Online vs Offline Commerce

Alibaba and JD in a war of words via lawyers over claims of dominating China’s e-commerce

PUBLISHED : Saturday, 25 November, 2017, 8:06pm
UPDATED : Saturday, 25 November, 2017, 8:06pm

China’s two dominant e-commerce platforms in the world’s largest online retail market are under the spotlight in an online debate via their legal representatives about their duopoly in the industry.

On one side is Alibaba Group Holdings, owner of the South China Morning Post and operator of the world’s largest online shopping platform, claiming that it has been the target of an organised series of chat room postings and blogs aimed at tarnishing its reputation.

On the other side is JD.com, China’s second-largest online retailer, which said it too had been the target of more than 100 attacks to cast aspersions on its reputation, as recently as during the November 11 online shopping gala.

The attacks on Alibaba were designed to “manipulate public opinion,” and made “groundless accusations,” the company’s legal department said in a Friday post on its Weibo social media account. “We believe the authorities should investigate and punish the criminal groups who we believe have illegally profited from propagating such rumours,” the Weibo post said, without naming the perpetrator.

Chat room posts and blogs have surged in the past month, accusing Alibaba of using its dominance of China’s e-commerce consumer market to force merchants to choose side, or be squeezed out of business.

As many as 9,700 articles emanating from more than 500 social media accounts were posted on various online platforms in China to attack Alibaba, mostly before the Singles’ Day online shopping gala on November 11, according to a WeChat post on Wednesday by Alibaba’s legal adviser. Up to 4,600 of these accused Alibaba of forcing merchants to choose sides or accusing it of monopolising China’s e-commerce market.

At stake is an e-commerce industry that has dwarfed every other country in the world, and is being dominated by two large companies.

Alibaba’s Tmall platform has 80 per cent share of China’s online clothing sales, while JD holds 10 per cent, according to research by Analysys.

Even though Alibaba hadn’t named the perpetrator of the online campaign, the company’s legal adviser had forwarded Weibo posts that claimed JD as the client behind a 2.6 million yuan (US$394,000) contract to hire ChinaLabs, a Beijing-based consulting services provider, to attack Alibaba of monopolising the market.

JD paid ChinaLabs 600,000 yuan to initiate research and host media seminars to discuss Alibaba’s monopoly in China’s e-commerce market, according to the posts, which cited a contract between the two parties between August 1 and December 31.

Another contract showed that ChinaLabs was receiving 2 million yuan from JD to instigate China’s antitrust regulators to investigate on Alibaba for monopolistic practices.

The contracts in the Alibaba legal adviser’s posts could not be independently verified. Spokespersons at JD, an online retail platform whose market value is about a tenth of Alibaba’s capitalisation, did not respond to text messages and phone calls soliciting their comment.

Jincheng Tongda Law Firm, acting on behalf of JD, issued a statement on Saturday denying any association with ChinaLabs.

Separately, ChinaLabs’ chairman Fang Xingdong denied through a Weibo post that his company had ever signed the contracts with JD, saying that it will continue to conduct investigations and research on the antitrust situation in China’s e-commerce industry.

Alibaba’s shares have doubled this year as the Hangzhou-based company broke its November 11 retail festival record and deepened its push to marry online and physical shopping. The company this month agreed to buy a 36 per cent stake in Hong Kong-listed Sun Art Retail Group, which runs one of the biggest hypermarket chains in China.