China Search, E-Commerce Leaders In Dispute

China's largest Internet retail platform and its biggest search engine are reportedly involved in a dispute that could have major implications for the country's online retail market. Partner sites for the online shopping website Taobao allege that Baidu has been reducing search results for their sites, hampering business, and threatening the livelihoods of many independent salesmen.

Alibaba Group subsidiary Taobao recently announced it has 400,000 active partner sites in its marketing union, Taobao Alliance, a considerable number given it was only launched in April. But less than three months later, it already faces a major challenge.

One Taobao Alliance partner site said that on June 5 its Baidu search results were drastically reduced, and that it was not the only time. Baidu's search results had been reduced to the point where some sites that had turned up more than 6 million search results now had less than 100,000. Other Taobao Alliance members said that, from June 5, their search results had decreased to just 10% of what they had been and continued to fall. Data from Taobao also showed that use of its APIs had quickly decreased from 200 million a day to around 30 million.

The Taobao Alliance site is a joint venture between Alibaba and Taobao. It gives third-party websites a chance to load information related to Taobao products by using an API and then sell the products for commission. The term "Taobaoke" has come to refer to the salesmen who market others' products using this method.

Analysts say that the Taobao Alliance's rapid rise has caused worries for Baidu, which relies on more traditional advertising methods for revenue. Many say the online search engine's response has been unjust to a wide range of websites and is an example of unfair competition.

It is not the first time such charges have been levied at Baidu. After it opened up its online video service Qiyi, it began putting pressure on a large proportion of movie-based Web sites, citing their "illegal" content.

If the charges leveled at Baidu are true, it could be a hint of its future plans. Earlier this year Baidu announced it would team up with the Japanese e-commerce operator Rakuten to build China's largest online shopping mall, and business on the site is just getting underway. Baidu-Rakuten will based on a different model than Taobao, but it's likely to be deemed a major competitor in China's online shopping market.