China's calls on watchdog to investigate Alibaba

Reuters News
Posted: Nov 03, 2015 6:37 AM

By Paul Carsten and John Ruwitch

BEIJING/SHANGHAI (Reuters) - China's second-largest e-commerce company Inc said it has sent a letter of complaint to a Chinese antitrust regulator and formally requested an investigation into rival Alibaba Group Holding.

The complaint concerns a State Administration for Industry and Commerce (SAIC) regulation that forbids e-commerce platforms from limiting or barring their merchants from participating in promotions on other platforms. The regulation came into effect on Oct. 1. said in its letter that it has received information from merchants indicating that Alibaba, which dominates Chinese e-commerce, is "forcing merchants" to choose to exclusively deal with one e-commerce site during promotional activities.

If merchants choose to participate in certain promotional activities on Alibaba's Tmall website during the upcoming Singles' Day online shopping event around Nov. 11, they "are not permitted" to participate in other platforms activities, otherwise "Alibaba will carry out punishment or sanctions", said it had been informed by sellers on its site.

"JD is panicking because Alibaba wins with customers and merchants because we provide a superior experience for users on our platforms," said Jim Wilkinson, senior vice president of international corporate affairs for Alibaba Group.

No one with the authority to speak on behalf of SAIC was available for comment when Reuters telephoned the administration outside business hours.

If the SAIC does launch an investigation and finds the company has violated regulations, it could be punished according to the country's laws governing antitrust and unfair competition.

BITTER RIVALS said that Alibaba's behaviour has "harmed merchants' interests" and "not only obstructed normal market competition, but also seriously harmed consumers' interests".

The two companies are bitter rivals in Chinese e-commerce, with little love lost between their founders.

If the SAIC does investigate, it would not be Alibaba's first tussle with the regulator.

In January the SAIC published a so-called "white paper" report on its website, criticising Alibaba for not doing enough to suppress widespread counterfeiting on its websites. The company's shares fell more than 8 percent on the day after the report.

Two days after the report went up on the website the regulator retracted it, saying that it was not an official "white paper" and that it did not carry any legal force. An Alibaba spokesman said at the time that the company felt vindicated.

Tensions have come to a head in the run-up to China's annual Singles' Day event, the world's biggest online shopping bonanza. Alibaba said that sales of more than $9 billion were achieved at last year's event.

The event is closely scrutinised and in April Alibaba was fined 800,000 yuan ($126,268.60) by the price bureau in eastern Zhejiang province for violations by third-party sellers during the promotions.

The thousands of vendors featured on Alibaba's Singles' Day shopping sites hope to boost sales and gain customers, but some have complained that discounts, often under pressure from Alibaba, and cut-throat corporate rivalry undercut the benefits.'s shares were up 3.6 percent at $29.70 in afternoon trading on Nasdaq, while Alibaba's shares were marginally down on the New York Stock Exchange.

(Reporting by Paul Carsten and Beijing Newsroom in BEIJING and John Ruwitch in SHANGHAI; Additional reporting by Kshitiz Goliya in Bengaluru; Editing by David Goodman and Anil D'Silva)