Briefing: Alibaba settles lawsuit over pre-IPO disclosure for $250 million
Apr 30, 2019
Alibaba Agrees to Pay $250 Million to Resolve Complaints Over Pre-IPO Counterfeit Claims – The Wall Street Journal
What happened: Alibaba announced on Monday that it will pay out $250 million to settle a lawsuit which charged the e-commerce giant with securities fraud. Investors in a class action lawsuit sued Alibaba for failing to disclose a regulatory warning from China’s State Administration of Industry and Commerce (SAIC) regarding its counterfeit prevention capacities before its $25 billion IPO in 2014. The company’s share dropped 12.8% on Jan. 28 to 29, 2015 after the SAIC issued a white paper based on the warning. Alibaba has denied any wrongdoing and stated that the settlement draws to a close any and all pending securities lawsuits against the company, its chief officers, and company directors.
Why it’s important: Alibaba has long grappled with concerns over counterfeit merchandise sold on its e-commerce platforms. The e-commerce giant has become increasingly conscious of the problem over the past four years as it pushes a globalization strategy. In 2018, it launched an anti-counterfeiting alliance that included Microsoft, Louis Vuitton, and Microsoft. Alibaba has been included on the US Trade Representative’s black list for its lax treatment of brand IP for three years running. Chinese social e-commerce platform Pinduoduo also made the list this year. Both of the companies have stated that they are taking steps to address the issue. In addition to conventional e-commerce platforms, knock-off products are finding new methods for distribution as sellers conduct business through various online channels, such as social network app WeChat and short video app Douyin. Short video apps like Douyin and Kuaishou have also been accused of allowing content that shows viewers how to make and sell counterfeit products.