Chinese Regulator Targets Taobao Marketplace

China’s main corporate regulator, the State Administration for Industry and Commerce, has released a report in which it accuses China's e-commerce giant Alibaba Group of dealing with unlicensed merchants, handling in fake goods and other illegal activities on its shopping websites Taobao Marketplace and, Associated Press (AP) reported.

Alibaba’s boss Jack Ma is under pressure /  photo: private
Alibaba’s boss Jack Ma is under pressure / photo: private

AP added that the regulator had presented its findings to Alibaba executives in a July 17 meeting at the company’s headquarters in Hangzhou, but that it had kept the results confidential at the time so as “not to affect Alibaba’s preparations for a stock market listing.”

License violations
The regulator’s report, made public earlier this week, said it had found 19 problems in five main areas on Alibaba’s sites. Those included a number of unlicensed or unregistered vendors selling items, including knockoffs and goods that were improperly imported or banned from sale in China. Such items included fake cigarettes, wine and mobile phones, knockoff handbags, gambling equipment, wiretapping devices, and restricted types of knives.

Because of its failure to take action against these shortcomings, Alibaba “faces its biggest credibility crisis since it was founded,” according to the regulator’s Chinese-language report.

Responding to the allegations on its social messaging service Weibo, Taobao not only claimed that it had been a victim of fakes and had gone to great lengths to prevent them from being sold on its site, it also took issue with the regulator’s approach, saying that the agency had not been objective.

Taobao considers filing a formal complaint
The AP report noted that in an unusual public criticism of a government official, Taobao accused Liu Hongliang, a bureau chief at the administration for industry and commerce, of using inappropriate procedures in carrying out his investigation. The company said it would file a formal complaint to the agency, adding that: "Mr Liu used mistaken methods to arrive at a conclusion that was not objective, causing very serious negative effects on Taobao and on China’s e-commerce industry participants.”

Last month, Alibaba spent about US$160 million combating the sale of fake goods on its sites in 2013 and 2014. Still, many companies complain that Alibaba can be slow to pull down listings of pirated goods. Others say that removed listings often quickly reappear under different names.

Producing counterfeit goods continues unabated
Sources in China have pointed out that, although in the past few years the Chinese government has taken several measures to reduce the production of fake goods in the country, it doesn't seem to have a problem with the manufacturing sector continuing the production and shipping of billions in counterfeit goods around the world through a massive network of distributors and websites.

According to one source, the action by the regulator against the sale of counterfeit goods to Chinese customers, probably points to a more political agenda against Alibaba and its flamboyant founder Jack Ma, who is known for speaking directly about delicate matters and has criticized regulators in the past.

A large number of Taobao and Alibaba traded goods are transported by integrators or cargo airlines to get the fastest possible way to the buyers be it Chinese or international customers.

Nol van Fenema

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