Taiwan gives Alibaba's Taobao 6 months to pull out, imposes small fine

Taiwan has given Chinese e-commerce giant Alibaba Group Holding Ltd six months to wind down its online marketplace Taobao's operations on the island after it failed to apply for the permit required for a mainland Chinese company to do business there, Taipei authorities said on Monday.

An official at Taiwan's Investment Commission said a fine of T$240,000 ($7,896) has also been imposed on Taobao in what is the second case of an Alibaba operation falling foul of the permit rules for mainland China companies this year. In March, Alibaba.com was told to leave Taiwan within six months and fined T$120,000 for a similar reason.

While the fine is small and Taiwanese shoppers can continue to orders goods via Taobao's mainland base in future, the permits glitch is an unwelcome headache for Alibaba as its seeks to grow business outside its mainland base.

"Mainland companies registered in foreign countries need to apply for mainland business permits in Taiwan," Investment Commission executive secretary Emile Chang said. "Neither Alibaba nor Taobao have done so."

Chang said both Taobao and Alibaba.com, the business-to-business online Alibaba platform hit by a similar ruling earlier this year, had applied for regular licenses to operate in Taiwan as non-Chinese, foreign-owned. Alibaba.com has a registration in Singapore, while Taobao has a Hong Kong registration.

He noted the companies could still apply for Chinese mainland-owned company permits and potentially maintain operations in Taiwan.

In a statement provided via its Taiwan Taobao operations, Alibaba said it is "having positive ongoing discussions with the relevant Taiwanese authorities...we hope to find a suitable way forward in order to continue to serve the needs of Taiwan consumers and merchants."

News of the Taobao fine was first reported by Chinese and Taiwanese media last Thursday and confirmed by authorities Monday.

In March, Alibaba.com was ordered to leave the island within six months and fined T$120,000 for a similar reason.

Investment rules in Taiwan are stricter for mainland-owned companies than other foreign-owned firms, largely due to longstanding mistrust between the two political entities.

Even though trade and economic ties have expanded markedly since the late 2000s, China deems Taiwan a renegade province and has not ruled out using force to take it back, particularly if the island makes a move toward formal independence.