Alibaba has been competing with Amazon for years in the online retailer space. But that competition just took a surprise turn for Alibaba – and Amazon should be celebrating. On Wednesday, the Office of the United States Trade Representative placed Alibaba back on its Notorious Markets List just four years after Alibaba was removed from that list for combating fraud. How bad is the news for Alibaba? What happens next for the e-commerce giant?

Alibaba Provided Counterfeit Products To US Customers. BIG MISTAKE.

Alibaba has stated on numerous occasions that the company is doing everything in its power to combat fraud on Alibaba sites, but those efforts couldn’t prevent the company from being noted as a fraudulent marketplace by the office of the U.S. Trade Representative. The Notorious Markets List “highlights prominent online and physical marketplaces that reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting.” The specific site in question is called Taobao, which is a fee-free marketplace connecting buyers and sellers. Think Ebay, but with no bidding or fees. Revenue comes from selling ad space and promoting those ads to users based on their product searches. Alibaba, obviously upset with the decision, claims the action is a result of Donald Trump taking office. Do they have a point?

Yes and no.

Trump has most definitely taken a hardline stance against China and Chinese companies. And that thought process may have a trickledown effect in the government. But while that idea may have shined a light on Alibaba, Taobao is just too full of knockoff goods. There’s a reason the company was on the list up until four years ago. Taobao is a massive platform with too little regulation. And while prices and lack of fees are very appealing to shoppers, Alibaba needs to do more to appeal to shoppers.

Alibaba continues to try and bring on Western brands in order to bring in Western shoppers. But this latest news is a huge setback for that plan. As a result of the blacklist, Alibaba’s reputation is tarnished and web traffic could be reduced due to loss of security certificates resulting in security prompts for shoppers to avoid the site.

Catch Ruth Ajuku’s video on how Alibaba went on and off the government’s list:

Shares of Alibaba Group Holding, Ltd. (BABA) ticked down on the news, and should continue to drop more.

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