E-commerce site Taobao Taiwan (淘寶台灣) yesterday announced that it would leave the Taiwanese market at the end of this year, after being told by the Investment Commission to register as a Chinese entity.
It made the “tough decision” to leave Taiwan, effective Jan. 1 next year, due to “market uncertainties” and was in talks with its employees over a redundancy scheme, the company said in a statement.
It would also help sellers on its site complete their outstanding deals to protect their rights and those of the buyers, it said.
The company said that it had decided to stop taking new orders before noon yesterday ahead of going offline on Dec. 31, and had also closed down some other functions on its Web site, which was launched in September last year.
The Investment Commission on Aug. 24 declared the site’s operator — UK-registered Claddagh Venture Investment Ltd — to be a Chinese investment and ordered Claddagh to rectify the issue within six months or withdraw its investment.
It also fined Claddagh NT$410,000 for contravening the law on Chinese investments.
A company is deemed to have Chinese investment if more than 30 percent of its shares are held by a Chinese entity or if it is in effect controlled by a Chinese entity, and the commission found that China’s Alibaba Group Holding Ltd (阿里巴巴), which operates the Taobao e-commerce site in China, held a 28.77 percent stake in Claddagh.
Although that amount is under the legal limit, the commission decided that the company was effectively controlled by Alibaba, based on a number of factors, including that Claddagh could not hold shareholder or board meetings without the consent of Alibaba, due to the size of the stake held by the Chinese firm, and that Claddagh relied heavily on Alibaba to run Taobao Taiwan.
Vice Minister of Economic Affairs Lin Chuan-neng (林全能) said that Taobao Taiwan had broken the law concerning Chinese investment and the commission’s decision to fine Claddagh followed regulations.
Executive Yuan spokesman Ting Yi-ming (丁怡銘) said that the government would not allow Chinese companies that want to enter the Taiwanese market to use indirect methods to bypass the law and it has stepped up its investigations into suspect operations.
Additional reporting by AFP
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