China in reconciliation mode with Ali Baba after fake products row

31 January 2015

The head of China`s commerce regulator met with Alibaba Group Holding Ltd chairman Jack Ma on Friday to discuss combating fake products, with the two adopting a conciliatory tone after a row over illegal business on the internet company`s platforms.

The meeting took place the same day the regulator, the State Administration for Industry and Commerce (SAIC), backtracked on an earlier report that had excoriated the Chinese online commerce company for not doing enough to suppress counterfeiting on its websites.

SAIC issued what it called a "white paper" on Wednesday saying many products sold on Alibaba`s websites infringed on trademarks, or were banned, substandard or fake. White papers often convey official policy positions.

But in a follow-up statement posted on its website on Friday, a spokesman for the regulator said the report was in fact not a white paper and carried no legal force.

"The most recent SAIC posting speaks for itself. We feel vindicated," Alibaba said in a statement in response.

It`s unclear what prompted the regulator`s seeming about-face in a highly unusual episode, one that saw a major Chinese corporation clash publicly with an influential government organisation.

While it remains unclear whether the SAIC intended any specific action against Alibaba or counterfeiting in general, analysts said the incident reminded investors of the political risk inherent in Chinese companies, that the country`s regulators may clamp down on business activities with little warning.

In the meeting with the SAIC on Friday, Ma promised to "actively cooperate with the government (and) devote more capital" to weeding out fake goods, according to Xinhua.

Zhang Mao, minister of the State Administration for Industry and Commerce (SAIC), said the company had made good efforts in safeguarding consumer interests and added his agency should find new modes of oversight for e-commerce.

The Chinese company is sensitive to accusations about its efforts to suppress counterfeit products, which span several years. During a quarterly earnings call on Thursday, Alibaba vice-chairman Joseph Tsai called the SAIC`s initial report "flawed," and said the firm was preparing to file a formal complaint.

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