Alibaba attacked by Chinese government over its 'credibility crisis'

The highly critical report said the company has failed to crack down on dodgy merchants, counterfeit goods, bribery and misleading promotions

Alibaba founder Jack Ma (Getty)

The Chinese government has published a highly critical report on Alibaba, which it admitted it had withheld until now because of the internet giant’s multi-billion dollar US stock market float.

Alibaba has a "credibility crisis" with a failure to crack down on dodgy merchants, counterfeit goods, bribery and misleading promotions, China’s State Administration for Industry & Commerce said, based on a meeting it held in July.

"For a long time, Alibaba hasn’t paid enough attention to the illegal operations on its platforms, and hasn’t effectively addressed the issues," the agency said.

"Alibaba not only faces the greatest credibility crisis since its establishment, it also casts a bad influence for other internet operators trying to operate legally."

Alibaba said it was preparing a response.

The scathing report came hours after Yahoo!, the US internet outfit, said it would spin off its remaining $39 billion (£26 billion) stake in Alibaba in a bid to increase value for its own shareholders.

The Chinese authorities accused Alibaba of allowing merchants to operate without necessary licences and running stores that sell copies of brands and fake wine.

Alibaba employees are accused of taking bribes and the e-commerce firm did not put right customer complaint faults and internal credit rating systems.

Alibaba went public in September last year after raising a record $25 billion in an initial public stock offering. Its shares have soared and it is now valued at more than $250 billion.

The US government and others have accused Alibaba of allowing sales of counterfeit goods but the report is the first time the Chinese government has criticised a company that is a leading star in the internet industry that communist leaders are eager to develop.

Alibaba’s services include Taobao, a consumer-to-consumer platform, and Tmall for consumer brands. The two outlets have a total of more than 50,000 merchants.

The report said regulators and Alibaba would work together to improve management but gave no details of planned changes.

Alibaba is due to release its first full quarterly results since the float on Thursday.