1 billion "choose one of two" compensation, Cai Chongxin denied it

Titanium Media APP

2024-05-11 20:52Posted on the official account of Beijing Titanium Media APP

Text | Deep Reading Business, Author | Hu Fei, ed Liu Manxin

The Jingdong v. Ali "One of Two Choices" case, which lasted for 6 years, had already been settled, but I didn't expect it to make waves again.

After reading deeply, Ali has recently appealed to the Supreme People's Court after the first-instance judgment at the end of last year, and the case will therefore enter the second-instance stage.

On December 29, 2023, the Beijing High People's Court made a first-instance judgment in the six-year-long case of JD.com v. Alibaba: it was found that Ali's monopolistic behavior of abusing its dominant market position to carry out "either-or" was established, causing serious damage to JD.com, and JD.com should be compensated RMB 1 billion.

At that time, Ali's official response was "respect for the court's verdict", but half a year later, it suddenly changed its hexagram, why is this? It may take several years before the dust settles after the case enters the second trial, what impact will it have on the industry?

01 Why did Ali go back on his word

Judging from the case itself, the fact that Ali "chose one of the two" is very sufficient.

For example, in August 2015, Tmall announced that it had signed exclusive cooperation agreements with more than 20 international brands such as Decathlon and Timberland, and the products could only be sold exclusively on the Tmall platform. In July 2017, a number of apparel brand merchants said that Tmall required it to close brand stores on other e-commerce platforms in the name of "exclusive cooperation", otherwise it would be cut in activity resources, search downgraded, blocked, etc.

Since August 2017, hundreds of brands such as Heilan Home, Jeanswest, Semir, and Seven have withdrawn from JD.com, and the number and time concentration are unprecedented

Public data shows that many clothing brands that have withdrawn from JD.com have not had a bad performance growth in JD.com. For example, from January to August 2017, Peacebird and Jeanswest grew by 90% and 40% respectively on JD.com, while GXG's growth rate was 120%. From the perspective of the share of the online clothing market at that time, Taobao and Tmall accounted for more than 80%, and JD.com only accounted for 8%.

Alibaba's choice of one of the two directly caused the rapid development of JD.com's clothing and beauty business to be devastated, and the impact continues to this day. Ali himself "generously" admitted this kind of behavior. For example, Wang Shuai, an executive of Alibaba, once said on social media: "Choosing one of the two is a normal market behavior, and it is also 'good money drives out bad money'."

However, a few years later, Ali and Wang Shuai were slapped in the face. On April 10, 2021, Ali was fined a sky-high price of 18.228 billion yuan by the State Administration for Market Regulation, setting a new record for anti-monopoly administrative penalties. At the end of 2023, Ali was sentenced to pay JD.com another 1 billion yuan in compensation.

Obviously, as the market leader of the e-commerce industry, Alibaba has been an important channel for these big clothing brands in the domestic online sales network for a long time. Before the rise of Pinduoduo and Douyin, these brands wanted to sell goods online, except for the Tao platform and JD.com, there were not many options.

"Choose one of the two" from Ali's point of view, it is natural to prevent JD from forming effective competition against it, but this does not conform to the laws of business, and the reason is very simple, once the market monopoly position is truly formed, the external pressure of the monopoly platform has almost disappeared, and the platform will no longer have a greater incentive to improve the user experience and service quality. In contrast, brand merchants cannot get more business opportunities, and consumers' rights and interests such as the right to choose are also deprived, and they can only be slaughtered by the platform.

Lawyer Yang Yi, a partner at Tian Yuan Law Firm, told Shenyu Business that whether it is the anti-monopoly "sky-high fine" issued to Alibaba in 2021 or the first-instance judgment of JD.com v. Alibaba half a year ago, it has maintained the order of market competition to a considerable extent, and also meets the expectations of the public and the industry to stop the either-or. At that time, in response to the first-instance judgment of "one of two choices", Alibaba said in an interview with a number of media: We have learned of this news and we respect the court's judgment.

Half a year later, Ali suddenly decided to appeal, which surprised the market and the industry. It is a common practice in the industry for the defendant to appeal after the first trial, but based on the various details of the case over the past six years, the possibility of Ali's comprehensive "reversal" is very small.

According to Alibaba's 2023 financial report, the company's net profit attributable to the parent company in 2023 will be 76.644 billion. Whether it is the previous "sky-high fine", or the amount of 1 billion in damages, or even the lawyer's agency fee for the "either-or" lawsuit since 2017, it is only a "drop in the bucket" for Ali's annual profits. Winning and losing the lawsuit will not be "nerve-wracking" for Ali.

