Taobao Taiwan has been identified as a Chinese Investment because its operator was being majorly controlled by Alibaba
The investment commission of Taiwan's Economics Ministry has said that an e-commerce platform linked to China's Alibaba Group is a potential security risk and has asked its operator to dispose of its ownership stake or register as a company from the rival mainland.
British Claddagh has six months to seek permission to operate as a Chinese company or else withdraw the investment, the ministry said. If the operator fails to comply, it will face a fine of up to 410,000 New Taiwan dollars (USD 14,000).
The name of the e-commerce company is 'Taobao Taiwan and is operated by a British-registered company called Claddagh Venture Investment, an investment firm that was in effect controlled by Alibaba.
The problem arose because of the user agreement Taobao Taiwan has with Alibaba which allowed it to send the user data back to Alibaba's China Server which directly violates Taiwanese law and also puts the information security at risk.
In the commission's investigation, it was found that the operator relies heavily on Alibaba for running backend operations at Taobao like system maintenance and technical support for the website. Secondly, Claddagh is not able to hold board meetings without the consent of Alibaba as latter contains a majority stake and finally user agreement of Taobao with Alibaba which makes it binding for the users to share their data.
Claddargh has said that it is yet to receive a formal notice from the government and will continue to communicate with Taiwanese authorities.
They also said that this issue wouldn't affect their daily operations. Taiwan and China split in 1949 during a civil war and they have no official relations but thriving trade and investment ties.
Alibaba Group, headquartered in Hangzhou, China, is a known name in the e-commerce space and is one of the biggest investors in Indian startups such as Paytm and Zomato.
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