Alibaba to pay $250m to settle lawsuit over pre-IPO warning on counterfeiting

Published April 30, 2019
The lawsuit accuses Alibaba of failing to disclose it had met with China’s administration before the company’s $25b IPO. — Reuters/File
The lawsuit accuses Alibaba of failing to disclose it had met with China’s administration before the company’s $25b IPO. — Reuters/File

NEW YORK: Alibaba Group Holding Ltd said on Monday it will pay $250 million to settle a US lawsuit faulting the Chinese e-commerce company for concealing a regulatory warning about its ability to stop counterfeiting before it went public in 2014.

The lawsuit accused Alibaba of securities fraud for failing to disclose it had met with China’s State Administration for Industry and Commerce on July 16, 2014, two months before the company’s $25 billion initial public offering.

Alibaba’s American Depositary Shares slid 12.8 per cent on Jan 28-29, 2015, after the SAIC issued a white paper based on concerns raised at the meeting, saying many products sold on Alibaba websites were fake or infringed trademarks.

The white paper also said the SAIC delayed releasing its findings so the IPO would not be affected.

Monday’s proposed class-action settlement covers investors in Alibaba ADS and ADS options in the 4-1/2 months preceding the release of the white paper, which was later withdrawn. The accord, which requires court approval, also resolves claims against Alibaba officials including billionaire founder and Executive Chairman Jack Ma.

Alibaba denied wrongdoing. It said the settlement ends all pending securities litigation against the company, its executive officers and its directors.

In court papers, the plaintiffs’ lawyers called the accord “inherently fair, reasonable, and adequate,” citing potential hurdles in showing that Alibaba made false statements and intended to commit fraud.

The lawyers may seek up to 25pc of the settlement fund for legal fees, the papers show. They did not immediately respond to requests for additional comment.

The Chinese company has long faced accusations that its online platforms are a haven for counterfeiters, including in lawsuits by luxury brands such as Gucci and Yves Saint Laurent.

Alibaba, Amazon.com Inc, eBay Inc and other such companies have policies banning counterfeiting, and highlighted their investments to thwart the practice.

On April 3, US President Donald Trump ordered a crackdown on online counterfeiting, saying global transactions in fake and pirated goods could reach $500bn annually.

The case is In re Alibaba Group Holding Limited Securities Litigation, US District Court, Southern District of New York, No. 15-md-02631.

Published in Dawn, April 30th, 2019

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Ties with Tehran
Updated 24 Apr, 2024

Ties with Tehran

Tomorrow, if ties between Washington and Beijing nosedive, and the US asks Pakistan to reconsider CPEC, will we comply?
Working together
24 Apr, 2024

Working together

PAKISTAN’S democracy seems adrift, and no one understands this better than our politicians. The system has gone...
Farmers’ anxiety
24 Apr, 2024

Farmers’ anxiety

WHEAT prices in Punjab have plummeted far below the minimum support price owing to a bumper harvest, reckless...
By-election trends
Updated 23 Apr, 2024

By-election trends

Unless the culture of violence and rigging is rooted out, the credibility of the electoral process in Pakistan will continue to remain under a cloud.
Privatising PIA
23 Apr, 2024

Privatising PIA

FINANCE Minister Muhammad Aurangzeb’s reaffirmation that the process of disinvestment of the loss-making national...
Suffering in captivity
23 Apr, 2024

Suffering in captivity

YET another animal — a lioness — is critically ill at the Karachi Zoo. The feline, emaciated and barely able to...