Alibaba Group Holding Ltd (BABA) Ordered To Stop Some Drug Sales in China

Alibaba Group Holding Ltd (BABA)

Alibaba Group Holding Ltd  has some bad news for vendors on its Tmall medicine e-commerce platform – they must stop selling over-the-counter (OTC) drugs. In a notice to the merchants, the company said that the Hebei provincial branch of the China Food and Drug Administration (CFDA) has directed the marketplace to stop selling these medicines.

Alibaba group holding ltd

No Impact On Other Medical Products

However, merchants can continue selling other medical device and health products, according to the company.

Tmall Drugstore is managed and operated by Alibaba Health Information Technology, previously known as CITIC 21CN. Recently, the Hong Kong’s Securities & Futures Commission (SFC) announced that Alibaba breached the takeover rules in its acquisition of CITIC 21CN Company Ltd. The company agreed to pay $170 million to acquire a stake in CITIC 21CN in 2014. At the same time, the firm inked another deal with a shareholder of CITIC 21CN, namely Mr. Chen Wen Xin, to buy his solely-owned Hebei Huiyan Medical Technology. This was a violation of the takeover rules, according to the Hong Kong regulators.

According to Alibaba, the regulators’ order to stop OTC drugs sale only applies on marketplace websites. The company directed vendors to stop selling or dispatching “any more of these kinds of products,” Reuters reported.

“The directive does not apply to other medical products,” Alibaba Group Holding Ltd  noted.

Yao.Tmall.com was “cooperating and complying with the government’s new policy to stop online drug sales on third-party platforms,” Reuters reported, citing a company spokeswoman. “While the policy change might impact the whole medicine e-commerce business including Yao.Tmall.com, industry players are exploring new ways to use internet technology to help improve the traditional drug retail system,” the spokeswoman said.

Alibaba Investing in Israeli Startup

In other Alibaba’s news, the e-commerce is going to invest in Israeli startup Twiggle to improve its online-shopping searches. Bloomberg reported, citing people familiar with the matter. The e-commerce firm wants to tap Twiggle’s search technology and solidify its lead in Chinese e-commerce.

Alibaba will invest $5 million to $10 million in the startup, one of the people said.

Twiggle is led by former Google Inc. executives Amir Konigsberg and Adi Avidor. The company’s search system uses machine learning and natural language processing to guess what shoppers are looking for.

“When users search for the “best laptop,” Twiggle will try to understand what that means: such as highest screen resolution, most memory, longest battery life and so on,” Bloomberg reported.

Alibaba is under investigation by the U.S. Securities and Exchange Commission (SEC) over its accounting practices. In the firm’s annual filing, it was disclosed that the SEC is probing whether the firm’s accounting practices may have broken federal securities laws. Alibaba said it had provided the agency with documents and information relating to its consolidation policies, practices, transactions, as well as operating data from Singles Day, an e-commerce holiday in China. “We are voluntarily disclosing this SEC request for information and cooperating with the SEC,” the company said in its filing.

Shares of Alibaba Group Holding Ltd  were trading up 3.37% in after-hours session. The stock has dropped by 3.68% during the past six month.

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