Mainland regulators, Alibaba tone down their spat over 'fake goods' accusations
Company chairman Jack Ma meets with head of regulator, with Ma vowing to fight fakes and the SAIC saying its criticisms had no legal force
The spat between Alibaba Group Holding and mainland regulators took on a more conciliatory tone yesterday with chairman Jack Ma promising to combat fake products on its platform and the regulator saying the white paper which sparked the row had no legal force.
On Wednesday, a State Administration for Industry and Commerce (SAIC) issued a white paper that accused Taobao, a retail subsidiary of Alibaba, of allowing a high proportion of counterfeit and substandard goods to be sold through its online platform. Alibaba hit back with executive vice-chairman Joe Tsai dismissing the white paper as "flawed".
The spat hit the US-listed Alibaba hard, wiping nearly US$30 billion of its market capitalisation and also threatening to take billions off its brand value.
But in a statement posted on its website yesterday, a SAIC spokesman said the paper had no legal force and was actually not a white paper. The SAIC said the paper was only for "internal reference" and did not have any legal implication, a statement that could head off any possible shareholder lawsuits against the US-listed company.
Xinhua reported that Ma met with SAIC minister Zhang Mao yesterday. During the meeting, Ma promised to "actively cooperate with the government [and] devote more capital" to weeding out fake goods on its platform.
Zhang said Alibaba had made good efforts in safeguarding consumer interests and added his agency should find new modes of oversight for e-commerce.
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On Tuesday, Alibaba was ranked China's second-most valuable brand with a value of US$59.7 billion in the 2015 BrandZ ranking by Millward Brown, an international advertising research agency, and WPP, the world's largest communication services conglomerate.
Before yesterday's meeting. Elspeth Cheung, global BrandZ director at Millward Brown, had said the regulator's claims would hit Alibaba's brand value.
"The BrandZ data does suggest that it will damage brand equity. This news will reinforce the negative impact of consumers' perceptions on the quality of Taobao's goods, leading to lower brand equity than Tmall," she said.
Tmall is another online platform of Alibaba that offers more high-end goods than Taobao.
Charles Brian-Boys, the chief executive of Alchemy Asia, an Asian brand consultancy based in Hong Kong, said chief executives worried about risks to a company's reputation due to the power of social media.
"The brand can take a long time to build but can be destroyed very fast by social media, fairly or unfairly," Brian-Boys said.
On Thursday in New York, Alibaba shares fell 8.78 per cent to US$89.81, taking the loss for the week so far to 13.6 per cent, reducing its market capitalisation by nearly US$30 billion. In early trade in New York yesterday, Alibaba shares were up to US$91.18.