Posted by: Justin Bachman on March 1, 2011
By Bruce Einhorn
As if Chinese Internet company Alibaba.com didn’t already have enough problems, the U.S. government has delivered another blow to chairman Jack Ma’s group. The U.S. Trade Representative today put Taobao, the Alibaba-owned company that is China’s largest online retailer, on a list of “notorious markets” that help sustain piracy and counterfeiting. This comes as Alibaba continues to struggle with the fallout from its Feb. 21 announcement that more than 2,000 of its suppliers had defrauded Alibaba users. Alibaba.com’s chief executive, David Wei, and chief operating officer Elvis Lee resigned to take responsibility.
For a good take on the impact of the fraud scandal at Alibaba.com, check out this story by my colleague Frederik Balfour. The B2B site is the only part of the Alibaba group that is publicly listed, so of course the news of turmoil there is painful. The stock price has dropped sharply in the past week. But the latest problem, involving Taobao, is potentially just as damaging over the long-term. Taobao is huge in China and an IPO would help Alibaba to capitalize on that popularity. Getting called “notorious” by the U.S. government will probably make it much more difficult for Alibaba to do that.