Alibaba Group Holding Ltd (BABA): Only 37% Taobao Goods Authentic, Says Chinese Gov’t

Alibaba Group Holding Ltd (NYSE:BABA) is in a rare public dispute against Chinese authorities in which the country’s regulators have revealed that only 37% of goods on the Chinese electronic commerce giant’s Taobao site are authentic.

In a report from Eunice Yoon on CNBC, Alibaba Group Holding Ltd (NYSE:BABA) is said to be battling a tough study by the State Administration of Industry and Commerce into its web properties’ popularity as a place to sell counterfeit goods.

“We’re seeing a very rare public dispute occurring between Alibaba and the Chinese authorities here over the authenticity of the goods that it sells on its sites especially on its popular consumer-to-consumer site Taobao. In a very unusually strongly-worded statement and white paper, the state regulator said that they found that many of the products sold on the site were either substandard, violated trademarks or just downright illegal,” Yoon said.

Alibaba Group Holding Ltd (NYSE:BABA) has been battling counterfeits for a long time, especially now that it’s a publicly-traded company in the United States.

According to Yoon, the new white paper and statement from the regulators in China reveal just how massive fake goods are on Taobao, one of the sites of Alibaba Group Holding Ltd (NYSE:BABA).

“This comes just days after the same agency issued another survey where they said that out of the sample of goods that they themselves examined, only 37% of them were authentic,” Yoon said.

The study was more flattering to JD.com, a rival of Alibaba, as authorities in China say that 90% of goods on the site are genuine. Compare this to 37.25% for Taobao and 85.7% on Alibaba’s T-Mall.

Alibaba Group Holding Ltd (NYSE:BABA)’s Taobao, in an open letter, is openly fighting the study questioning the sampling and methodology of study. The government then released the whitepaper to counter the company’s letter.

This is the first open fight between the e-commerce darling and the Chinese government. While the authorities have panned Alibaba for relaxed internal controls, the company said that counterfeits are like a “tumor” in economic development and that they are willing to work with the country’s departments to cleave this tumor.