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Chinese Government Agency Slams Alibaba For Counterfeit Goods

To avoid impacting Alibaba’s IPO and NYSE listing, the agency waited six months to release its complaints.

Chinese Government Agency Slams Alibaba For Counterfeit Goods
[Photo: JEWEL SAMAD/AFP/Getty Images]

The Chinese government consulted trading giant Alibaba about illegal business practices two months before its July 2014 initial public offering, which was the largest in history.

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China’s top business regulator, the State Administration for Industry and Commerce, released a white paper today (link in Chinese) detailing the meeting, which wasn’t made public until now to avoid impacting Alibaba’s IPO in July and its listing on the New York Stock Exchange in September, the report says.

The white paper slammed Alibaba for its failure to crack down on unlicensed merchants and accused its shopping platforms of selling counterfeit and dangerous goods, holding misleading sales promotions, and having a flawed credit ranking system, among other charges.

That China’s State Administration for Industry and Commerce is making this fight public might be a risk to shareholders, says Quartz, though they also note that Alibaba’s company prospectus lists regulatory oversight and potential investigations as a risk factor directly resulting from post-success scrutiny, which will “at a minimum, result in our having to increase our investment in compliance and related capabilities and systems,” the prospectus said.

The white paper was publicly released a day after Alibaba accused China’s State Administration for Industry and Commerce of applying different standards and not complying with due procedures during its inspection of Taobao, according to Forbes. Alibaba directly criticized the government agency official responsible for internet monitoring, Liu Hongliang, of unspecified “procedural misconduct” and said it would be lodging a formal complaint with the agency. As quoted by The Guardian:

“We welcome fair and just supervision, and oppose selective omissions and malicious actions,” said the statement from Alibaba. “Obtaining a biased conclusion using the wrong methodology has inflicted irreparable and serious damage to Taobao and Chinese online businesses.”

On Tuesday, Yahoo CEO Marissa Mayer announced that Yahoo would spin off its 15% stake (worth about $40 billion) in Alibaba into a separate company.

[via Quartz ]