Alibaba Settles US Class-Action Lawsuit By Agreeing To Pay US$250 Million

Alibaba Group
Co-founder and executive vice chairman of Alibaba Group, Joseph Tsai (Photo: Reuters)

To finally put an end to a US lawsuit against it, Alibaba Group Holding has now agreed to pay US$250 million as settlement.

The company was previously sued over its failure to disclose to the public that its executives had met with Chinese regulators prior to its IPO in 2014. The executive allegedly met with regulators to discuss the company's selling of counterfeit goods on one of its larger online shopping platforms.

China's largest e-commerce company has fully denied any wrongdoing in the case.

The New York Stock Exchange-listed company also stated that paying the settlement does not mean that it admits to any of the allegations against it. According to Alibaba's filing to the US Securities and Exchange Commission (SEC) earlier in the week, it still believes that all of the claims against it still have no merit.

Following its SEC submission, the firm released a statement that mentioned that it was glad that the matter is now over with. The company sees prolonged litigation as counterproductive to its goals, which includes creating more value for its millions of customers around the globe. 

The class-action lawsuit against the company filed in the United States originated from a report submitted by the State Administration for Industry and Commerce (SAIC).

The report alleged that Alibaba had allowed unlicensed businesses to sell their counterfeit goods on its Taobao Marketplace platform. It also revealed that Alibaba executives had arranged several meetings with SAIC officials to discuss the issue prior to its IPO.

The Chinese agency later admitted that it had delayed the submission of the report to "avoid hindering" the firm's IPO in the United States. The lawsuit argued that the Alibaba's action, which led to the delay of the report's submission, was a clear misinterpretation to its investors. The information contained in the report could have apparently affected the company's share prices during its IPO.

Shortly after the lawsuit was filed in 2014, Alibaba had responded that its meetings with SAIC officials were merely a part of its business process and is even apparently normal for international companies. The company's executive vice-chairman Joseph Tsai reiterated that they never requested the agency to delay the release of its report. Alibaba has since filed its own complaint, citing how unfair SAIC's white paper was given how it targeted the company specifically. Alibaba's settlement is currently still subject for court approval, which will likely be concluded before the year ends.

Alibaba, along with other Chinese online retailers, has been the subject of criticism in recent years given their apparent lack of control towards preventing counterfeit products on their platforms. The US had even marked Alibaba's platform as part of its notorious markets list, which includes other sites that contain a large number of counterfeit products. 

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