In a recent development, Alibaba Group (NYSE:BABA) has decided to settle a class-action lawsuit filed by its shareholders for $433.5 million. The lawsuit alleged that the company had made misleading statements about its exclusivity practices.
What Happened: The e-commerce behemoth, based in China, denied all allegations of fault, liability, wrongdoing, or damages, reported The Wall Street Journal on Wednesday. The company stated in a regulatory filing that it opted for the settlement to evade further litigation costs and disruptions.
The lawsuit was filed in the U.S. District Court in the Southern District of New York in March 2023. It accused Alibaba of violating federal securities laws by making numerous false statements about its antitrust and exclusivity practices. This allegedly led to an artificial inflation of its stock price, causing financial losses to investors.
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The legal action was initiated against Alibaba, along with certain directors and officers, representing all investors who purchased or otherwise acquired the company’s American depositary shares between July 9, 2020, and Dec. 23, 2020.
Why It Matters: The lawsuit alleged that Alibaba enforced exclusivity practices that “required or coerced merchants to sell exclusively on Alibaba platforms,” and penalized merchants who sold on competitors’ platforms. The company allegedly continued these practices even after promising to stop them in an agreement signed in July 2020 with the State Administration for Market Regulation, which enforces China’s e-commerce and antimonopoly laws.
The settlement, however, is still subject to several conditions, including court approval.
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