A cat dog battle spanning 10 years (with Tmall and JD.com mascots being cats and dogs respectively) came to an end on the last working day of 2023. Alibaba paid a sky high tuition fee with two bills totaling 19.2 billion yuan: the "two choice" mutual friction did not win the merchants, but instead lost the market.
Sky high tuition fees
On December 29, 2023, the Beijing Higher People's Court made a first instance judgment on the case of JD v. Zhejiang Tmall Network Co., Ltd., Zhejiang Tmall Technology Co., Ltd., and Alibaba Group Holdings Co., Ltd., determining that their abuse of market dominance and implementation of a "two choice one" monopoly behavior were established, causing serious damage to JD, and ordered compensation of 1 billion yuan to JD.
In response, JD.com stated in its announcement that this judgment is a fair ruling against the "two choice" monopoly behavior and will also be a significant contribution to China's anti monopoly legal process. Alibaba's response to the media was slightly low-key: it has learned of this news and respects the court's ruling.
The so-called "two to one" usually refers to e-commerce platforms using their monopoly and market advantages to force operators to choose between major platforms through unfair means, which is equivalent to e-commerce platforms enjoying exclusive channels for merchants.
JD's high profile and Alibaba's low profile are understandable. In this long-standing dispute that has lasted for 10 years, both sides have invested huge energy costs, and Alibaba has even spent nearly 20 billion yuan in real gold and silver.
In June 2013, an online article by a JD executive made public the issue of the platform requiring merchants to choose between two options. As public opinion continued to ferment, the situation reached its peak in November 2015. At that time, the "Double 11" shopping festival was booming, and Alibaba created an online shopping festival. JD.com also wanted to take a share, but was cut off halfway by Alibaba. Many merchants were under pressure and withdrew from JD.com's "Double 11" discount activities. JD.com has issued a statement accusing Alibaba of coercing merchants to choose between two options during the "Double 11" promotion and reporting Alibaba's disruption of the e-commerce market order in real name.
In 2017, JD.com officially filed a lawsuit against Alibaba Group with the Beijing Higher People's Court regarding a "one out of two" case. However, Alibaba raised a "jurisdictional objection" and advocated for the trial to be conducted by the Zhejiang Provincial Higher People's Court, where its headquarters are located. It was not until 2019 that the Supreme People's Court made a final ruling, recognizing the jurisdiction of the Beijing Higher People's Court.
Since then, the "cat dog battle" has received attention at the national level. In December 2020, the State Administration for Market Regulation filed an investigation into Alibaba's suspected monopolistic behavior of "choosing one from two" in accordance with the law, and imposed administrative penalties in April 2021, ordering it to stop illegal activities and imposing a fine of 4% of its 2019 sales, totaling 18.228 billion yuan. In addition to the compensation judgment of the Beijing High Court, Alibaba has paid nearly 20 billion yuan for its "one out of two" monopoly behavior.
Although JD.com has not responded to the use of Alibaba's 1 billion yuan compensation, coincidentally, at this year's Hunan TV New Year's Eve party, JD.com provided a 1 billion yuan red envelope subsidy.
"A hidden corner"
The battle between cats and dogs has come to an end, but the choice between the two still seems to be hidden in the "hidden corners" of e-commerce.
JD mentioned in this statement that in 2023, JD's procurement and sales will break the industry's hidden rule of "super anchor price monopoly", which also implies that there is still a dilemma of "choosing between two" in live streaming e-commerce. For example, during the "Double 11" period, at the end of October this year, a certain electrical appliance reported that JD's selling price was lower than that of a certain top live broadcast room, violating the signed "bottom price agreement" and demanded JD to compensate a huge penalty for breach of contract. JD staff used this to criticize the top anchor's "choice between two" behavior.
Although the government has repeatedly warned and punished monopolistic practices on internet platforms, it is still unable to eliminate the existence of a "two choice" policy. In 2021, after Alibaba received a huge penalty of 18.2 billion yuan, more "either or" options were exposed.
