Tmall Incident—A Legal Problem or Business Operation Dispute

© Springer-Verlag Berlin Heidelberg 2015
Yimeei Guo (ed.)Research on Selected China’s Legal Issues of E-Business10.1007/978-3-662-44542-6_5

5. Tmall Incident—A Legal Problem or Business Operation Dispute

Yimeei Guo  and Weiwei Hu 

School of Law, University of Xiamen, Xiamen, 361005, China



Yimeei Guo (Corresponding author)


Weiwei Hu


Tmall incident invokes legal concerns in certain aspects and is a business operation dispute by nature. This article brings forward the suggestion to make a balance between both parties and hopes a good and healthy development of China’s e-commerce.

Tmall incidentLegal concernsBusiness operation disputeE-Commerce

(Published by“Proceedings of 2012–2013 Advanced Manufacturing Technology, Vols. 472–475, Part 4” (ICMSE 2012. <EI indexed>).

5.1 Introduction

In early November 2011, Taobao Mall (hereinafter Tmall), part of the e-commerce operations of Alibaba Group and considered as China’s biggest business-to-consumer (B2C) retail platform, suffered from a stormy protest from small vendors against its new rule.

This article provides an overview of the whole incident, analyzes legal concerns related to Tmall incident from certain aspects, e.g., violation of the principle of honesty and credibility, abuse of market power and violation of consumers benefits and rights, and examines whether on earth it is a legal problem or just a business operation dispute as well. Finally, this article brings forward the suggestion to make a balance between both parties and hopes a good and healthy development of China’s e-commerce.

5.2 An Overview of Tmall Incident

Launched in April 2008, Tmall (www.​tmall.​com) is an online B2C retail platform wholly owned by Alibaba Group.1

In June 2011, it was separated from Alibaba Group’s online customer-to-customer (C2C) platform—Taobao Marketplace (www.​taobao.​com) and became an independent business. According to information on Alibaba Group’s Web site, Tmall contributes to 48.5 % of China’s B2C online retail market as of 2011 Q2 and is also the most visited B2C online retail Web site in China (​news.​alibaba.​com/​specials/​aboutalibaba/​aligroup/​index.​html). Tmall currently features more than 70,000 major multinational and Chinese brands from more than 50,000 merchants.

On October 10, 2011, Tmall announced its new merchant rule which, among other things, is set to charge significantly higher annual technical support fee and security deposit to vendors on Tmall. Under the new Tmall rule, the annual technical support fee of 2012 would hike fivefold to tenfold, from RMB 6,000 yuan in 2011 to RMB 30,000 yuan to RMB 60,000 yuan (varied by the size of the B2C stores) in 2012; the security deposit of 2012 would hike fivefold to 15-fold from RMB 10,000 yuan of 2011 to RMB 50,000 yuan to RMB 150,000 yuan (also varied by the size of the B2C stores) in 2012. Both fees are fully or partially refundable depending on a store’s sales.

The new rule also includes terms on a 7-day return period for all purchases, stricter rules on shipping time upon order confirmation, and stricter policies against selling of fake products. According to Tmall, the new rule is purely for motivating vendors on Tmall to provide quality goods and better services to customers. The new rule immediately angered small vendors, which would be under huge cash flow pressure and might find it hard to survive.

At the night of October 11, 2011, several big vendors on Tmall were attacked by some 4,000 well-organized attackers, most of which are small vendors on Tmall. These small vendors placed massive orders with the big vendors and then immediately returned the products demanding refunds, while giving the big vendors poor ratings simultaneously. The online protest escalated later with more big vendors affected and the number of attackers growing to over 40,000. The online attacks were said to bring losses of up to RMB 10 million yuan to some of the big Tmall vendors.

On October 15, the Department of Electronic Commerce and Information of the Ministry of Commerce (MOFCOM) started to intervene and ordered mediation. Tmall then changed its uncompromising attitude and started to open online discussions with the attackers, who immediately suspended online attacks. On October 17, Tmall announced that it would delay implementation of the new rates and commit to invest RMB1.8 billion yuan to help small Tmall vendors. The Tmall incident appeared to have temporarily settled (Susan et al. 2011).

5.3 Legal Concerns Analysis

5.3.1 Whether Small Vendors’ Activities Are Violation of Law or Not

There are certain differential opinions toward small vendors’ conduct in the legal field. Is such conducting a serious illegal one or just a self protection by utilizing the rule of game?

Some legal personnel point out that small vendors are clever enough to fully use the rule of game during the process of game. If we look superficially, that small vendors buy goods, give poor comments and return goods complying with the rule because most of the people are vendors and buyers of other goods at the same time. Therefore, small vendors’ conduct is exactly reasonable just like to set a person’s own spear against his own shield.

But most legal personnel think on the contrary. First, according to Article 4 of China’s Contract Law which provides that: “The parties shall have the rights to be voluntary to enter into a contract in accordance with the law. No unit or individual may illegally interfere.” After the contract reaches the deadline, both Tmall and its merchants have the right to choose whether or not to renew the contract and how to renew the contract. Tmall is a privately owned e-commerce platform. Its operator has the right to develop its own operation strategy and independently decide the price for the product and service provided by it. Speaking from this meaning, Tmall’s new merchant rule is the display for the right to operate independently, while the small vendors’ collective attacking activity against the big merchants belongs to serious violation.

Second, Article 4 of China’s General Principles of the Civil Law (GPCL) provides that: “In civil activities, the principles of voluntariness, fairness, making compensation for equal value, honesty and credibility shall be observed.” The principle of honesty and credibility is the reflection of market ethics and standard of civil law, i.e., when civil subject has civil activities, it should have honest intention, good faith, enforce the right without infringing other, and the society’s interest, abide by basic trading morality, perform the duty, keep the promise, and comply with the laws and regulations, and finally achieve the goal that all the obtaining civil benefit activities not only make the balance among the parties, but also among the parties and the society. Thus, the “Anti-Tmall Alliance” is utilizing the loopholes of Tmall’s rule to engage in malicious attack and violates the principle of honesty and credibility.

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