Chinese e-commerce Web site Taobao (淘寶) hit another setback in Taiwan after the Investment Commission on Wednesday rejected Taobao International Exhibition Industry Alliance Ltd’s (淘寶國際) NT$30 million (US$1.02 million) investment plan, saying that it breached laws restricting Chinese companies from operating advertising businesses.
The company applied to create a Taiwanese subsidiary to offer Taobao and TMall (天貓) trading platforms to local consumers by forming two firms in Taiwan.
These e-commerce companies would sell advertising as a part of their business model, which is against regulations, commission spokesman Su Chi-yen (蘇琪彥) said by telephone yesterday.
“E-commerce companies usually charge retailers more money to be featured more prominently on their site,” Su said. “This is a form of advertising.”
The commission also said it is concerned about the privacy of Taiwanese, as Taobao plans to store personal information on Chinese servers, but this was not the primary reason for rejecting Taobao this time, Su said.
This is not the first time Taobao has tried to expand its presence in Taiwan. It first applied to invest through a Hong Kong parent company set up in 2013.
The commission in 2015 determined that the investment was actually from China, not from Hong Kong, and ordered the firm to divest.
Alibaba Group (阿里巴巴集團), Taobao’s parent, has licensed the Taobao brand to an English company, Claddagh Venture Investment Ltd, which operates Taobao Taiwan (淘寶台灣) through a Taiwanese subsidiary of Claddagh Venture.
The commission said it is looking into whether Claddagh Venture is a front for Chinese investors.
“There are fewer restrictions on foreign investments that do not originate in China, that is why Claddagh’s investment did not have to come before the Investment Commission” Su said. “But if we find that it is actually Chinese money that funded Taiwan Taobao, then it will have to be scrutinized accordingly.”
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