Lawyers look into possible violations in U.S.
Chinese e-commerce giant Alibaba, which has just been removed from the U.S.-based anti-counterfeiting coalition, faces new problems in the U.S. market, as U.S. regulators and law firms investigate claims of potential misrepresentations by the e-commerce powerhouse.
Law firms such as New York-based Pomerantz LLP and Los Angeles-based Goldberg Law PC have started investigating whether the NYSE-listed company and its officers violated U.S. securities laws by issuing misleading information, according to separated press releases issued on Wednesday.
On Thursday, the Beijing-based Hao Law Firm announced it would join the other law firms, aiming to file a class action lawsuit against Alibaba on behalf of investors.
The law firms' announcements come as the U.S. Securities and Exchange Commission (SEC) investigates Alibaba's accounting practices. Earlier this year, the SEC questioned Alibaba's blockbuster Singles' Day sales event and its relationship with an affiliated unit that handles its deliveries, the company disclosed on Tuesday in response to an SEC request.
The SEC is questioning whether Alibaba actually controls logistics company Cainiao, even if Alibaba is a minority shareholder.
Following the disclosure, Alibaba shares slid nearly 7 percent to $75.59 on Wednesday. They inched up slightly to $77.19 on Thursday's opening.
Any Alibaba investor who loses more than $50,000 due to the disclosure can seek relief through a class action suit, Hao Junbo, a partner and lawyer at Hao Law Firm told the Global Times.
Alibaba has drawn the SEC's attention in the past over the alleged sales of counterfeits on its online marketplaces, and analysts have expressed concerns over the methods used by the company.
"The latest SEC probe meets my previous expectations and was destined to happen, as some of Alibaba's practices do not comply with generally accepted accounting principles," Liu Dingding, an analyst at Beijing-based market consultancy Sootoo, told the Global Times on Thursday.
Liu questioned the authenticity of the transactions generated by merchants on Alibaba's bazaars, who usually pad their sales figures with returns and pre-orders. "Such practice is common in China's retail business," he noted.
During the nationwide sales event last year on Singles' Day, Alibaba, the first to capitalize on the day in 2009, racked up 91.22 billion yuan ($13.9 billion), compared to 57.1 billion yuan the previous year and 52 million yuan in 2009.
Alibaba responds
An Alibaba spokesperson told the Global Times on Thursday that it is understandable why there are challenges to Alibaba's success on Singles' Day, because people from other countries are overwhelmed by the sales volumes.
The company said it promises to disclose more information to guide Alibaba investors.
"It is still unclear who the whistleblower is and what the motive was, but one thing's for sure: Cainiao is an independently operated company, adopting different business models from other competitors … and will develop at a pace competitors cannot imagine," Alibaba's spokesperson said.
Unnamed sources were quoted by media reports as saying on Thursday that the whistleblower is among Alibaba's domestic competitors.
This might be true, said Hao, noting that the SEC investigation, which is usually based on tips, is much more common in the U.S. than in China, thanks to the SEC's whistleblower award program.
However, the probe should not be considered an indication that Alibaba is doing something suspicious, said the lawyer.
Cainiao was jointly established in 2013 by Alibaba and major courier companies in China including SF Express, STO Express and Shanghai YTO Express, which is perceived as a method to compensate for Alibaba's delivery and warehousing shortcomings.
An in-house logistics system has long been the edge of Alibaba's arch rival, JD.com.
Alibaba's latest quarterly report issued in early May shows that Cainiao, in which Alibaba holds a 47 percent stake, had raised 10 billion yuan in the first quarter.
The SEC investigation is the latest in a series of setbacks for Alibaba. The International Anti-Counterfeiting Coalition (IACC) said in mid-May that the board had decided to suspend a newly created category, under which the Chinese Internet mammoth was granted membership in April.
Despite the setbacks, Liu said the company would not be knocked out completely, as it is actively shifting its efforts to other sectors, such as Internet finance, big data and entertainment.
