Regulator releases damning report on Alibaba over fake, substandard goods on Taobao

The war of words between mainland’s largest online shopping site and the state commercial regulator escalated today after the authority released its full report on the failure of Taobao.com to ban substandard products – just one day before its parent corporation, Alibaba Group, releases a financial report.

Alibaba, in return, said on its official Weibo account that it would file a formal complaint to the Administration of Industry and Commerce against the director of its e-commerce division, Liu Hongliang.

The director, in charge of a recent quality survey of products sold on Taobao.com, violated the country’s product quality inspection regulations and imposed a “very serious negative impact on our e-commerce professionals”, Alibaba said.

Alibaba’s latest move came shortly after the administration released on a state-owned news site, People.com.cn, memos from an internal conference meetings between itself and Alibaba in July.

The document, dubbed the “Alibaba White Paper”, accused Taobao.com, Alibaba’s largest e-commerce business that has been called a Chinese version of eBay, of allowing merchants to operate without required business licences, to run unauthorised stores that co-opted famous brands, and to sell counterfeit products.

The website’s employees have long turned a blind eye to the flaws raised in customer feedback and internal credit-rating systems, the report said.

It also accused the employees of disclosing the regulator’s confidential report on counterfeit products to the merchants and letting them to remove the products from shelves before the authority could make its next move.