UPDATE 1-China small business owners expand fee protest to Alipay

Mon Oct 24, 2011 6:01am EDT

BEIJING Oct 24 (Reuters) - A group of small-business owners in China has expanded a protest against higher fees to target Alipay, the country's leading online payment platform, after its corporate sibling, Taobao Mall, announced up to tenfold fee hikes for some businesses using its service, Chinese media reported on Monday.

Alibaba Group is affiliated with Alipay and owns Taobao Mall, which announced on Oct. 10 that it would raise the annual fee for business owners to the maximum of 60,000 yuan ($9,400) in 2012 from 6,000 yuan ($940) and raise required deposits to 150,000 yuan from 10,000 yuan.

The company said the fee increase was necessary to improve the overall standard of sellers on the platform, keeping the fees as collateral for sellers to reach certain service and sales targets and giving back a portion for those that hit the targets.

That triggered a wave of online protests from thousands of small-business owners and their supporters, Chinese media reported.

Days later, Alibaba Group said it would invest 1.8 billion yuan to aid the development of small-to-medium sized enterprises on Taobao Mall. Alibaba said the investment was aimed at helping small business pursue higher quality goods and services and protect the interests of consumers.

It said 1 billion yuan of the amount would be used to offset half of the increased deposits and 500 million yuan would be used to help some firms obtain loans.

Alibaba Group, which also owns Taobao, Etao and Hong Kong-listed Alibaba.com , is about 40 percent-owned by Yahoo Inc .

The Chinese government has called for the establishment of new rules to govern the country's booming e-commerce sector.

Still dissatisfied, a group of merchants organised last Friday to simultaneously withdraw money from their Alipay accounts, according to China's Southern Metropolis Daily.

The report did not say how many businesses participated in the protest, but Alipay confirmed the move on its official microblog.

An Alipay spokesperson said the company had not been affected by the "malicious action" in what the Global Times newspaper described as "large-scale simultaneous withdrawals" of money from their accounts.

Taobao Mall had 32.8 percent of China's 54.2 billion yuan in the business-to-consumer online marketplace in the second quarter, according to data from Analysys International. Taobao Mall's nearest rival, 360buy, had 12.4 percent of the market.