Caixin
Dec 06, 2016 05:53 PM
BUSINESS & TECH

Alibaba 'Brushing' Lawsuit Tackles Alleged Online Sales Inflators

(Beijing) — Alibaba Group Holding Ltd., China's largest e-commerce firm, has sued a "brushing" firm for 2.16 million yuan ($300,000) — its first court case against a business that allegedly helps online merchants artificially boost their transaction volumes and customer ratings by using people posing as buyers.

Shatui, which has four employees, helped to create over 26 million yuan worth of false transactions in two years for 3,000 shops on Taobao and Tmall, Alibaba's two most popular online shopping malls, Alibaba alleged in a lawsuit filed this week.

The suit accuses the company of severely damaging market order, and seeks 2.16 million yuan as compensation. Alibaba declined to say where the lawsuit was filed, but said the action was accepted by the court and therefore will go to trial.

"Only civil litigation will increase the risk and cost of brushing, and teach them a real lesson," Alibaba said in a statement.

The e-commerce giant tried to stop Shatui earlier this year by working with law enforcement authorities. But the result of those efforts was a relatively minor fine of 100,000 yuan, and Alibaba alleges that Shatui has continued to engage in the practice.

Brushing is common among Chinese e-commerce merchants seeking to boost their business. It is especially rampant on Taobao, a consumer-to-consumer marketplace where small merchants rely on big sales numbers and positive customer ratings for a better placement on the site to attract real customers.

Though Alibaba often reiterates its determination to crack down on such sales-boosting techniques, some analysts said the recent move seems to be only a halfhearted attempt to solve a problem deeply rooted in the culture of Alibaba's marketplaces.

"Brushing has always been a double-edged sword for Alibaba," said Cao Lei, president of the China E-Commerce Association. "It inflates the company's (online sales volume), pumps up perceived activity, and the company still gets to charge commissions even if the transactions are fake."

But Cao added that Alibaba's reputation could also suffer if artificial sales begin to injure the platform's credibility.

Earlier this year, Alibaba conceded that fictitious transactions are a form of fraud on its platforms, and added such activities subject it to liability and negative publicity, according to a filing in response to a probe by the U.S. securities regulator.

"There's no question that Alibaba wants to pluck these brushing companies, but there's no reason to believe taking them to court would eliminate brushing," Cao said. "This is curing the symptoms, not the disease."

An earlier version of this story incorrectly stated the amount of damages that Alibaba was seeking, which should be 2.16 million yuan.

Contact reporter April Ma (mafangjing@caixin.com); editor Doug Young (dougyoung@caixin.com)

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