China Business News, 5/07/12
Over the weekend, Chinese e-commerce conglomerate Alibaba Group issued an open letter to the media and its shareholders in which it listed a total of nine online shops previously operating on its B2C and C2C e-commerce subsidiary Taobao that have been permanently shut down due to suspected bribery and other misconduct. Alibaba Group announced that compulsory measures of punishment have been implemented, arrests have taken place, and that an investigation is still underway. The company asserted that this is only the beginning of what will be a strict crack down on the acceptance of bribes from vendors on the part of Taobao staff and staff at other Alibaba subsidiaries.
According to an informed source close to Alibaba, internal corruption at the company began as early as 2009, when the conglomerate experienced rapid growth and recruited a large number of new employees. The source reported that Alibaba currently employs over 25,000 people, making management and monitoring increasingly difficult.
In 2010, Alibaba first responded to internal corruption by setting up an anti-corruption unit led by Jiang Fang, the director of the group's corporate culture and values division. The unit, devoted to handling complaints about employee behavior, received notice of possible preferential treatment of Taobao vendors earlier this year.
Jiang Fang is one of the eighteen original founding members of Alibaba Group, and has led previous fraud investigations, including one related to Alibaba Group's B2B e-commerce subsidiary Alibaba.com (1688.HK).
Editor's note: Last year, Alibaba Group's B2B e-commerce subsidiary, Alibaba.com, discovered that more than 2,300 vendors had been using its website to defraud global buyers. The news led to then-CEO David Wei's resignation. For more background on this topic, please see "Alibaba.com CEO, COO Resign Over Fraud Investigation," MD issue 2/21/11.