Alibaba Group Holding Ltd has filed a lawsuit against Shatui.com, the country's biggest e-commerce operator, in Hangzhou West Lake District People's Court, seeking damages worth 2.16 million yuan ($310,000).
According to Bloomberg, Alibaba's lawsuit sheds light on fake reviews and purchases on its website, as the company pushes for greater credibility to attract more brands.
The company worked with Chinese authorities to search Shatui's office and confiscated the accounting books.
The report said that Shatui allegedly links merchants with people who are willing to make false purchases and write bogus comments about it to drive the sellers' rankings up Alibaba's website.
Companies called brushing operators pushed the merchandise volume of Alibaba for years but now, they threaten to undermine the company's efforts to boost its credibility. As Alibaba is now expanding into new business and focused on sales rather than transactions, it is now trying to crack down on dubious practices on its website.
"Alibaba wasn't as stringent about brushing before its IPO, but it's really cracked down on the malpractice in the past year," Ray Zhao, an analyst at Guotai Junan Securities Co, said. "It's quite essential for the company to maintain its credibility and keep the system healthy as they want to attract larger and high quality brands."
In a statement, Alibaba said that it will cut the credit scores of erring merchants or shut down their businesses.
According to the report, Shatui's site was already deactivated, as searchers are now re-directed to an e-commerce website. The company also did not answer calls to its listed offices.
Alibaba is not alone in combating fakes and counterfeits as Amazon.com is also trying to suppress false reviews while Facebook is battling fake news.
But Chinese operators have taken their method to the next level by outsourcing the tasks to several people, even thousands. Xinhua reported that Shatui has recruited more than 5,000 people on its site.
Brushing is a method used to trick a website, such as Taobao, to make it appear that a purchase was made. Using messaging apps such as QQ, the fake buyer communicates with merchants. A merchant works with a brushing company whose members make the purchase and confirms the delivery of goods, even though nothing was shipped. The brushing company pays the member through virtual currency, which they can re-use or exchange for cash, as well as payment for their labor.
Alibaba said that it has been working to rid its website of fictitious transactions which they have detected using several methods that include big data analysis but others are even openly promoting their services.
Hiwinwin, an operator, advertises brushing services on its website, with videos that instruct beginners how to learn the trade. It also has its own virtual currency to smooth transactions, and a test to ensure that brushers do a good job.
Merchants who cannot pay for brushing services are affected by fake orders and urged Alibaba to prevent the practice and instead take care of merchants who are willing to pay huge money for advertising.
Jian Weiqingwho has been selling cosmetics on Taobao for 11 years, felt the effects of not brushing. She has also spent about 5 million yuan a year on advertising in Taobao.
"It's practically impossible for a newcomer to start a shop on Taobao these days without resorting to brushing," Jian added. "Our business is hurt."