Business regulator warns online stores like Alibaba and JD.com on "Singles Day" strategy

China’s business regulator said it has warned leading online shopping companies, including Alibaba Group Holding and JD.com, against adopting dodgy sales tactics at the upcoming “Singles Day” festival, China’s biggest shopping day of the year. The stakes are high in the one-day event, held annually on Nov. 11, which sees billions of dollars of goods sold online at steep discounts, and is watched as a barometer for the e-commerce industry and consumer economy in China as a whole. Alibaba’s transactions alone exceeded $14 billion last year and are expected to grow this year.

The State Administration for Industry and Commerce (SAIC) said it met with Alibaba, JD.com, Amazon.com Inc, Baidu Inc, Tencent Holdings and several others on Monday and warned them against selling fakes, falsifying sales figures and engaging in other fraudulent practices. “The SAIC will strengthen market supervision … monitor and manage online marketplaces according to law, and together with the majority of industry players jointly create an online market environment of fair competition and an environment for online consumption that is safe and secure,” it said in a statement posted on its website on Tuesday.

Amazon, Baidu and Tencent did not immediately respond to emailed requests for comment on the SAIC’s warning. A JD.com spokesman said: “Our commitment to quality products and service has always been a key differentiator for us in this market and we employ additional resources for major sales to keep that promise even during the busiest periods.”

An Alibaba spokeswoman said: “We are the industry leader in combating unfair and illicit practices; We never tolerate malpractices by merchants on our marketplaces. Infringing merchants are subject to a range of penalties including the permanent closure of their storefront.” Singles Day, launched seven years ago by Alibaba, has already eclipsed the combined sales of the equivalent events in the United States: Cyber Monday and Black Friday.

However, cutthroat competition for customers on Singles Day has led to accusations of underhanded tactics by online commerce platforms, including false advertising, massaging of statistics and forcing sellers to choose one platform over others. While the SAIC has served such a warning in prior years, there is added focus on the Chinese online shopping companies this year after Alibaba’s accounting practices for the event came under the scrutiny of the U.S. Securities and Exchange Commission. Some merchants have questioned whether results from the event are really as high as reported.

The SAIC asked the e-commerce firms to guard against fudging of transaction figures, false advertising and sales of fake or shoddy products. It also warned them against deploying fake user ratings. The regulator noted various problems that had cropped up in 2016 in e-commerce and said “those operating on the internet need to face (the issues) squarely, to further standardize online market order, and optimize the online consumption environment”.

Reuters