(Photo : Alibaba group)

• Alibaba Group has completed a three-year "rectification" process following a $2.75 billion fine for monopolistic practices.
• The company underwent significant restructuring, including splitting into six units and leadership changes.
• Despite these changes, Alibaba's revenue growth slowed and its stock value decreased significantly.
• With the rectification process complete, Alibaba is at a "new starting point for development," navigating regulatory and market challenges.

Alibaba Group, the Chinese e-commerce giant, has recently marked the completion of a three-year rectification process, as announced by China's State Administration of Market Regulation (SAMR) on August 30, 2024. This followed a record $2.75 billion fine imposed on the company in 2021 for monopolistic practices. The regulator commended Alibaba for achieving good results and pledged to continue guiding the company to regulate its operations and improve compliance and quality.

The journey leading up to this point has been a tumultuous one for Alibaba. The first significant event occurred on November 10, 2020, when China published draft rules aimed at preventing monopolistic behavior by internet platforms. This increased scrutiny of online marketplaces and payment services of firms such as Alibaba. The regulatory pressure culminated on April 10, 2021, when SAMR imposed a record 18 billion yuan ($2.75 billion) fine on Alibaba. The anti-monopoly probe concluded that the firm had been abusing its market dominance since 2015 by preventing merchants from using other e-commerce platforms.

In response to the regulatory scrutiny and amidst a backdrop of heightened competition and slowing economic growth, Alibaba announced on December 6, 2021, that it would reorganize its international and domestic e-commerce businesses and replace its chief financial officer.

Alibaba's Restructuring and Leadership Changes

The regulatory landscape seemed to ease on April 30, 2022, when the Politburo, following a meeting chaired by President Xi Jinping, signaled an easing of the tech sector crackdown. The government pledged to increase policy support, including for the so-called platform economy, to stimulate economic activity after a period of growth-sapping COVID-19 containment measures.

However, the most significant restructuring in Alibaba's 24-year history was announced on March 28, 2023. The company said it would split into six units and explore listings for most of them, as the government vowed to ease a sweeping regulatory crackdown and support private enterprises. In a surprising development, Alibaba's then-Chief Executive Officer and Chairman Daniel Zhang stepped down on June 20, 2023, to focus on its cloud division. Eddie Yongming Wu, chairman of Alibaba's Taobao and Tmall, took over as CEO, and Executive Vice Chairman Joseph Tsai became chairman.

However, the restructuring journey was not smooth. On September 10, 2023, Zhang quit the cloud business, a move that took market watchers by surprise. Wu took over the unit. Then, on November 16, 2023, Alibaba announced it would not spin off its cloud business as previously planned, citing uncertainty created by U.S. export curbs on chips used in artificial intelligence applications.

Alibaba's Financial Performance and Future Outlook

CEO Wu further consolidated his power by taking over Alibaba's domestic e-commerce arm on December 20, 2023. This was a core area for attention and investment as the company fended off competition from low-price rivals such as Pinduoduo. However, on March 26, 2024, Alibaba shelved plans to list Cainiao, its logistics unit, and said it would instead buy the rest of the stock it did not already own in the unit for as much as $3.75 billion.

Despite these efforts, Alibaba reported April-June revenue that grew 3.9% but missed market expectations and fell far short of the 30% growth of the same quarter three years earlier. Its stock was down 72% since the anti-monopoly rules announcement in November 2020, putting its value at $200 billion versus its $830 billion peak.