Alibaba’s Tmall slapped with another lawsuit over abuse of market power on the eve of “Double 11”

Chinese regulators recently underlined their opposition to monopolistic practices and unfair competition.

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Chinese home electronics manufacturer Galanz is suing Alibaba’s online marketplace Tmall for the latter’s alleged abuse of market dominant position. Galanz joins JD.com, Vipshop, and Pinduoduo to legally challenge the e-commerce titan’s denounced practices of forcing merchants to enter exclusive partnerships with Alibaba.

The lawsuit follows a dispute between Galanz and Tmall. In June, Galanz alleged via its Sina Weibo account that searches for its products on Tmall, where it runs a flagship store, were leading to “abnormal results” from time to time, seriously affecting sales, KrASIA reported.

The firm, known as a supplier of microwave ovens and other household items, said that this problem began right after some of its executives had visited Pinduoduo, Alibaba’s strong rival, and signed a strategic cooperation agreement on May 28. Yet, Alibaba maintains that search results for Galanz were normal when contacted by KrASIA at the time.

The case, which has been accepted by Guangzhou Intellectual Property Court on November 4, put a spotlight on this prolonged issue in the e-commerce competitive space. Some major operators have been reportedly forcing vendors to choose only one platform to work with, in a bid to compete for more sales and market share.

On November 5, ahead of the annual shopping extravaganza on November 11, known as “Double 11,”  the State Administration for Market Regulation held a meeting in the eastern technology hub of Hangzhou, state media The Paper reported, with the participation of China’s main online retailers, including Alibaba, JD.com, Meituan Dianping, Pinduoduo and Vipshop.

During the meeting, officials underlined that “choosing one out of two,” or “exclusive trading” is a behavior violating China’s E-commerce Law, as well as the Antitrust Law and Anti Unfair Competition Law. Besides, the authority announced that it will start antitrust investigations in the sector soon, without disclosing a specific timetable.

Previously, JD.com sued Tmall for RMB 1 billion, arguing the latter has been prohibiting some of its merchants to participate in competitors’ sales activities since 2015.

Recently, the JD-Tmall lawsuit was brought to the Beijing Municipal High People’s Court. Vipshop and Pinduduo have both filed applications for joining the case as a third party member. Alibaba’s archrival Tencent is a backer of JD.com, Vipshop, and Pinduoduo.

In response to the alleged unfair practice, Wang Shuai, Alibaba’s chief marketing executive, announced via his Weibo on October 14 that “choosing one of two is a normal market practice, just like bad money drives out good.”