The markets have enjoyed some positive news on the vaccine front but the same can’t be said for Chinese tech giants. On Tuesday, Beijing unveiled new regulations that could slow the growth of Chinese firms that use monopoly practices to dominate the markets.
The draft rules, which were issued by China’s State Administration for Market Regulation, would block e-commerce platform strategies like “choose one between two.” Under this practice, online marketplaces could restrict brands from selling on several platforms.
China’s e-commerce leader Alibaba (NYSE: BABA; HKEX: 09988) is among the companies using such practice, according to Reuters. In 2019, China’s State Administration met with 20 platforms and asked them to cease requiring merchants to sign exclusive cooperation deals.
Ma Chen, a Beijing-based partner at Han Kun Law Offices, notes that authorities are concerned that internet giants have gotten too powerful.
“This is a watershed moment,” he said, as cited by Bloomberg.
The new rules could apply to Alibaba’s platforms including Taobao and Tmall, as well as rival JD.com’s online retail marketplace. Payment services including WeChat, controlled by Tencent (HKEX: 00700; OTC: TCEHY) and Ant Group’s Alipay could also come under fire. Food delivery giant Meituan (HKEX: 03690) could also face heat from the crackdown.
As a result, Hong Kong-traded shares of JD.com, (HKEX: 09618; Nasdaq: JD) Alibaba, Tencent, and Meituan all tumbled 9%, 5%, 4%, and 11%, respectively, at the close of trading Tuesday.
In New York, Tencent, Alibaba, and JD.com’s stocks slipped 6%, 7%, and 6% intraday.
The stock plummet comes as JD.com and Alibaba gear up for China’s largest shopping festival known as Singles’ Day that’s set to kick off on Wednesday. Last year, China’s leading e-commerce players each set new records in sales. In terms of gross merchandise volume, Alibaba reached $38.4 billion, while JD.com hit around $29.2 billion in last year’s event.