Online retailer lambasted by regulator over fakes

The e-commerce firm Alibaba Group has landed in hot water with a Chinese regulator as new allegations arise that it has been selling counterfeit goods on its website. 

China's State Administration for Industry and Commerce said in a (translated) statement released this week that the Hangzhou-based, New York-traded Alibaba was 'lax' in what it allows traders to sell on its online retail platforms.

The SAIC added that its sales platforms offered 'inadequate product information' and a 'flawed system' for ranking sellers.

"For a long time, Alibaba Group hasn't been paying enough attention to the mismanagement of the Alibaba Internet transaction platforms for a long time, and hasn't implemented effective controls to solve the problems," the regulator said.

This dressing down of the company in fact happened in July last year, but its report wasn't published until this week in order to avoid affecting Alibaba's record-breaking $25bn initial public offering (IPO) in September, the regulator said.

The report was released a day before the Hangzhou-based company is expected to release earnings from its first full quarter since the IPO.

"The SAIC is now teaching Alibaba a lesson and telling it to learn its place," said Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, to the financial news wire Bloomberg.

"Many Chinese government agencies are probably not too happy with [chief executive] Jack Ma's high profile, his initiatives in the financial sector and impact on the retail sector."

Alibaba's Taobao e-commerce platform said it is "willing to assume the responsibility of fighting fakes" and that its effort "is far from complete."

It did however criticise the inspection methods of a top SAIC official, Liu Hongliang, and said it would file a formal complaint with the SAIC.

"We believe director Liu Hongliang's procedural misconduct during the supervision process; irrational enforcement of the law; and obtaining a biased conclusion using the wrong methodology has inflicted irreparable and serious damage to Taobao and Chinese online businesses," it said in a statement.