China Lays Plans to Tame Tech Giant Alibaba

Under founder Jack Ma, Alibaba Group Holding Ltd. had regulators and local officials in its corner as it grew into a Chinese version of Amazon.com Inc. Chinese President Xi Jinping’s recent crackdown on the empire of China’s best-known entrepreneur has put an end to that.

Since late last year, Alibaba has been in Beijing’s crosshairs, along with its financial affiliate Ant Group Co. Regulators already have come down hard on Ant, which they consider a risk to the financial system, forcing it to make changes that will severely hamper its prospects.

Alibaba, though, appears destined for softer treatment. Officials familiar with Beijing’s thinking said regulators don’t want to crush a technology powerhouse popular with both Chinese households and global investors—as long as it disassociates itself from its flashy and outspoken founder and aligns itself more closely with the Communist Party.

Antitrust regulators are considering levying a record fine against Alibaba exceeding the $975 million that Qualcomm Inc. paid in 2015 over anticompetitive practices, so far the largest in China’s corporate history, according to people with knowledge of the matter.

Those people said Alibaba also will be required to end a practice that has been dubbed “er xuan yi”—literally, “choose one out of two”—under which, regulators believe, the tech giant punished certain merchants who sold goods both on Alibaba and its rival platforms, including JD.com . The precise remedies Alibaba will have to take likely will be hammered out only after a decision is announced, according to one of the people.