Authorities seek to diffuse anger of small vendors over fee increases

BEIJING / SHANGHAI - The Ministry of Commerce intervened on Saturday in a bitter dispute between Taobao Mall, China's top online retail platform, and small business owners sparked by a massive hike in membership fees.

Taobao Mall announced last week a minimum five-fold, and a potential ten-fold, increase in membership fees. This ignited an immediate protest by the owners of small businesses who disrupted online services by placing orders and then canceling them after leaving disparaging remarks.

The ministry expressed its concern at the protests and vowed to support small businesses and stabilize prices, according to a statement on its website.

It also said that Taobao Mall should listen to small business owners and insisted that protests should be within legal parameters.

Taobao Mall said last Monday that it would increase annual membership fees from 6,000 yuan ($940) to between 30,000 yuan to 60,000 yuan, depending on the type and scale of the business.

Fees will be fully or partially refunded to a shop if its scale and service quality meet set criteria, Taobao Mall said.

Cash deposits also increased from 10,000 yuan to a maximum of 150,000 yuan, depending on the category of goods.

Large businesses could easily accommodate the changes but small businesses would be crushed, owners said.

Thousands of small-scale Taobao Mall vendors started protesting online on Tuesday night by buying up goods from large retailers and then asking for refunds or filing complaints to interrupt their businesses.

Taobao Mall said on Wednesday that it had referred the matter to the police.

The new fees are seen as part of Taobao's efforts to bring order to online shopping, where consumers have repeatedly complained about fraud and counterfeit products.

"There's no way I could afford the additional costs," said a small wine vendor, who declined to be named, from Xiamen, Fujian province. "Small vendors demand that the increased fees and deposits are cancelled. I will protest at Taobao's Hangzhou headquarters to make sure this happens."

The vendor said he would not have invested 200,000 yuan in his shop, which has been in operation for a little more than three months, if he had been informed of Taobao's intentions earlier.

"I had heard about a possible fee hike three months ago but Taobao denied it and said it would not increase charges."

The protests have hit the takings of the big retailers, such as Hstyle and Osa.

"The financial losses will be significant but more importantly our reputation will suffer due to the libelous attacks on our website," Chen Xin, spokesperson for Korean-style dress shop Hstyle, said.

IT critic Tang Yi said Taobao Mall will not compromise as the fee hike is part of "its strategy to squeeze small- and medium-sized vendors out of the mall".

Taobao Mall, founded in April 2008, hosts more than 40 million registered users, 50,000 registered businesses and 70,000 brands.

Products sold on Taobao Mall range from daily essentials to household appliances and cars.

According to Analysys International, Taobao Mall accounts for 33 percent of the B2C online retail market in China, followed by 360buy and Amazon.cn.

Xinhua and Xu Junqian contributed to this story.