Alibaba faces uphill fight against fakes

Law firm Robbins Geller Rudman & Dowd LLP has filed a class action suit against Alibaba Group Holding Ltd, saying the company did not disclose meetings with China's State Administration of Industry and Commerce (SAIC) before its IPO in the US in September 2014.

This news came on the heels of disappointing fourth-quarter financial results for the e-commerce giant as well as the release of a critical SAIC report which took Alibaba to task for the heavy percentage of counterfeit items sold on its platform. These two items dealt a heavy blow to Alibaba's share price, and some feel the company should have done more to protect the interests of investors.

Many Chinese companies possess an incomplete knowledge of the US capital market, where corporate rule-breakers are often targeted in class action lawsuits. Alibaba now faces legal trouble for its alleged failure to warn investors about the pirated goods sold by its vendors, as well as the regulatory risks it might face as a result.

Solving these problems won't be easy. In any large company, it will take a great deal of time and money to clean up internal management issues.