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Alibaba lawsuit spotlights fake reviews and purchases

December 19, 2016 05:01 PM
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(Bloomberg) -- A lawsuit filed by Alibaba Group Holding Ltd. is shining a light on the fake reviews and purchases on its websites.

China’s biggest e-commerce operator sued Shatui.com, which allegedly links merchants with people willing to falsify purchases and write positive comments that can drive sellers up Alibaba’s rankings. The suit in Hangzhou West Lake District People’s Court is seeking 2.16 million yuan ($310,000). Alibaba worked with authorities that raided Shatui’s office and took away its accounting books for allegedly rigging the market, the official Xinhua news agency reported.

Alibaba has a complicated history with so-called brushing operators, who have pumped up gross merchandise volume for years but now undermine its push for credibility. As it now emphasizes sales over transactions and expands into new businesses, the company is trying to stamp out questionable practices that have drawn the ire of state media and investors.

“Alibaba wasn’t as stringent about brushing before its IPO, but it’s really cracked down on the malpractice in the past year,” said Ray Zhao, a Shenzhen-based analyst at Guotai Junan Securities Co. “It’s quite essential for the company to maintain its credibility and keep the system healthy as they want to attract larger and high quality brands.”

Merchants with violations can have their credit scores cut and can even have their businesses shut down, Hangzhou-based Alibaba said in an e-mailed statement.

Shatui.com’s site is no longer online, instead redirecting to an e-commerce website. Multiple calls to the number listed on the site of Shatui’s parent went unanswered. No defense to Alibaba’s suit is listed on the court website. Staff at the Hangzhou West Lake Court’s general line said they don’t handle queries about cases and hung up.

Alibaba, which is also facing criticism for counterfeits on its sites, isn’t alone in battling the fakers. Amazon.com Inc. is trying to quash fake reviews while Facebook Inc. is combating fake news that has become a political issue.

However, China’s operators take their methods to the next level by crowdsourcing the tasks to thousands. Shatui.com for example allegedly recruited more than 5,000 people on its site, Xinhua said.

The art of brushing comes down to tricking a website such as Alibaba’s Taobao into thinking a purchase has been made and disguising the movement of money that makes it happen. The fake buyer communicates with merchants through instant messaging apps such as QQ, steering clear of Alibaba’s own chat service.

Typically, a merchant lists an assignment with a brushing company’s exchange board and waits for a member to pick it up. The buyer then goes ahead with a transaction and confirms the goods have been delivered, even though nothing has been shipped. The member is later reimbursed by the brushing company, often in a virtual currency they they can re-use or exchange for cash, along with an extra payment for their efforts.

With a billion listings on Taobao, standing out from other merchants is critical in attracting genuine shoppers in a Chinese e-commerce market expected to grow 39% to 27.3 trillion yuan in transactions by 2018 from this year, according to internet consultant IResearch.

While Alibaba said it scrubs fictitious transactions detected through a range of methods, including big data analysis to track irregular activity, there are plenty of others openly marketing their tricks.

One such operator is Hiwinwin, which advertises brushing services on its website, posts videos to show rookies the ropes, has its own virtual currency to smooth transactions, and requires an entry-level test to make sure the brushers do a good job.

Brushers are also rated on how well they complete their tasks-- whether they complete purchases fast enough and write comments that say what the merchants want.

“The age for giving yourself good reviews and buying your own orders is too simple. You need a professional network to help,” said one tutorial video posted on Hiwinwin’s website. “We will grow together in this war without gunfire.”

Multiple calls to the main phone lines of Hiwinwin went unanswered and the website didn’t list a fax number, e-mail contact or physical address.

The raft of fake orders hurts merchants who refuse to play the game, raising the imperative for Alibaba to stamp out the practice and look after the merchants that pay it millions for advertising.

Shanghai-based Jian Weiqing, who’s been selling cosmetics on Taobao for 11 years, feels the pain of not brushing.

“It’s practically impossible for a newcomer to start a shop on Taobao these days without resorting to brushing,” said Jian, who spends as much as 5 million yuan a year advertising on Alibaba’s biggest platform. “Our business is hurt.”

 

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