. “We think this is an exaggeration,” said Raymond James researcher Aaron Kessler. Barons.

Alibaba acknowledged the state administration’s announcement of market regulation, saying it was investigating under China’s antimonopoly law. Alibaba said it would co-operate with the investigation and that its business operations were “normal”.

Beijing also said it would meet with the Alibaba branch of the Ant Group on financial terms. Last month, Ant postponed its much-anticipated initial public offering. In its own statement, Ant said, “We will seriously study and strictly comply with all regulatory requirements and make every effort to carry out all work related to it.”

Sharp sales May surprise investors. Like the United States, Chinese regulators have been paying close attention to giant technology companies such as Alibaba for their rising power concerns. Google

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(GOOGL) and

Facebook

(FB) Everyone faces multiple lawsuits about their competitive practices.

Last month, China Published draft hopeless rules Popular digital sites are designed to push merchants from using their position to exclusive arrangements and other monopolistic practices.

Kessler, of Raymond James, said the tricky part, if any, would calculate the success of the revenue. And China’s regulators are likely to go after other companies, he said.

According to Foxet, analysts estimate that Alibaba’s fiscal year 2021 sales will reach $ 106 billion by the end of March. This is an increase of 49% from the 2020 financial year. Kessler said Barons E-commerce sales are projected to grow at 20%, with Alibaba expected to grow 24% in fiscal 2021. Alibaba’s practices “do not appear to be harassing competitors,” he said.

Alibaba owns one-third of Fintech ant, which was on the verge of raising $ 34 billion in its IPO last month, but Canceled the introduction at the last minute After controlling the partner, Jack Ma was summoned to a meeting with the regulators.

Ant executives are scheduled to meet with regulators again in the next few days. The People’s Bank of China released a statement saying the meeting would “guide the ant team to oversee the finances, implement fair competition and protect the legitimate rights and interests of consumers” in Reuters.

In a note on Thursday, Kessler said “the timing of the IPO is very uncertain.” Ant “The Chinese government may need to make concessions and face tougher controls.”

Write Liz Moyer at [email protected]