Alibaba fails to protect consumers
Print Edition
Chinese regulators have accused Alibaba Group of allowing the sale of fake goods and hurting consumers in a report that was withheld until yesterday to avoid disrupting the company’s stock market debut in the United States.
The State Administration for Industry and Commerce said the e-commerce giant allowed unlicensed merchants to use its Taobao and Tmall platforms and failed to protect consumers’ rights.
Alibaba responded via its WeChat account by accusing the SAIC of bias and misconduct in its reports on the sale of counterfeit goods online. The statement was a rare break with the obedient public tone of Chinese businesses in dealings with authorities.
The company alleged that Liu Hongliang, head of the SAIC’s market regulation department, failed to comply with appropriate procedures. In doing so, his conclusions were “defective” and damaging to China’s e-commerce sector as a whole.
“We welcome fair and just supervision, and oppose selective omissions and malicious actions,” Alibaba said.
“Obtaining a biased conclusion using the wrong methodology has inflicted irreparable and serious damage to Taobao and Chinese online businesses,” it said.
The company said it will file an official complaint about the matter to the SAIC.
Such public defiance is almost unheard of in a system in which companies nearly always respond to official criticism by promising to reform.
Alibaba’s comments were the latest in a weeklong spat with the regulator, which began last Friday with the publication of an SAIC report claiming that more than 40 percent of the goods it bought from China’s leading e-commerce platforms were fake.
The SAIC said yesterday that Alibaba must “withhold its bottom line and overcome its arrogant emotions” and remember that no firm “has privileges before the law.”
“Illegal business exists on Alibaba Group’s trading platforms, and for a long time the company has failed to pay adequate attention and failed to take measures to stop it,” the report said.
“This not only is the biggest crisis of integrity faced by the company since its founding, but also has hurt other Internet companies that try to operate legally,” it said.
Alibaba also allowed “illegal advertising” that misled consumers with false claims about low prices and other details, it said, adding that some Alibaba employees took bribes and that the company failed to deal effectively with fraud.
The report said regulators and Alibaba will work together to improve management but gave no details of planned changes.
Alibaba, founded by Jack Ma in 1999, floated on the New York Stock Exchange last September in the world’s largest-ever public offering.
The regulator said in yesterday’s report that it gave Alibaba “administrative guidance,” a form of censure, at a meeting with the company’s top executives on July 16, about two months before its IPO.
The meeting was chaired by Liu, the document said.
It also said that the meeting was held privately “in order to avoid impacting the progress of work before Alibaba’s listing.”
Alibaba said yesterday it has set up a 300-member team to fight the counterfeiters.
In December it said it has been working hard to stamp out the sale of fake goods on its platforms.
In the first nine months of last year, it closed down 200 producers and vendors of counterfeit products, and alerted police to more than 1,000 criminal cases involving 400 people.
The company also removed 90 million listings for products that breached intellectual property rights to build its global reputation ahead of its stock market listing.
(See ‘Yahoo shares’ story on A11)
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