Alibaba probed by SEC amid counterfeit clampdown

E-commerce giant Alibaba is being probed by the US Securities & Exchange Commission (SEC) following an ongoing controversy about the sale of counterfeit goods on its web platforms.

The announcement comes after a war of words between e-commerce giant Alibaba - which runs the Taobao marketplace - and China's State Administration for Industry and Commerce (SAIC), although the parties promised to collaborate on the tackling the problem last month.

The SEC wants more information from Alibaba about its dealings with the Chinese government on alleged sales of fake goods, according to the Chinese company, which is also facing shareholder lawsuits in the US.

The company has been accused of misleading investors by not revealing that it had been questioned by the SAIC in the build-up to its $25bn initial public offering (IPO) last September.

The spat with the SAIC escalated last month when it published a white paper detailing a survey - conducted between August and October last year - which claimed less than 40 per cent of goods sold on Taobao were genuine.

That revelation prompted an angry response from Alibaba chief executive Joe Tsai during the company's third-quarter results meeting in January, who questioned both its findings and the manner in which it was released.

"We believe this report was flawed and was based on arbitrary methodology and we gave our views to the SAIC," he told investors recently, noting that the company felt that being singled out by the SAIC was so unfair that it had felt compelled to make a formal complaint.

"The issues of counterfeiting and IT protection are a part of the problems in a growing economy today, whether it is online or offline," he said, adding that Alibaba has taken a number of measures to try to clamp down on the trade.

These include the use of technology to analyse and track infringing products and identify hotspots for counterfeit distribution and sales, periodic checks on goods sold on its sites using third-party organisations and forging closer ties with brand owners.

Alibaba also claims to have cooperated with Chinese law enforcement agencies in over 1,000 counterfeiting cases, resulting in 400 arrests and the closure of 200 bricks-and-mortar stores, factories or warehouses involved in production and selling of counterfeits.

In a statement, Alibaba insisted that "the SEC letter states it should in no way be construed as Alibaba … having done anything wrong or there having been any violation of securities law."

Meanwhile, the Chinese government has said it intends to increase monitoring of online retailers in the face of rising concern about counterfeit sales. The General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ) says it will provide training and assistance for e-commerce companies to help them drive counterfeits from their sites, reports Chinese news service ECNS.