The impact of antitrust enforcement on China's digital platforms: Evidence from SAMR v. Alibaba☆

In this article, we explore the dynamics of antitrust enforcement in the Chinese e-commerce platform market by examining the landmark decision of SAMR v. Alibaba (2021) using an event study methodology. We find that the announcement of the antitrust investigation leads to a negative impact on Alibaba's abnormal returns, while its competitors experience mixed outcomes, with some showing positive abnormal returns and others showing statistically insignificant changes. However, the announcement of the financial penalty triggers a positive stock market response for Alibaba and a negative response for its competitors, consistent with narratives suggesting that investors adjust their expectations based on new information revealed by the investigation. To assess the cumulative effects of the investigation on Alibaba, we conduct a long-horizon event study, which shows a 17 to 25% decline in Alibaba's abnormal stock returns, with a relatively smaller decrease for its competitors. Additionally, using a synthetic control approach, we identify a 7 to 9% reduction in Alibaba's gross profit margins compared to similar firms. Our findings reveal that the decision has a substantial impact on Alibaba's profitability, with our estimates indicating an effect significantly larger than that observed in comparable studies in the EU and U.S.