China’s Alibaba halts fee hike after massive web protest

Chinese internet giant Alibaba says that it will delay a fee hike for some sellers on its online shopping site after a storm of protest over the planned rise.

The group also announced that it will invest 1.8-billion yuan (US$284-million) in its Taobao Mall site. This as the firm looks to help disgruntled small vendors.

The announcement came after tens of thousands of users attacked big brands on the site, threatening to place massive orders online and immediately cancel them in protest against the service fee hike.

The move was aimed at denting the customer ratings of large retailers, which can result in a suspension from the site.

Alibaba chairman Jack Ma compared the protesters to fascists, describing them as “people playing the Nazi anthem, hurting the innocent by shouting ‘Eliminate all, destroy all.'”

“We help small businesses wholeheartedly because we understand that kind of pain,” Ma wrote on Sina Weibo, China’s popular Twitter-like microblogging service.

“But not everybody who does business will make money. Business is a serious discipline of learning.”

The kickback by small vendors on the site came after Tabao Mall’s recent announcement that its annual service fees would rise ten-fold to 60 000 yuan.

That fee would be refunded to merchants who achieve a certain sales volume or high positive-feedback levels from customers, angering small vendors who said they were disadvantaged by the changes.

Alibaba also announced that a fixed-sum deposit would go up to 150 000 yuan (US$23 518) from 10 000 yuan (US$1 568).

The revised plan will see Alibaba allow a nine-month grace period on period on the fee hike to existing vendors with good customer ratings.

The fee hike will take effect from 2012 but, according to Alibaba, all vendors will only need to pay half the required deposit, with the web retail giant making up the shortfall.

It also claims that the investment in Tabao Mall will help small vendors improve the quality of products and services while protecting the interest of consumers.

Taobao Mall President Zhang Yong was quoted as saying the fund will be used for sellers having “operational difficulties”.

Alibaba may not, however, have addressed the situation on its volition.

China’s ministry of commerce recently claimed that it had ordered Alibaba to “appropriately address the matter” and respond swiftly to the requests being made by small vendors.

Alibaba is China’s largest eCommerce company and is part owned by Yahoo! The company has, however, expressed interest in buying the ailing internet giant.

Alibaba is considered one of Yahoo!’s best assets, but the relationship between the two was strained earlier this year in a dispute over Alibaba’s online payments platform Alipay.

Ma moved Alipay out of the Alibaba group without prior approval from the board of directors, of which Yahoo! is a member. Ma continues to insist that Yahoo! was notified of the transfer of ownership and that his actions complied with the Chinese licensing agreements.

The two eventually reached an agreement in July under which Alibaba Group would “continue to participate in Alipay’s future financial performance, including a future IPO or other liquidity event”.