Yahoo! Inc. (YHOO), Alibaba Group Holding Ltd (BABA): Alibaba’s Problem Is Counterfeiting

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Yahoo! Inc. (NASDAQ:YHOO) and Alibaba Group Holding Ltd (NYSE:BABA) may be getting a lot of headlines at the moment because of the latter’s impending listing on the New York Stock Exchange but the electronic commerce giant has a major hurdle it needs to overcome, Eunice Yoon discussed in a report on CNBC.

According to the CNBC correspondent, the flaw with Alibaba Group Holding Ltd has a lot to do with intellectual property and the counterfeits being hawked through its main site and on Taobao.com, a site the company also owns.

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According to Yoon, brands claim that the Yahoo! Inc. (NASDAQ:YHOO)-connected Alibaba Group Holding Ltd (NYSE:BABA) is a “titan” in the counterfeit trade coming from China.

To prove just how prevalent fakes are on Alibaba Group Holding Ltd (NYSE:BABA), Yoon managed to find merchandise directly connected to CNBC such as stickers of the company’s logo. She ordered these merchandise and proceeded to interview the vendor where they came from.

According to the vendor, Alibaba Group Holding Ltd (NYSE:BABA) has not notified them to stop selling the merchandise although he himself admitted that they have no authorization from CNBC to sell the products. The Chinese merchant said that Alibaba would notify them should the company want them to stop selling unauthorized products.

Nonetheless, Yoon noted that in a filing with the U.S. government as part of the preparations for its market debut in the country, the Alibaba Group has pledged that it is purging its site of counterfeits and is making it easier for companies to report infringements of their intellectual property.

Yahoo! Inc. (NASDAQ:YHOO) owns a major stake in Alibaba Group Holding Ltd (NYSE:BABA). According to one of the Chinese internet retail giant’s filings with the U.S. Securities and Exchange Commission, the internet veteran owns a 22.5% stake of the Alibaba Group.

Yahoo! Inc. (NASDAQ:YHOO) is expected to sell 6% of the Alibaba Group during its New York Stock Exchange debut, an event closely watched by observers of Yahoo! Inc. as the company stands to gain a substantial amount of capital from the listing.

David E. Shaw’s D.E. Shaw & Co., L.P. is a shareholder of Yahoo! Inc. (NASDAQ:YHOO) as the hedge fund reported about 16.19 million shares in the internet company by the end of the first half of the year. The stake was valued at about $568.85 million at the time the hedge fund reported the shares.

Disclosure: None

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