China’s record fine on one of the largest home-grown corporate champions sets an example for the country’s technology behemoths and aspiring unicorns , showing them that the antitrust regulator is increasingly competent in applying market rules to rein in Big Tech , analysts said. In a document with more than 12,000 words , the State Administration for Market Regulation (SAMR) outlined its definition of a market, the role of Alibaba Group Holding as a participant, and the company’s dealings with merchants and customers before slapping a penalty of 18.2 billion yuan (US$2.8 billion) on the world’s largest e-commerce company. This was a milestone that “offers a reference for the future, as China has never had a case on how to define abuses [of a] dominant market position from the antitrust perspective,” said Zhai Wei, executive director of the Competition Law Research Centre at East China University of Political Science and Law in Shanghai. The fine, equal to 4 per cent of Alibaba’s 2019 revenue but shy of the 10 per cent maximum stipulated by China’s antitrust law, also served as a bookend after almost four months of investigations that began last Christmas Eve. In so doing, it offers an object study for antitrust regulators in the European Union and United States as they too grapple with how to ensure competition in digital markets in the face of dominance by Amazon, Apple, Facebook and Google. Alibaba accepted the ruling and waived its right to appeal, or hold a public hearing, according to the regulator in Beijing. The Hangzhou-based company and owner of South China Morning Post said it “accepts the penalty with sincerity and will ensure its compliance” with the law, according to a statement announcing a conference call on Monday morning with investors and the media. Still, the investigation into Alibaba’s business practices uncovered three key areas that are instructive for China’s technology giants, not least those that operate platforms in highly concentrated market segments. The regulators have caught up with the internet speed of China’s technology entrepreneurs and are drawing regulatory red lines around risks , especially those that threatened financial stability during the coronavirus pandemic. The first was over the definition of market. Alibaba, which operates the Tmall platform for consumer brands from Burberry to Tommy Hilfiger and competes with Richard Liu Qiangdong’s JD.com , argued that it was not a monopoly in the business-to-consumer (B2C) market, and that should be kept separate from Taobao’s platform of letting small merchants and individuals sell to shoppers (C2C). The regulator ruled that the two segments are parts of the same “online retail platform service market.” That made it easier to define Alibaba as a dominant player when both Tmall and Taobao are taken into consideration. The second was whether Alibaba was dominant in its market segment. The company’s share of the defined market topped 50 per cent even if its dominance shrank from 76 per cent in 2015 to 62 per cent in 2019, SAMR said. Alibaba had the ability to exert “strong market control” through its e-commerce platforms, enough to overpower merchants, due to its strong financial and technology advantages, the regulator said. It was costly for merchants to relocate to alternative services from Alibaba’s platform, the agency found. As such, SAMR ruled that Alibaba has a dominant market position, meeting the key condition for imposing antitrust regulatory scrutiny. The third point of contention was whether Alibaba forced merchants into exclusive deals, compelling them to “pick one from two” uneven options through contractual clauses. Alibaba’s public relations head Wang Shuai had argued that any exclusivity with merchants were “voluntary” because the company had to offer marketing and other support. The regulator disputed the claim, citing evidence to conclude that most merchants preferred to sell on different platforms and they entered into exclusive deals with Alibaba for fear of retribution. Meanwhile, the resources invested by Alibaba were never targeted for any particular merchant and can’t be justified as a reason to implement “picking one from two” policies, the regulator said. Alibaba’s antitrust case may set the example, prompting other Chinese internet companies to conduct self-checks on their own businesses, said the Singapore Management University’s associate professor of law Henry Gao. In so doing, the government “will be able to achieve more impact with fewer costs” than going after the Big Tech one by one, he said. “There have been warning signs, like last year’s Central Economic Work Conference, which listed the enhanced enforcement of antitrust laws on platform enterprises as a priority,” Gao said. “If any of the [other] giants get into some high-profile scandal, they could also become the next target.” The fine on Alibaba was more than three times the penalty slapped on Qualcomm in 2015, and equivalent to 12 per cent of the company’s net income in the 2020 financial year. Still, it was short of the maximum penalty, as the regulator factored in the “duration and degree” of Alibaba’s misconduct, as well as the company’s “in-depth self-examination” and “proactive rectification.” Alibaba always reflected and adapted when it faced challenges, chairman and chief executive Daniel Zhang said in a staff memo on Saturday, calling for unity and saying that the company should “make self-adjustments and start over again.” Alibaba’s share price has fallen 4.5 per cent in Hong Kong since last Christmas Eve, underperforming Tencent Holdings that gained 11.6 per cent and Baidu that rose 15 per cent in New York in the same period. “China’s record fine on Alibaba may lift the regulatory overhang that has weighed on the company since the start of an anti-monopoly probe in late December,” Bloomberg Intelligence analysts Vey-Sern Ling and Tiffany Tam said, describing the penalty as “a small price to pay to do away with that uncertainty.”