In April 2021, the Shanghai market supervision department imposed a "two choice one" monopoly on the food delivery platform of Shipai Shi, and fined 1.1686 million yuan in accordance with the law. In October of the same year, the State Administration for Market Regulation imposed administrative penalties on Meituan's "two choice one" monopoly behavior in accordance with the law, with a total fine of 3.442 billion yuan. The trend of "choosing one from two" has even spread to overseas markets. On December 14, 2023, Temu, a subsidiary of Pinduoduo, filed a lawsuit against fast fashion e-commerce giant Shein. The lawsuit, spanning over a hundred pages, accused Shein of using illegal means to detain suppliers, steal platform commercial information, and threaten small and medium-sized businesses to choose between two options.
However, both subjective feelings and objective data show that in recent years, the "one or two" phenomenon in the e-commerce field has greatly improved.
In 2022, the State Administration for Market Regulation released the "Annual Report on China's Anti Monopoly Law Enforcement", which showed that in 2021, China's market regulatory authorities conducted in-depth investigations on over a thousand clues related to platform enterprises failing to declare concentration of operators in accordance with the law, investigated nearly 200 cases, punished 98 cases of failure to declare in accordance with the law and made them public to the public, strengthened the warning and deterrent effect, and effectively guided enterprises to improve their compliance awareness and capabilities. As of 2022, the "two choice" behavior in the platform economy sector has basically stopped, and the market competition order has significantly improved. Merchants, especially small and medium-sized operators, on the platform have gained broader development space, further enhancing development vitality.
The winner is not the winner
In the "one out of two" trial, JD.com won the final victory, but there was no winner in this "cat dog battle". Both JD.com and Alibaba have lost their former glory in performance.
In the international capital market, Alibaba was once the "light of Chinese concept stocks", reaching a market value peak of 857.7 billion US dollars, ranking sixth on the global market value list, second only to giants such as Apple and Microsoft, and preparing to hit the trillion dollar mark. However, in just three years, the value of the US stock market has dropped to below $200 billion, almost half of the market value of China's internet in the US. The same goes for JD.com. JD.com once shouted the slogan of "surpassing Alibaba in five years", but now its stock price has dropped by half in a year, with a market value of only over 40 billion US dollars.
Monopoly behaviors such as "choosing one or two" seem to deepen the platform's "moat", but in the long run, they have become their own "tight curse". Wang Xianlin, Vice President of the Economic Law Research Association of the China Law Society, believes that small and medium-sized enterprises are often at a disadvantage compared to platforms. Once their freedom of operation is restricted, their legitimate rights and interests are infringed upon, which not only makes it difficult to achieve better development, but may even endanger their survival. In addition, monopolistic behavior also limits consumer choices, preventing them from obtaining better prices and services, and their legitimate rights and interests cannot be fully protected.
Fortunately, e-commerce giants such as Alibaba and JD.com have timely turned around, shifting from forcing merchants to choose between two options and competing for consumers.
On the eve of last year's "618" promotion, Taobao established three strategic keywords: "user first, ecological prosperity, and technology driven". The new management's emphasis on users and partners is evident. The latest Alibaba interim report for the 2024 fiscal year shows that Taobao Group's adjusted EBITA (pre interest and tax profit) increased by 6% year-on-year, and Goldman Sachs China Internet monthly report also shows that Taobao's daily activity and user hours increased by 7% year-on-year in November last year. In the third quarter of 2023, JD Group's revenue was 247.7 billion yuan, a slight increase of 1.7% year-on-year. Liu Qiangdong also stated within the company that "JD's foundation is still strong and will definitely emerge from a low point.".
After focusing on a combination of tactics such as "price power" and "refund only" after sales, Alibaba and JD.com have shifted their focus back to the product itself. Instead of "choosing one or two" internal friction, it is better to work together to make the cake bigger. After all, under the pursuit of the new generation such as Pinduoduo and Tiktok, there is not much time left for them.