Alibaba Settles Class-Action Lawsuit for $433.5 Million Over Exclusivity Practices
In a significant development, Alibaba Group (BABA) has reached a settlement agreement in a class-action lawsuit filed by its shareholders. The lawsuit, which sought $433.5 million, accused the Chinese e-commerce giant of making misleading statements about its exclusivity practices, ultimately causing financial losses for investors.
The lawsuit, filed in the U.S. District Court for the Southern District of New York in March 2023, claimed that Alibaba had violated federal securities laws by making false statements regarding its antitrust and exclusivity practices. The company allegedly enforced exclusivity agreements that forced merchants to sell only on Alibaba platforms, penalizing those who sold on competing platforms. These actions, according to the lawsuit, artificially inflated Alibaba’s stock price, leading to investors suffering financial losses.
While Alibaba has denied any wrongdoing, liability, or damage, the company decided to settle the case to avoid further litigation costs and potential disruptions. In a regulatory filing, Alibaba stated that it chose the settlement to “avoid the expense, inconvenience and distraction of further litigation.”
The lawsuit specifically targeted Alibaba, along with certain directors and officers, on behalf of investors who acquired the company’s American depositary shares between July 9, 2020, and December 23, 2020. This timeframe is crucial as it encompasses a period when Alibaba reportedly continued its exclusivity practices despite previously agreeing to cease them in a July 2020 agreement with the State Administration for Market Regulation (SAMR), China’s e-commerce and antimonopoly law enforcer.
The settlement, however, is contingent upon several conditions, including court approval.
This case highlights the ongoing scrutiny faced by tech giants like Alibaba over their business practices and the potential for legal action when these practices are perceived to be anti-competitive. The settlement serves as a reminder that even powerful companies can face significant consequences for alleged violations of regulations.