But looking at the "generational change" of Ali's authority, things may be more interesting - the cooperation in the face of the sky-high fine of 18.2 billion yuan was a decision made by Xiaoyaozi Daniel Zhang during his reign. Now that Tsai Chongxin has taken office, both the organizational structure and business decisions have almost completely negated the "political legacy" of the Daniel Zhang period.

Now even the "either-or" case has chosen to appeal, which also shows that the new generation of Ali leadership, represented by Tsai Chongxin, is dissatisfied with and dissatisfied with the past internal management decisions and the law's ruling on Alibaba.

02 Cai Chongxin, a master of "law" and "money".

Alibaba repented and chose to appeal, and Tsai Chongxin, the No. 1 position, must be the final decision-maker.

Tsai Chongxin was born in a legal family, and he is also an elite in the legal field. For example, Cai Chongxin's grandfather, Cai Liucheng, was Du Yuesheng's royal lawyer, responsible for handling all the legal affairs of the Jiang Song family in Shanghai; His father, Tsai Chung, was the first Taiwanese to receive a Ph.D. from Yale Law School.

Joe Tsai is a Canadian national and holds a Juris Doctor degree from Yale Law School and is admitted to practice law in the State of New York. Prior to his practice, he worked as an associate in the tax group at Sullivan & Cromwell, an international law firm based in New York, and later as lead counsel at Rosecliff, Inc., a management buyout firm in New York. As a result, few of Tsai Chongxin's available international judicial resources can match it.

As one of Alibaba's "Arhats", Joe Tsai has been a member of the company's board of directors since the company's inception and served as its chief financial officer until 2013. After taking over as chairman of Alibaba's board, he already has access to all of the company's resources.

Although this status does not give Alibaba "preferential treatment" in either-or, as mentioned above, whether it is an appeal after nearly half a year, or a retrial that may last several years after the appeal period, Alibaba has won a considerable window of time.

During the appeal period, whether it is international judicial resources or available commercial resources, how Tsai Chongxin will act is a variable that cannot be ignored in this case.

03 After 6 years of "protracted war", how long will it drag on

According to public information, the "either-or" dispute between JD.com and Alibaba began in 2013.

At that time, JD.com publicly accused merchants of being forced to "choose one of the two"; Since 2015, JD.com has reported Alibaba's behavior to the former State Administration for Industry and Commerce in real name. In 2017, the two parties went to court over the dispute; Then, in 2019, the Supreme People's Court issued a final ruling, rejecting Alibaba's "jurisdictional objection" and confirming that the Beijing High People's Court had jurisdiction over the case.

During this period, China's e-commerce industry has also undergone a transformation from "savage growth" to "strong regulation". At the end of 2020, the State Administration for Market Regulation fined JD.com, Tmall, and Vipshop 500,000 yuan respectively after an investigation in response to issues such as online shopping price increase before and after discounts, false promotions, and inducement of transactions that consumers strongly reacted to before and after the "Double 11";

In 2021, the platform economy ushered in the first year of the "strong supervision" policy. The State Administration for Market Regulation fined Alibaba Group 18.228 billion yuan.

And today in 2024, China's e-commerce rivers and lakes are no longer the "back garden" of the Ali family - Jingdong's self-operated quality e-commerce, Doukuai's live broadcast e-commerce, Xiaohongshu's community e-commerce, and Pinduoduo's other sinking platforms.

The first-instance judgment of JD.com v. Alibaba, whether as a landmark precedent for domestic anti-monopoly or as a judicial footnote to the standardization of the e-commerce industry, has a very direct role in promoting the development of industry norms and the protection of the rights and interests of consumers and merchants.

Now Alibaba has chosen to appeal, from the perspective of platform interests and business competition, which is understandable. But this also makes the dust settle on the two-choice case, and it becomes even more distant. Although since last year, the macro policy for the platform economy has changed from strong supervision to encouraging development, but from the perspective of regulating the market, the general direction will not change fundamentally.

Therefore, the longer the time period of "one out of two cases", its judicial and social significance will gradually decrease. The judicial marathon of "six years after six years" is actually not helpful to the platform itself and the development of the industry. The sooner the case is closed, the more beneficial and beneficial it will be for the sustainable development of the e-commerce industry.

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