Alibaba Q4 Sales Rise, Profits Fall Amid Counterfeit Allegations

Lower than expected holiday sales dragged down quarterly profit, while the e-tailer faces accusations of illegal activity on its websites.

Chinese e-commerce giant Alibaba Group reported its adjusted 2014 fourth quarter earnings on Thursday, in which earnings beat expectations but net income decreased considerably.

Alibaba sales spiked 40 percent during the holiday quarter to $4.22 billion, but analysts' expectations were for $4.44 billion. Net income during the quarter fell 28 percent to $957 million from $1.32 billion a year ago.

The earnings release comes on the heels of news that the company is facing a report from Chinese Regulators blasting Alibaba for conducting illegal business on its websites. The State Administration for Industry and Commerce is accusing the e-tailer of selling products that were counterfeit, banned, or endangered public safety.

"Alibaba Group has long paid insufficient attention to the illegal business activities on Alibaba platforms," the SAIC report said. The company "let that abscess fester until it became a danger," it added.

Alibaba says the report is unfair and it is preparing a formal complaint.

"We believe the flawed approach taken in the report, and the tactic of releasing a so-called 'White Paper' specifically targeting us, was so unfair that we felt compelled to take the extraordinary step of preparing a formal complaint to the SAIC," Alibaba Vice Chairman Joe Tsai said. He also said that the SAIC, a Chinese government regulator, has removed the report from its Web site.

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