E-COMMERCE

Regulator vows to be bold but prudent after spat with Alibaba

Industry and commerce agency says investigations will be bold but prudent as it tussles with the online giant over counterfeits claim

PUBLISHED : Thursday, 05 February, 2015, 11:56am
UPDATED : Friday, 06 February, 2015, 3:09am

The government regulator at the centre of a public spat with Alibaba over the sale of fake goods has told its officials to be bold in their investigation but to avoid provoking trouble.

Ma Zhengqi, a deputy chief at the State Administration for Industry and Commerce (SAIC), made the remarks during a video conference call on consumer rights protection, after a war of words erupted between the administration and the e-commerce giant.

Without naming specific companies, Ma said: "As long as it's in accordance with the law, we should be prudent, targeted yet decisive in our crackdowns.

"We should not provoke trouble, but neither shy away from trouble," he was quoted by The Beijing News as saying. Ma said his department would launch random quality checks on products, including mobile phones, clothes, toys and electric bicycles, being offered in stores and online. Shops selling substandard products would be invited for talks, but punishments would be imposed if the shops refused to address the problem, he said.

"We should focus on illegal behaviour that damages the interests of consumers, and be strict in exercising the laws," Ma said. "At the same time, checks against products sold through online platforms will be intensified."

The SAIC sparked a public row with Alibaba last month after it released a white paper that accused Taobao, a retail subsidiary of Alibaba, of allowing a high number of counterfeit and substandard goods to be sold through its online platform. Alibaba hit back, with executive vice-chairman Joe Tsai dismissing the paper as "flawed" and threatening to make a formal complaint. The company said SAIC director Liu Hongliang had made public the paper without giving online shop owners a chance to respond to the claims.

The spat wiped nearly US$30 billion of market capitalisation from the US-listed company and threatened to take billions off its brand value.

The claims might also make the firm vulnerable to US shareholder lawsuits and punitive action by American regulators if Alibaba was found to have known of the SAIC's investigation of Taobao before its IPO in September.

But the confrontation eased slightly last week with SAIC saying the paper had no legal force and was only intended for "internal reference" - a statement that could head off possible shareholder lawsuits. In a meeting between Alibaba chairman Jack Ma and SAIC minister Zhang Mao last Friday, Ma vowed to "actively cooperate with the government and devote more capital" to weeding out fake goods.

Last month, Millward Brown and WPP, the world's largest communication services group, ranked Alibaba as the second most valuable Chinese brand in 2015 with a brand value of US$59.68 billion.