Alibaba Group Holding (NYSE: BABA) may soon be facing a formal investigation thanks to a letter of complaint sent to a Chinese antitrust regulator by JD.com Inc. (NASDAQ: JD). JD.com is the second largest e-commerce company in China, and Alibaba’s biggest rival.
The complaint has to do with a particular SAIC (State Administration for Industry and Commerce) regulation that prohibits e-commerce platforms from barring or limiting merchants from participating in promotions held on other platforms. This regulation went into effect on the 1st of October.
According to JD.com’s letter, the company has received information from other merchants that indicate Alibaba is allegedly “forcing” merchants to deal exclusively with the company during promotional events. If merchants decide to participate in Alibaba’s Tmall promotions during Singles’ Day on November 11, they are prohibited from participating in other activities on other platforms. If merchants do not abide by this rule, Alibaba will “carry out sanctions or punishment,” according to information given to JD.com by sellers on its site.
Rico Ngai, a spokesman for Alibaba, told Reuters that the company “strongly denies” the allegations, and that the company welcomes competition as it benefits all parties.
Formal investigations allege the company has violated regulations, Alibaba will be punished according to the country’s laws that govern unfair competition and antitrust if found guilty.