The Investment Commission yesterday said it has determined that Taobao Taiwan (淘寶台灣) is a Chinese-controlled company operating illegally in Taiwan.
The Ministry of Economic Affairs (MOEA) commission has fined the e-commerce site NT$410,000 (US$13,890) and required it to divest or change its investment structure within six months to conform with laws pertaining to Chinese companies in Taiwan.
Taobao Taiwan is owned and operated by Claddagh Venture Investment Ltd (英商克雷達投資), a UK-based company 28.77 percent held by Alibaba Group Holding Ltd (阿里巴巴).
Photo: CNA
However, the commission said Taobao Taiwan is actually controlled by Alibaba Group, which is in contravention of the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area (臺灣地區與大陸地區人民關係條例).
“It is little more than a piece of signage. Behind the scenes, the one in control is Alibaba Group,” commission spokesman Su Chi-yen (蘇琪彥) said.
Claddagh’s company statute says that the board member representing Alibaba’s stake must be present at any board meeting, the commission said.
“According to the way the company statute is written, the other two members of Claddagh Venture Investment cannot convene a board meeting on their own. This means Alibaba Group has a veto on any decision relating to Taobao Taiwan,” Su said.
Claddagh is completely reliant on Alibaba for the operation of Taobao Taiwan, the commission said.
Claddagh shares a URL, IT system maintenance and technical support with Alibaba, while Taobao Taiwan’s servers and other network equipment are rented from Taobao Hong Kong (淘寶香港), it said.
“There is no evidence that Claddagh Venture Investment is capable of running Taobao Taiwan independently,” Su said.
Taobao Taiwan users are also required to sign a service and privacy agreement with Taobao in China, leading to data safety concerns, he said.
“On its Web site, you cannot sign up to Taobao Taiwan without signing a terms of service agreement with Taobao [China],” he added.
The Taobao Taiwan Web site says users must agree to its world Taobao service platform service and privacy policy to sign up.
However, Taobao Taiwan spokeswoman Kay Ko (柯中甯) denied the company was controlled by Alibaba, saying the commission’s announcement “caught the company off guard.”
“We have worked with the Investment Commission every step of the way, and we will keep working with the commission and not let this disrupt our operations,” Ko said. “I must reiterate again, Taobao Taiwan is an independent company not under the control of Alibaba Group. I am not at liberty to disclose who the other investors in Claddagh Venture Investment are, but the Investment Commission is aware.”
The terms of service agreement “will be gone by tomorrow,” she said.
Taobao tried to operate in Taiwan through a Hong Kong company set up in 2013, but the commission in 2015 determined that the investment came from China and ordered the company to divest.
It must come up with a plan to conform with the law if it does not want to repeat history, the commission said.
“They do not have six months to come up with a plan, they must come up with a plan immediately that can be fully implemented in six months,” Su said.
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