Shares of Alibaba (BABA) were on an upswing in trading as the Chinese e-commerce major successfully completed a three-year regulatory “rectification” process. This marked the end of a challenging period for the company following the antitrust fine that was imposed on it in 2021 for monopolistic practices.
The Chinese regulator, the State Administration for Market Regulation (SAMR), stated that it had closely monitored Alibaba over the past few years to ensure compliance with antitrust regulations. The regulator noted that the rectification process achieved “good results.”
“Choose One” Policy Unfairly Strengthened Alibaba’s Market Dominance
SAMR imposed a fine of RMB18.23 billion ($2.6 billion) in 2021 after an investigation revealed that Alibaba engaged in anti-competitive practices. This included pressuring merchants to choose between two e-commerce platforms, effectively preventing them from working with both. The regulator stated that the “choose one” policy was a tactic that unfairly strengthened Alibaba’s market dominance.
Since the imposition of the fine, SAMR has been supervising Alibaba’s efforts to comply with the required regulations. The SAMR confirmed on Friday that Alibaba has fully complied with these requirements and has stopped the “choose one of two” practice. Furthermore, the regulator will guide Alibaba in improving its compliance, efficiency, and innovation.
Regulatory Overhaul Is Good News for BABA
The conclusion of this regulatory investigation is good news for Alibaba, as it signals the end of one of its most significant conflicts with Beijing, which had severely impacted the company’s stock. Indeed, BABA stock has fallen more than 70% from its peak in 2020. Nevertheless, Alibaba still faces challenges, including sluggish growth amid intensifying competition in China’s e-commerce sector and cautious consumer spending.
Is BABA a Good Buy Right Now?
Analysts remain bullish about BABA stock, with a Strong Buy consensus rating based on 13 Buys and three Holds. Over the past year, BABA has declined by more than 10%, and the average BABA price target of $109.53 implies an upside potential of 35.2% from current levels.
