Alibaba’s Taiwan Operations Face Another Regulatory Headache

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Alibaba is once again facing legal issues in Taiwan. The company has been ordered to shut down the local branch of Taobao, its business-to-consumer marketplace, within six months and pay a fine of NTD$240,000 (about US$7,888).

The current situation is similar to Alibaba’s ongoing negotiations with Taiwan’s Investment Commission over the legality of Alibaba.com’s operations in the country. Alibaba.com is the Chinese e-commerce leader’s business-to-business platform.

At the heart of both disputes is where exactly Alibaba’s local businesses originate. Alibaba.com and Taobao are registered in Singapore and Hong Kong, respectively. The executive secretary of Taiwan’s Investment Commission Emile Chang said, however, that does not mean Alibaba is exempt from regulations governing businesses based in mainland China.

“Mainland companies registered in foreign countries need to apply for mainland business permits in Taiwan. Neither Alibaba nor Taobao has done so,” he told Reuters.

In prepared statement, a Taobao Marketplace representative said “We are having positive ongoing discussions with the relevant Taiwanese authorities and we hope to find a suitable way forward in order to continue to serve the needs of Taiwan consumers and merchants.”

Alibaba has not disclosed how much revenue it makes from Taiwan, and consumers there would still be able to use its China-based sites even if their local versions shut down. But the company is trying to attract Taiwanese businesses to its platforms and the closure of their local operations would make that task harder.

In March, Alibaba announced the creation of NTD$10 billion (US$316 million) fund for entrepreneurs in Taiwan who want to sell merchandise on its sites. At an event in Taipei, Alibaba founder Jack Ma said that investments will focus on food and agricultural products, which are an crucial vertical for Chinese e-commerce companies.

As the problems facing the local operations of Taobao.com and Alibaba.com underscore, however, working with Taiwanese merchants might not be as straightforward as Alibaba would like, thanks to strict investment laws for mainland Chinese businesses that were put in place due to the tense political and economic relationship between the two countries.

Featured Image: Charles Chan/Flickr UNDER A CC BY-ND 2.0 LICENSE