Alibaba and Apple face increasing regulatory scrutiny
E-commerce giant Alibaba has lost roughly half its market value since founder Jack Ma criticised China’s financial regulators last October.
That has led to the current backlash against not just the technology sector but also the gaming, education and entertainment industries. A Goldman Sachs basket of US-listed Chinese shares has halved since peaking in early 2021.
For Alibaba, all roads seem to lead to its mobile payment platform company Ant whose initial public offering, thought to be worth around $37 billion, was suspended last November.
On 13 September 2021, Alibaba’s shares were again under pressure after state regulators said they wanted to break up Alipay, Ant’s leading mobile payment app which has over 1 billion users.
Beijing wants to create a separate independent app for the loans business which issued around 10% of the country’s non-mortgage consumer loans last year.
In addition, it is requiring Ant to share user data in a new credit scoring system which would be partly state-owned, according to the Financial Times.
The real issue for the regulators is maintaining control of the monetary system, argues current affairs magazine The Diplomat.
Alipay customers use a currency issued by the platform’s parent company Alibaba, rather than the state currency renminbi, when they use their phones to make a transaction.
It just happens that the Alipay currency has a one-to-one exchange rate with the state currency (renminbi) and is backed by reserves held by Alibaba. The problem is that Alibaba isn’t regulated as a commercial bank and therefore operates outside the financial system.
The Chinese central bank is looking to solve this problem by being one of the first to issue its own digital money and integrating Alipay and other private payment systems, regaining control of the currency.
It’s not just China cracking down on large technology companies. Phones and computer giant Apple lost a pivotal case against gaming company Epic Games, maker of the hugely successful Fortnite. Apple had blocked the game after Epic tried to bypass the Apple app store payment system.
While US District Judge Yvonne Gonzalez Rogers stopped short of calling Apple a monopolist and found that the commission it charged app developers (30%) wasn’t a violation of competition law, Rogers said Apple’s conduct was anti-competitive.
The ruling means Apple is forbidden from stopping other companies’ apps including buttons or external links that direct customers to purchasing mechanisms as well as in-app purchases.
Benedict Evans, an independent technology analyst, says Apple generated around $15 billion last year from app commissions which only represents 5% of company revenue, so even if they were to eventually disappear it would be small beer in the bigger picture.