Let market solve Taobao Mall dispute

The recent online dispute between Taobao Mall and some of its small and medium-sized vendors highlights the urgency of establishing sound and fully market-based commercial rules, said a South Metropolis Daily editorial. The following are excerpts:

A bitter online fee dispute between Taobao Mall, the country's leading online retail platform, and its small and medium-sized retailers is calming down following the intervention of the Ministry of Commerce.

On Monday, Taobao Mall announced revised fees, including a 9-month grace period for regular sellers, who have maintained good ratings, and a 1.8 billion yuan ($282.2 million) investment plan to aid the development of small and medium-sized enterprises.

The conciliatory move came a day after the Ministry of Commerce ordered Taobao to respond to vendors' demands.

The outcome of the dispute is dramatic, but to some extent it follows China's national conditions. Its settlement once again demonstrates that anytime two market players in China cannot resolve their disputes through negotiations or market rules, one side always turns to the government for mediation or intervention.

Such a model is by no means an encouraging phenomenon for those who advocate the full role of the market.

In this dispute, Taobao Mall's small and medium-sized sellers were in a weak and disadvantageous position until the latest announcement by the online retail giant. Facing potentially huge losses, these sellers chose to lash out at their larger-sized counterparts in a way that contravened market principles. Such behavior has invited criticism from some traditional media.

But the protest of these Taobao vendors has successfully converted their purely economic dispute with their more powerful cooperative partner into a nationwide debate about the survival of domestic small and medium-sized enterprises (SMEs) and even about reform of China's e-commerce sector.

In this process, the difficult situation facing these retailers and their complaint that Taobao Mall intends to desert them after developing into an e-commerce giant with their extensive participation has garnered extensive sympathy from grassroots netizens.

At the same time, the collective "online unrest" they launched has reflected the bigger context in which some domestic SMEs are struggling to survive.

If no moral criteria are considered, the vendors who participated in last week's online campaign employed successful tactics, because they were well aware that a head-on confrontation with the more powerful Taobao would be futile. They were also aware that in the power bureaucracy of Chinese society the government holds a dominant position, and that the balance of power would shift to them if the government could be introduced into the dispute on their side.

Certainly, this is not a tactic these vendors inevitably wanted to employ from the very beginning. However, it is an undeniable fact that such a tactic has become the main method for some small enterprises trying to survive in China's current commercial environment.

In this context, once their interests are at risk of being compromised, any market players will want to transform their purely economic disputes with other players into one with the participation of the government. It is their belief that government intervention will result in the reversal of the rules of the game.

For the government, it is also willing to play the role of mediator for the sake of its own interests. This was reflected by government's role in the acquisition dispute between Wahaha, a Chinese beverage company, and its business partner Danone, a French food giant.

The prevalence of such a dispute-settling model indicates all market players in China will talk of adherence to market rules, but all will try to sabotage them if these rules prove unfavorable to them.

To change such an embarrassing situation, a fully and well-developed market consciousness should be built among all market participants, given that any victory based on the breaking of market rules will not last long. At the same time, the government should make urgent efforts to establish and improve market rules.

(China Daily 10/19/2011 page8)