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Lenovo and Alibaba are two of China’s largest and most globally influential technology companies. Photos: Agencies

Analysis | Chinese tech giants Lenovo, Alibaba become hot targets of US class-action lawsuits

Capital-rich Chinese technology firms such as top PC maker Lenovo and e-commerce giant Alibaba have apparently become hot targets for class-action lawsuits in the United States.

Lenovo

Capital-rich Chinese technology firms such as top PC maker Lenovo and e-commerce giant Alibaba have apparently become hot targets for class-action lawsuits in the United States as their investors and customers pay more attention to possible business misconduct.

Beijing-headquartered Lenovo last week was sued by professional blogger Jessica Bennett, who claimed she received unwanted pop-up adverts on a Lenova Yoga 2 laptop she used for business – which she later learned had been preloaded with Superfish Visual Discovery adware.

The class-action suit was filed at the US District Court of the Southern District of California.

At least six US law firms have also launched separate investigations for a potential class-action lawsuit against Lenovo and its partner, software start-up Superfish.

Security experts have warned that the Superfish adware breaks secure connections on laptops in order to push advertising into online searches and websites without the computer user’s permission, leaving machines exposed to hackers and other malicious software.

The class-action lawsuit against Lenovo came just a few weeks after Hangzhou-based Alibaba’s trouble with some of its minority shareholders in the US, where Alibaba launched the world’s largest initial public offering (IPO) of stocks late last year.

Six US law firms filed class-action shareholder lawsuits against Alibaba earlier this month after the e-commerce giant’s dispute with Chinese regulators over the alleged sale of fake goods caught the attention of American regulators.

After Alibaba’s high-profile IPO, the public and media in the US naturally pay more attention to Chinese companies
Wang Chao, industry analyst

“Class-action lawsuits are very common in the United States. There were already some cases targeting Chinese companies a few years ago but these cases were relatively smaller cases compared with the current [lawsuits against Lenovo and Alibaba],” said Wang Chao, an internet industry analyst at Nomura Securities in Hong Kong.

Lenovo and Alibaba are two of China’s largest and most globally influential technology companies.

“After Alibaba’s high-profile IPO, the public and media in the US naturally pay more attention to Chinese companies, especially in the technology sector. So you may see more cases targeting major Chinese companies in the future,” said Wang.

Class-action lawsuits are often the stuff of Hollywood movies. Films like Erin Brockovich, which was inspired by actual events, tell the stories of ordinary folk banding together to fight the giants of industry and correct injustices. Class-action lawsuits can reap millions of US dollars for lawyers and clients when companies are ordered to pay compensation or if they settle out of court.

On the other hand, public relations experts noted that Chinese companies also needed to learn better crisis management strategies.

In the case of Alibaba’s tussle with Chinese regulators, which eventually resulted in class-action lawsuits, the company initially got mired in a series of online debates with the government over whether it sold fake products online.

Later, after the company's share price sank to a record low, senior executives were forced to sit down with the regulators in Beijing to fix the problem.

Customers’ concerns about their online security and privacy when using Lenovo computers equipped with the controversial adware first emerged late last year and caught worldwide attention earlier this month after warnings by cyber security experts on the potential security risk.

It was only until this week when Lenovo’s chief technology officer, Peter Hortensius, formally apologised for the security scare and decided to launch a sweeping security overhaul for millions of its laptops.

“Apparently there is still a lot for Chinese companies to learn about crisis management,” said a PR consultant who declined to be named as he was not authorised by his firm to comment on specific cases. “The more attention you get, the more trouble you will get.”

 

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