E-commerce watchdog, Alibaba trade barbs over fake goods

Alibaba shares slide in Wall Street trading

A row between Chinese e-commerce giant Alibaba Group's popular online bazaar Taobao and the State Administration for Industry and Commerce (SAIC) escalated Wednesday as the agency published a strongly-worded white paper on Taobao's practices after an anonymous Taobao employee accused the agency of unfair treatment over a random quality inspection report on January 23.

The SAIC published a white paper on Alibaba, disclosing details of a meeting with senior company executives on July 16, 2014. The agency said it decided to hold back the report so that it would not affect Alibaba's record-breaking listing on the New York Stock Exchange in September, which helped the company raise $25 billion.

The white paper said that Alibaba's Taobao is only paying lip service to checking the identities of vendors, who are selling fake products and items prohibited under Chinese law.

However, the white paper was removed from the SAIC website hours later on Wednesday.

Taobao quickly replied with a post on its official Sina Weibo account Wednesday, saying that it is a victim of fake goods and asked for understanding as it invites more parties to help solve the nagging issues involving counterfeit goods.

However, Taobao alleged that Liu Hongliang, the SAIC official in charge of supervising the e-commerce business, was guilty of procedural misconduct during the supervision process and has been "emotional" in performing his duty as a market regulator, which has created a negative impression of Taobao to the extent that Taobao decided to file a complaint to the SAIC.

The events followed a post on Taobao's Weibo account on Tuesday, in which an anonymous Taobao employee accused Liu of unfair treatment over a separate quality inspection report which said 19 of 51 samples on Taobao were authentic.

The SAIC took 92 samples from e-commerce companies including jd.com, and Jumei.

Alibaba shares fell 3.2 percent to $99.66 during Wednesday trading at the New York Stock Exchange.

Tang Jia, an industry analyst with the Beijing-based Analysys International, said she is not surprised over the fake goods issue.

"Many e-commerce companies were listed in the US, where the public viewed the issue of counterfeit products much more seriously than in China, so the counterfeit issue was bound to surface," Tang told the Global Times on Wednesday.

Cao Lei of the China e-Business Research Center said Taobao should not shirk its responsibility and focus on its contribution to society and correct its "arrogant" attitude.

"The report and white paper are not aimed at Alibaba. It is part of an overall campaign. They were released because of Taobao's market share, revenue, and the problems revealed in the findings," Cao told the Global Times on Wednesday.

"For example, Taobao should remove shops that sell a Louis Vuitton handbag for a fraction of the price of an original. The unwillingness is partly rooted in the revenue brought by advertisements or illegal behavior that gave some shops undeserved credit ratings," Cao said.

The China Consumers' Association's Qiu Baochang said the SAIC is blameless in this incident as it is only responsible for the accuracy of the samples taken in the random inspection and people should not conclude that all goods sold on e-commerce sites are questionable.

Qiu said the focus should be on whether the inspection exposed problems and how to address these problems to protect the rights of both consumers and companies. But others doubt the fairness and transparency of SAIC's report.

Ala Musi, the director of the policy and law committee of the Beijing-based China E--commerce Association, said the information disclosure is incomplete as the report failed to reveal the third-party agency that conducted the inspection.