JD sues Alibaba, accuses its rival of false advertising

The lawsuit comes days before Singles Day, aka the biggest single shopping day of the year

Alibaba has been having a rough time of it lately, with regulators coming after it and accusations of selling bad merchandise. Now one of its biggest rivals is taking aim.

Chinese electronic commerce company JD is suing Alibaba, accusing the company of misleading its customers with false advertising, as well as unfair competition, according to a report from Bloomberg on Friday.

JD also said that Alibaba had been exaggerating its same-day delivery service,' saying that it “misled consumers to win an unfair competitive advantage," with ads that the company had put up in Beijing’s subway system. Alibaba's same day delivery service only covered eight core districts of Beijing, while the ads made it seem like it was available city-wide, the court statement said. 

What's most interesting about this lawsuit is the timing. It's likely not a coincidence that it comes just days before November 11, aka Single Day in China, aka the biggest shopping day in the world.

Singles Day, which is on 11/11, was popularized by Alibaba in 2009, then copyrighted in 2012, and has now become a big shopping holiday in the country, growing bigger and bigger each year, becoming the world's largest single sales day.

It's now even become bigger than America's Black Friday and Cyber Monday.

In 2013, Alibaba broke a single day record with a total of $5.78 billion spent on Single's Day, shipping 150 million packages. Last year that number was absolutely destroyed, with consumers spending a whopping $9.3 billion (RMB 57.1 billion).  

More than 27,000 brands and merchants participated in the event last year, including Costco, Muji, Desigual, ASOS, and The North Face, with buyers from 217 countries and regions participating in this last year’s Single's Day sales.

If JD wants to hurt Alibaba by dragging its name through the mud, this is the right time to do it. Not that it was even really necessary, as Alibaba has been weathering these types of scandals all year.

In April regulators fined the company over pricing violations committed during Singles Day, forcing Alibaba to pay 800,000 yuan, or $129,000, for violations committed by third-party sellers on its platform.

While the price bureau admitted that Alibaba does not actually control those third parties, it was still going to levy the fine in order to stress the point that the rules need to be enforced in order to protect consumers. It wants Alibaba to take a stronger stance with its sellers.

Alibaba had previously revealed that it was contacted by the Securities and Exchange Commission earlier this year after it came to light that the company had been talking to China's State Administration for Industry and Commerce regarding sales of counterfeit goods. The company failed to disclose this information on in its IPO prospectus prior to going public last year.

Earlier this week it was revealed that Alibaba had likely sold $45 billion worth of counterfeit goods in the last quarter alone. 

The company has also seen its stock tumble, dropping from $104 a share at the beginning of this year to $84.96 as of trading on Friday. In September of 2014, the IPO priced at $68, raising $21.8 billion. That made it the biggest U.S. IPO in history and company founder Jack Ma the richest man in China. 

VatorNews has reached out to both Alibaba and to JD for comment on the lawsuit. We will update this story if we learn more.

(Image source: recode.net)