All eyes on Alibaba as China proposes tighter regulations on ecommerce sites

China’s market regulator said today that the government will regulate ecommerce more strictly in an upcoming clampdown on counterfeit products and poor customer service. The comments came from Zhang Mao, minister of the State Administration for Industry and Commerce (SAIC), speaking on the sidelines of China’s annual parliamentary session, according to state news agency Xinhua.

The move comes weeks after the SAIC produced a controversial report on fake products being sold online by China’s top ecommerce stores.

That report slammed Alibaba’s marketplace, Taobao, claiming that about 63 percent of the stuff for sale on the site is counterfeit. However, that was extrapolated from a survey of 51 products that SAIC’s secret shoppers bought from Taobao. SAIC’s entire report was based on just 92 products bought from six leading Chinese estores.

Taobao is an online marketplace for third-party merchants made up of about seven million merchants. Alibaba has long struggled to police fake items sold by merchants.

“We will welcome any regulations or policies that encourage the healthy and sustainable development of ecommerce in China,” an Alibaba spokesperson told Tech in Asia this afternoon.

Despite the study’s flawed methodology, Alibaba’s stock price fell just over four percent after its publication in late January.

See: Alibaba reaches 334 million shoppers who spent $126 billion in Q4

‘Cost of breaking rules is too low’

“The reason why there are so many market violations is that the cost of breaking rules is too low,” Zhang said Monday in reference to Taobao’s poor performance in the SAIC’s study.

He added that new regulations on ecommerce would be focused on companies’ “key responsibilities” to consumers in terms of “credibility and integrity.” Referring to China’s online retailers, Zhang said the SAIC will “listen to them, provide guidance for them, and demand their self-discipline.”

Tightening regulations on ecommerce might spook Alibaba investors once again as soon as US markets open for trading on Monday.